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TMI Blog2024 (9) TMI 959X X X X Extracts X X X X X X X X Extracts X X X X ..... own for special category falling u/s 144C was also codified u/s 144B of the Act. The procedure laid out in such a way that after the initial assessment by the assessment units, they will forward the same to the NFAC, NFAC will send the draft assessment order, if required after the review of the same in special cases, to the respective assessee. After giving opportunity of being heard to the assessee or by allowing them to submit relevant information through the e-portal, the final assessment orders are being finalized and forwarded to the respective assessee. The process of one more opportunity at the stage of draft assessment order to the assessee are duplicate in nature, even if there is violation it is only curative in nature since the assessment is not complete. Whereas in the case of other assessment like assessments u/s 143(3), 144 and 147 once the draft assessment are issued and after granting opportunity or non granting of opportunity to the assessee, the outcome is the final assessment order. The courts have held that the passing of FAO without granting opportunity of being heard is bad in law and held that the relevant assessment is deserves to be quashed. Whereas in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asons on the issues of NFAC. Beyond his capacity, therefore, we do not see any violation on the part of JAO. Ld DRP gave direction to the NFAC and ultimately the assessment was completed by the JAO. Hence, we do not see any reason to make the assessment bad in law. FAO passed without considering the submissions and evidences before the AO, is a serious issue and needs to be addressed - This issue can be resolved by remitting the issue back to the file of AO. However, we observed that the issue relating to section 68 is issue of share capital to its AE s and this issue was already considered in the TP stage itself and TPO has not passed any adverse comments and accepted that there is no variation. Instead of remitting the issue back to the file of AO, we are inclined to adjudicate the issue on merit. Addition u/s 68 - Share capital subscribed by a non resident and received through proper banking channel, the same cannot be disallowed invoking the provisions of section 68. In this case, the assessee has already proved the identity of the share holders since the same shareholders have invested in the previous assessment year and relevant documents submitted to prove the identity befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment completed vide order dated 29.04.2022 passed under section 143(3) read with section 144C of the Income Tax Act, 1961 ('the Act') ['impugned order'] is illegal and bad in law. 1.1. That on the facts and circumstances of the case and in law, the impugned assessment order having been passed not only in gross violation of principles of natural justice but also the mandatory procedure prescribed in section 144B of the Act is illegal, bad in law and liable to be quashed. 1.2. That on the facts and circumstances of the case and in law, the impugned assessment having been completed without passing and serving upon the appellant, the draft assessment order as per provisions of clause (xiv)(b) of sub-section (I) to section 144B of the Act, is non-est, illegal, bad in law and liable to be quashed. 1.3. That the impugned assessment order [including draft order passed by National Faceless Assessment Centre (NF AC) under section 144C] having been passed without allowing personal hearing (either physically or virtually), in gross violation of mandatory provisions of the Act and principles of natural justice, is without jurisdiction, illegal, bad in law and liable to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right issue to existing non-resident shareholders. 4.5. That the assessing officer erred on facts and in law in not appreciating that similar capital was received by the appellant from same non-resident shareholder in preceding year(s) which have been accepted as genuine after due examination in completed scrutiny assessments. Re: Disallowance of PF/ ESI Contribution 5. That the assessing officer erred on facts and in law in disallowing an amount of Rs. 54,031 under section 36( 1 )(va) of the Act, being employees' contribution to Employee State Insurance Fund ("ES),') and other welfare funds on the ground that the same was deposited beyond the time specified under relevant statute. 5.1. That the assessing officer erred on facts and in law not appreciating that employees' contribution had been deposited before the due date of filing return of income as prescribed under section 139(1) of the Act and the same is, therefore, allowable as deduction. 5.2. That the assessing officer erred on facts and in law in making the aforesaid disallowance without considering the legal position/ judicial pronouncements, and in gross violation of binding directions of the DR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P gave a direction to Assessing Officer to record reasons for valuation and pass speaking/reasoned order in this regard and also directed to restrict the TP adjustment as per rectification order passed u/s 154 of the Act and directed the Assessing Officer to consider the evidences and submissions filed by the assessee with regard to addition u/s 68 of the Act. 8. After considering the directions of the ld. DRP, final assessment order was passed by the jurisdictional Assessing Officer (JAO) on 29.04.2022 assessing the total income of the assessee at Rs. 146,19,11,543/-. 9. Aggrieved with the above order, assessee is in appeal before us. 10. At the time of hearing, the assessee first pressed the jurisdictional issues raised by the assessee in grounds no.1 to 2.1 and also made submissions alongwith filed a synopsis. The same is reproduced as under :- 11. It is respectfully submitted that the assessment completed under section 143(3)/ 144C of the Act is illegal and bad in law since the same has been passed in gross violation of provisions of sections 144B, 144C of the Act as also principles of natural justice inasmuch as: (a) the impugned assessment has been completed without pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the income declared in return of income or making variation to the said income and forward the copy of such draft assessment order to the NFAC. (b) Thereafter, the NFAC, in terms of clause (xvi) of sub-section (1) to section 144B of the Act, is, upon receipt of such draft order, mandated to examine the same in accordance with the risk management strategy and then, to either: a) finalise the assessment, in case no variation is proposed which is prejudicial to the interest of the assessee, by passing and serving such final assessment order accompanied with notice of demand specifying the amount payable along with notice for initiating of penalty proceedings, if any, to the assessee; or b) provide an opportunity to the assessee, in case any variation is proposed, by serving a notice directing the assessee to show-cause as to why the proposed variation should not be made; or c) assign the draft assessment order to the review unit. (c) That thereafter, it is only in cases where no response to the show-cause notice is received from the assessee, that the NaFAC is, on the basis of material available on record, permitted to finalise the assessment on the basis of draft assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer (in short 'AO'), via the impugned assessment order dated 15.04.2021, has made an addition of Rs. 75,79,981/- to the taxable income of the assessee. Thus, the assessee has been assessed at Rs. 75,79,980/- (rounded off). 3.3. In view of this, it is evident that variation was made to declared taxable income of the assessee which, as noticed above, was Nil, albeit, without issuance of a show cause notice-cum-draft assessment order. Admittedly, the assessee had no opportunity to respond to the additions made. 4. Given these admitted circumstances, the impugned assessment order as also the consequential notices, issued under Section 156 and 270A of the Act, dated 15.04.2021, would have to be set aside. It is ordered accordingly. 4.1. Liberty, however, is granted to the revenue to take next steps in the matter, in accordance with the law. 5. The writ petition and the pending applications are disposed of in the aforesaid terms." (emphasis supplied) • Reliance is also placed on the decision of the Bombay High Court in the case of Shreeji Investment & Advisory Services v. National Faceless Assessment Centre: (2021) 323 CTR 505/ WP No.13235 of 2021. In that case, the Peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es issued in the course of assessment proceedings and no opportunity whatsoever was given to petitioner to file its objections against these additions. In the affidavit in reply of respondent, there is no denial of this fact. In the affidavit in reply, the affiant has gone on the merits of the two additions but does not deny the fact that neither the alleged draft assessment order or any of the notices have not even referred to this proposed additions under Section 68 of the Act. Issuance of show cause notice is the preliminary step which is required to be undertaken. The purpose of show cause notice is to enable a party to effectively deal with the case made out by respondent (Om Shri Jigar Association Vs. Union of India) 1 Therefore, on this ground also the impugned order is required to be set aside. 5 In our view, having heard Mr. Syal and Mr. Pinto and having considered the petition and the affidavit in reply, the prayer as prayed for in prayer clauses (a) and (c) of the petition has to be granted and is hereby granted. The same read as under: "(a) that this Hon'ble Court be pleased to issue a Writ of Certiorari or any other writ, order or direction under Article 226 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter exhaustively analyzing the scheme of faceless assessment, the Hon'ble Court, specifically observed that grant of personal hearing is, in case of a specific request to that effect having been made by the assessee, mandatory and not discretionary. 23. The Gujarat High Court in the case of Dr. K R Shroff Foundation v. ACIT: R/Special Civil Application No. 14779 of 2021 dated 11.03.2022 emphasized on the effective and real opportunity of hearing to be granted to the assessee before conclusion of assessment. The Court was pleased to quash the assessment order that resulted in demand of Rs. 633.50 crores over disrupted VC hearing provided prior to completion of assessment. 24. Attention is also invited to the observations Sanjay Aggarwal vs National Faceless Assessment Centre, Delhi: [2021] 436 ITR 180 (Del): "Conclusion: 12. Therefore, in our view, given the aforesaid facts and circumstances, it was incumbent upon the respondent/revenue to accord a personal hearing to the petitioner As noted above, several requests had been made for personal hearing by the petitioner none of which were dealt with by the respondent/revenue. 12.1 The net impact of this infraction would be t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TO, National E-Assessment Centre [W.P. No.8379-2021; decided on 01.04.2021] (Mad) • Magick Woods Exports Private Limited vs. National E-Assessment Centre [W.P. No.10693-2021; decided on 28.04.2021] (Mad) • Orissa Stevedores Ltd. vs. Union of India [WP(C) No.19402/2021; decided on 08.07.2021] (Ori) 26. In view of the aforesaid, the impugned assessment completed without providing any opportunity, much less adequate opportunity, of being heard to the appellant calls for being quashed at the threshold. Re (c): Impugned assessment order passed by JAO instead of NFAC bad in law 27. In terms of mandatory provisions of section 144B of the Act, the assessment is required to be in a "faceless manner"; the notices are required to be issued by NFAC and also the assessment order(s) are required to be passed by NFAC. 28. In the facts of the present case, it may be noted that: (a) various notices from time to time during the course of assessment proceedings were issued by the National e-Assessment Centre/ NFAC; (b) the draft assessment order dated 21.09.2021 under section 144C of the Act was passed by NFAC; (c) pursuant to directions of the DRP, a notice dated 30.03.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such order to the National Faceless Assessment Centre ………………….. (xxx) the assessment unit shall in conformity of the directions issued by the Dispute Resolution Panel under sub-section (5) of section 144C, prepare a draft assessment order in accordance with sub-section (13) of section 144C and send a copy of such order to the National Faceless Assessment Centre; (xxxi) the National Faceless Assessment Centre shall, upon receipt of draft assessment order referred to in clause (xxx), finalise the assessment within the time allowed under sub-section (13) of section 144C and serve a copy of such order and notice for initiating penalty proceedings, if any, to the assessee, alongwith the demand notice, specifying the sum payable by, or refund of any amount due to, the assessee on the basis of such assessment;" 30. On perusal of the aforesaid, it will kindly be appreciated that section 144B clearly mandates that notwithstanding the provisions of section 143, NFAC shall pass the final assessment order. In fact, clause (xxx) of section 144B(1) mandates the NFAC to pass an order in conformity with the directions of the DRP, which is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessing officer without following the binding directions of the DRP as is explained hereunder: (a) The DRP had held that draft assessment order under section 144C(1) was passed in breach of the provisions of section 144B of the Act and directed the assessing officer to spell out the reasons for the same in the final assessment order. The DRP, in para 3.1.1 of DRP order observed that "…..An order u/s 144C was issued subsequent to the aforesaid notice vide order dated 21.09.2021, breeching the provisions of section 144B of the Act. The Panel directs the AO to spell out the reasons in this regard, while passing the final order in this case. The Panel reiterates the need to pass a speaking order in this regard." (emphasis supplied) Despite the aforesaid specific direction of the DRP,the assessing officer has failed to record any reasons for violation of provisions of section 144B of the Act in the impugned order. In fact, the assessing authority continued to conduct assessment in violation of section 144B of the Act and passed the impugned order as explained supra in violation of the mandatory provisions. (b) In respect of addition under section 68 of the Act, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laced on record by the appellant, despite the specific directions of the DRP. Further, the documentary evidences have not been controverted by the assessing officer before making the additions. 41. In fact, the appellant had, during the course of assessment proceedings even offered that if any additional document/ information is required, the appellant would be pleased to submit the same [refer letters dated 11.12.2020 and 10.09.2021] however, no further requirement was raised, and the assessing officer proceeded to pass the final order straight away. That apart, additions have been made which are contrary to the principles/ law settled by the apex Court and various High Courts. Assessment conducted in such a manner ignoring the submissions of the appellant is illegal and bad in law [Refer: RKKR Foundation vs NFAC: W.P.(C) 5277/2021 (Del.), KBB Nuts Pvt Ltd vs NFAC: W.P.(C) 5234/2021 (Del.), DJ Surfactants vs NeAC: W.P.(C) 4814/2021 (Del.)]. 42. For the aforesaid cumulative reasons, it is patently clear that the impugned assessment order is beyond jurisdiction, illegal and bad in law and thus calls for being quashed at the threshold. (II) WITHOUT PREJUDICE- ON MERITS Re: Gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es to the said shareholders in preceding years was duly provided. 47. Also, the case of the assessee was also referred to the Transfer Pricing Officer (TPO) under section 92CA of the Act. During such proceedings, - the TPO, vide notice dated 25.02.2021, inter-alia, required the assessee to submit the details of change in shareholding structure and other international transactions [refer pages 97-98 of paper-book]; and - in response thereto, the appellant vide reply dated 07.07.2021 submitted (as Annexure-11 to the reply), the details of fresh shares issued to the existing shareholder, without any change in the percentage shareholding [refer pages 99-101 of paper-book]. 48. The aforesaid transaction of issuance of shares was duly accepted by the TPO vide order dated 25.07.2021 read with rectification order dated 29.07.2021 without any adverse inference or adjustment therefor. 49. The NFAC, however, vide draft assessment order dated 21.09.2021 passed under section 144C(1) of the Act proceeded to treat the aforesaid sum of Rs. 134.99 crores as unexplained credit under section 68 of the Act. While making the said addition, the NFAC vaguely alleged that the assessee has not fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , share premium, the assessee shall be required to furnish source of source as well. However, it is clear that the proviso is applicable only to the person who is resident under the provisions of the Act. The above analysis of the provisions of section 68 of the Act would make it dear that where the sum received as share capital is from non-resident shareholders, then proviso to section 68 of the Act would not apply. Accordingly, there is no requirement to prove source of source of the non-resident shareholder. Reference in this regard may be made on Ms. Vodafone India Limited v DCIT [ITA No. 1835/Mum/2018]. Date of judgement: 28.08.2020, Syntensia Network Security India Pvt. Ltd. v ITO (Mumbai ITAT) ITA No. 2927/Mum/2017. It is further stated that the assessee was not afforded reasonable opportunity of being heard as discussed in facts above. Therefore, assessee was not able to furnish the details as desired by the Assessing Officer vide notice dated 03.09.2021. The Panel finds that the AO has not considered the evidence stated above. The Panel, accordingly, directs the Assessing Officer to consider this evidence and pass a speaking order in this regard." (Emphasis supplied) Re: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r sake of brevity. 59. In view of the aforesaid, the impugned addition calls for being deleted on the said ground alone. Re (b): Share capital from existing non-resident shareholder cannot be treated as unexplained as all documentary evidence filed and similar capital expressly accepted in past 60. Section 68 of the Act reads as under" "Cash credits. 68. Where any sum is found credited in the books43 of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year : Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless-- (a) the person, being a resident in whose name such credit is recorded in the books of such company also off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 68 on the ground that assessee had discharged initial burden cast upon it by providing necessary details, Department's SLP filed against said decision of High Court was to be dismissed. • In the context of amount received towards share capital, the Supreme Court in the case of CIT v. Stellar Investment Ltd: 251 ITR 263 upheld the decision of the Delhi High Court, stating that there can be no addition in the hands of a company for moneys received towards share capital. The Court held that, if necessary, the Revenue may reopen the assessment of the shareholders to bring to tax the alleged undisclosed amount. • CIT v. ARL Infratech Ltd.: [2017] 394 ITR 383 (Raj.): Where PAN of share applicants have been given and the mode of payment has been explained, in absence of any direct/ indirect relation between the assessee and the applicants, application money received cannot be doubted and added under section 68 of the Act. • Pr. CIT vs. Softline Creations (P) Ltd: 387 ITR 636 (Del): The Hon'ble Court held that where the assessee has provided sufficient indication(s) including by way of permanent account number, to highlight the identity of the share applicants ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 119 (Del.) • CIT v. Kamdhenu Steel and Alloys Ltd: 361 ITR 220 (Del.) • CIT v. Victor Electodes Ltd.: 329 ITR 271 (Del.) • CIT v. Nipuan Auto (P.) Ltd. 361 ITR 155 (Delhi) • CIT v. Sophia Finance Ltd.: 205 ITR 98 (Del)(FB) • Divine Leasing and Finance Ltd. &Ors: 299 ITR 268 (Del.) affirmed in Lovely Export (P) Ltd.: 319 ITR (St.) 5 • CIT v. Dwarkadhish Investment Ltd: 194 Taxman 43 (Del.) • CIT v Antartica Investment (P) Ltd. 262 ITR 493 (Del) • PCIT vs Ami Industries India (P) Ltd: 424 ITR 219 (Bom.) • Orient Trading Co. Limited: 49 ITR 723 (Bom.) • CIT v. Gagandeep Infrastructure (P.) Ltd. - [2017] 80 taxmann.com 272 (Bombay) • CIT v. Vacmet Packaging India (P) Ltd.: 367 ITR 217 (All.) • CIT v. Arunanada Textiles P. Ltd: 333 ITR 116 (Kar) • CIT v. Metachem Industries: 245 ITR 160 (MP) • DCIT v. Rohini Builders: 256 ITR 360 (Guj) • CIT v. Shree Rama Multi Tech Ltd.: 215 Taxman 157 (Guj.)(Mag.) • Nemichand Kothari V. CIT: 264 ITR 254 (Gauhati) • CIT v. Talbros Engineering Ltd.: 386 ITR 454 (P&H) • CIT v. Pranav Foundations Ltd.: T. C. (A.) NO. 262 OF 2014 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii. As stated supra, the appellant has duly placed on record the following details/ information: • Details of equity shares issued including name of the shareholder, complete address, PAN, number of shares issued, face value, premium, date of issue and total amount received; • The valuation reports to justify the premium/ issue value has also been placed on record; • Shares certificates issued for allotment of shares; • Copy of Bank statements of the assessee highlighting the transactions of receipt application money is placed on record; the transactions are proved to be through banking channels; • Copy of Foreign Inward Remittance Certificate (FIRC) to justify/ prove the money received from non-resident shareholder is duly filed by the appellant; • The confirmations from the shareholders on their letter heads wherein the shareholders have categorically mentioned and clarified qua the number of shares and the amount invested in the assessee-company. iii. The money was received from the non-resident shareholder after compliances with all the norms of FDI Scheme governed by RBI. Necessary filings like Form FC-GRP, etc., before the RBI was d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the allegation that the capital received from unexplained money. It has been held in the following decisions that where the initial onus to prove identity, creditworthiness and genuineness of the transaction has been discharged by the assessee and the Revenue has not carried out any inquiry/ verification, or has not been able to controvert the evidence furnished by the assessee, no addition under section 68 could be made: • CIT v. Sidhi Vinayak Metcon Ltd: 414 ITR 402 (Jhar.) • Prayag Polytech Pvt. Ltd. v. ACIT: ITA No. 6015/Del/2017 (Delhi Trib.) • Prime Comfort Products (P.) Ltd v. ACIT: 111 taxmann.com 89 (Del Trib.) • Flourish Builders and Developers Pvt. Ltd. v. DCIT: 176 ITD 409 (Del Trib.) • Axisline Investment Consultants (P.) Ltd. v. ITO: 178 ITD 402 (Kol Trib.) • Baba Bhootnath Trade & Commerce Ltd. v. ITO Kolkata: I.T.A. No.1494/Kol/2017 (Kol Trib.) • DCIT v. M/s. Gladiolus Property & Inv. Pvt. Ltd.: ITA No. 2924/Mum/2017 (Mum. Trib.) • DCIT v. Pali Fabrics P. Ltd.: 110 taxmann.com 310 (Mum Trib.) • DCIT v. Acro Exports Trade (P.) Ltd: 111 taxmann.com 51 (Mum Trib.) • Carmel Asia Holdings Pvt. Ltd. v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lip;…….. 11.5 We find merit in the contentions of learned counsel and reliance on the decisions of the Tribunal in the cases of Finlay Corporation Ltd. (supra), Smt. Susila Ramasamy (supra) and Saraswati Holding Corpn. Inc. (supra) and the import of CBDT circular referred to above. Whenever remittances are made by the non-resident holding company for purchase of shares of its subsidiary in India, the money undoubtedly is capital in the nature and if documents like FIRC etc. are produced, it can safely be stated that the said money came in through banking channels. 11.6 In the absence of any evidence to show that the money remitted by the non-resident accrued in India, it cannot be held to be taxable in India. Hence, moneys remitted by non-residents whose identity is not in question through their bank accounts outside India have to be held as capital receipts not exigible to tax. It therefore naturally follows that if the identity of the non-resident remitter is established and the money has come in through banking channels, it would constitute a capital receipt and ordinarily cannot be treated as deemed income under s. 68 or 69 of the Act. This is clarified by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee proved that money was flowing from books of investor as certified by Swiss Tax Authorities. 72. Reliance in this regard may be made to the decision of the Mumbai Bench of the Tribunal in the case of Vodafone India Limited v DCIT: ITA No. 1835/Mum/2018. In that case, share capital was received by the assessee from its existing Mauritius based shareholders on subscription to right issue of shares. The assessing officer added the said capital received under section 68 of the Act. On second appeal, the Tribunal held that where the assessee has duly discharged its onus to prove the identity, genuineness, and creditworthiness of the shareholder by submitting various documentary evidences which have not been refuted by the lower authorities, no addition can be made merely on the basis that 'source of source' of funds was not established. The Tribunal held that the amendment in Section 68 is applicable w.e.f 01.04.2013 and is applicable only where the shareholder is a resident in India and not when the shareholder is a non-resident. The relevant observation of the Court are as under: "2.31 We also observed that the increase in share capital was not on account of any new shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;…. 2.39 Further more, we observed that that Section 68 would not apply to remittances made in India by non-resident is strengthened by the proviso to Section 68 inserted w.e.f. A.Y. 2013-14. According to the said proviso, if an assessee company, in which public are not substantially interested, receives money by way of share capital, then the source of funds of resident share holder has to be established by the assessee in order to get out of the kin of the deeming provision under section 68. The proviso talks of the source being established only when the shareholder is a resident of India. There is no such requirement if shareholder is a non-resident. Hence, the creditworthiness of the shareholders, if he is a non-resident, does not have to be established by the assessee in respect of remittance received by him. For this purpose, reliance is placed on the judgment of the Hon'ble Delhi Tribunal in the case of M/s Russian Technology Center (P) Ltd Vs DCIT, New Delhi, (supra), wherein the Hon'ble tribunal observed that the provisions of Section 68 though inserted w.e.f. 01.04.2013 also reveals the legislative intent that if the shareholder is a non-resident and the money is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the monies were received through normal banking channels duly approved by FIPB & RBI proved the genuineness of the transaction. 75. In the case of Pondi Metal &Roling Mills, ITA No.788/2016, the Delhi High Court held that once it is proved that money was received by assessee from a corporate shareholder incorporated in Mauritius, no addition could be made in the hands of the assessee; at best, the addition/ investment could be examined in the hands of the Mauritius Company. SLP filed by the department against the aforesaid order of the High Court has been dismissed. 76. In view of the aforesaid factual and legal position, the action of the assessing officer in invoking section 68 of the Act is unwarranted and the addition made calls for being deleted. Re: Ground of Appeal Nos.5-5.3:Disallowance u/s36(1)(va)- PF/ESI contribution 77. The undisputed facts relating to the issue are as under: (a) For the year under consideration, the appellant had deposited a sum aggregating to Rs. 54,031 [Rs.42321 under ESI Act and Rs. 11,710 under other welfare funds] towards employees' contribution in a delayed manner. (b) The aforesaid contributions have, however, been deposited mus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the latest decision of the Delhi Bench of the Tribunal, wherein the Tribunal in a batch of matters reported in Raj Kumar and Ors. vs. ITD, CPC: 136 taxmann.com 244 / 194 ITD 802 (dated 28.02.2022)while disposing of 114 appeals held that amendment to section 36(1)(va) of the Act is prospective in nature and therefore applicable only from assessment year 2021-22. It was held that delayed payment of employee's contribution is allowed if the same is deposited within due date of filing return of income for the relevant year. 84. It has been held similarly in the case of Shankar Fenestration & Glasses India Pvt Ltd.: ITA 97/Del/2022 (Del.) and Crescent Roadways Private Limited vs. DCIT: ITA No. 1952/Hyd./2018 (Hyd. Trib.). 85. In view of aforesaid settled legal position, it is respectfully submitted that employees' contribution undisputedly deposited by the appellant much before the due date of furnishing of return of income under section 139(1) was clearly allowable as deduction in terms of section 36(1)(va) read with section 43B of the Act and the action of the CPC in disallowing the same was erroneous and bad in law. 86. That apart, the assessing officer erred in making double a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter the DRP directions were passed on 15.03.2022 and based on those directions the NeAC AO issued the letter dated 30.03.2022 to the assessee requesting for documents with regard to the additions, in line with the DRP direction. As already mentioned, Act has been amended w.e.f 01.04.2022 and in line with the section 144B(8) of the IT Act, the case was duly transferred from faceless AO to IAO by the Pro CC, NeAC (taking approval of CBDT). The case history notings' has been duly submitted during the course of hearing along with the copy to the assessee counsel and duly explained to the Hon'ble bench of the contents there in. (C) The assessee has only argued on legal/technical grounds and its argument can be summed up as follows: (i) Draft assessment order cum show cause notice u/s 144B(i)(xvi)(b) has not been served on the assessee (ii) Personal hearing has not been provided (iii) Order passed by the jurisdictional AO i.e. ACIT, Circle-7(1) instead by NeFC (iv) Evidence/documents have not been considered (v) AO passed the order in violation of DRP directions (D) The assessee objections are dealt as under: 1. On ground no. 1: Draft assessment order cum show cau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or section 144 B (1) (xxi) (amended from 1.04.2022). For ready reference, the provisions of section 144 B (1) (xxvii), (pre amended) is reproduced below. (xxvii) where the draft assessment order or final draft assessment order or revised draft assessment order is forwarded to the eligible assessee as per item (A) of sub-clause (a) of clause (xxiii) or item (A) of sub-clause (a) of clause (xxv), such assessee shall, within the period specified in sub-section (2) of section 144[' file his acceptance of the variations to the National Faceless Assessment Centre; From the perusal of the above provisions, it is clear that for the eligible assessee, the draft assessment order required to be forwarded as per provisions of section (xxv) to (xx vii) and that was precisely done in the case. Also, without prejudice to the above, it is submitted that the intention behind issue of draft assessment order as per section 144 B of the I.T act is to provide an opportunity to the assessee to present his case before finalization of the assessment order or crystallization of demand. The intention of the legislature can never be to issue repeated show case notices/ opportunities to the assessee. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted any error. However, at the same time, considering the fact that the Faceless Assessment Scheme has been introduced recently and therefore, the Revenue ought to have been given some leverage to correct themselves and take corrective measures and therefore the High Court ought to have remanded the matter to the Assessment Officer to pass a fresh order in accordance with law, after following the due procedure, as required under the law, namely, more particularly, under Section 1448 of the Act. The following facts clearly emerge out from the perusal of the above decision of the Hon'ble Supreme Court, which substantiates the case of the revenue: (1) The Hon'ble Supreme Court has duly taken note of the faceless scheme introduced by the Government and clearly held that because of the launch of the new scheme, the revenue has to be given some leverage to correct themselves and take corrective measures. (2) Even though prayer has been made in that case to quash the assessment proceedings, however the Supreme Court has rejected the prayer and instead remanded the matter back to the AO to pass further-order in accordance with law. It is absolutely clear that even though the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court has set aside the matter and remitted back to the AO to pass a fresh order after giving an opportunity. The relevant extract of the decision is reproduced below: 12. Keeping in view the aforesaid facts and mandate of law, the impugned assessment order dated 30th April, 2021 as well as notice of demand are set aside and the matter is remanded back to the Assessing Officer, who shall grant an opportunity of hearing to the petitioner by way of Video Conferencing and thereafter pass a reasoned order in accordance with law. The above decision is squarely applicable to the assessee [if the Hon'ble Bench feels that personal hearing was required under section 144 C (13)] and with the utmost respect, it is submitted that being a jurisdictional High Court decisions it is binding of the Hon'ble Bench. Thus though reasonable opportunity was provided to the assessee and no opportunity of personal hearing can be granted after DRP directions, in line with specific provision u/s 144C(13) but still if the Hon'ble Bench desires then atmax, the case can be remitted back to the AO for providing fresh opportunity and the assessee prayer for quashing the assessment proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and deserve to be rejected. [4] On ground no. 4 and 5: Evidence/documents have not been considered (i) AO passed the order in violation of DRP directions Both the above objections, being interrelated are taken up together. There are basically two additions, i.e. additions u/s 68 and Late deposit of PF IESI, which are contested by the assessee before the Hon'ble ITAT. a) For additions u/s 68. During the course of assessment, the AO, vide notice dated 3.9.2021, had asked the assessee to provide the following details: i) Provide documentary evidence to substantiate the identity and ITR of last 3 years of the shareholders to substantiate creditworthiness and shareholders as well as the proof of genuineness of transaction in respect of fresh credit of the share capital account. ii] Please furnish confirmation account of the shareholders along with the blank account statement of the shareholders for the year under consideration. iii] Please provide balance sheet of the shareholders for the year under consideration. iv) Please explain the source of money in the hands of the shareholders for the amount invested by them with you in the form of share capital. In response, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case and failed to discharge the primary onus as required under section 68 of the I.T act. Only after considering the documents on record and following the directions of the DRP, the AO treated the amount received of Rs 134,99,99,904 as unexplained cash credits in the hands of the company under sections 68 of the I.T act 61. Same holds true for the other addition related to late deposit of employee contribution of PF /ESI. Even though, this additions was part of assessment order under section 143 (1) of the I.T act, but considering the DRP directions, the AO has discussed this issue in detail and made additions of Rs 54,031/- and the AO also mentioned in order that she is not making the addition separately as these are already covered under order pass under section 143 (1) of the I.T act. Thus, it is crystal clear that the AO has duly followed the direction of the DPR for both the additions and it is unfair and wrong on part of the assessee to claim that DRP direction are not followed. Though the DRP directions were fully followed by the AO but at the same time nobody can deny the right to assessee to question, in its wisdom, that the AO could have passed more speaking unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecisions (para 7), the Hon'ble Bench has agreed with the stand taken by the department and remitted the matter back to AO to give effect to DRPs/TPOs OGE. At worst, the facts of the present case and the facts of the Hitachi Astemo (cited supra) are similar and it is respectfully submitted that being the judgment of the Hon'ble coordinate bench, the same should be followed because in that case also, the case laws cited by the assessee and the department has been duly considered. (ii) Further it is submitted that with regard to 144C violations, the assessee case is fully covered by the decisions of Hon'ble jurisdictional Delhi High Court, Karnataka High Court and Hon'ble Madras High Court in several cases, which for ready reference are mentioned below- 1) Anand NVH Products Pvt. Ltd. vs. National E Assessment Centre ANR dated 06.08.2021 WP(C) 7936/Del/ 2021 2) Fiber Home India Vs. National E Assessment Centre ANR 15.12.2021 WP(C) 11609/2021 3) SRF Ltd. Vs. National E Assessment Centre and ANR WP(C) 6484/2021 4) Marvel India Pvt. Ltd. vs. National faceless Assessment Centre, Delhi 138 taxmann.com145 (Karnataka) (2022) 5) TT Steel Service India Pvt. Ltd. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DRP as well as the Assessing Officer in this regard. 8. In the result, I pass the following: ORDER.: [iii] The Dispute Resolution Panel (DRP) is directed to conclude the proceedings by considering the objections filed by the petitioner, in accordance with law and section144C of the Income-tax Act, 1961. (iv) Upon the DRP concluding the proceedings as provided under section 144C referred to supra, respondent No.1 - Assessing Officer shall proceed further and pass appropriate orders in accordance with law. Thus though the Hon'ble High Court found the order passed by the AO as arbitrary, illegal and without jurisdiction/ authority of law but still the Hon'ble High Court has not quashed the entire assessment proceedings and in fact, restored the proceedings to DRP to conclude in accordance with law and section 144C of the IT Act. Thus as the Hon'ble Delhi High Court, Hon'ble Karnataka High Court and the Madras High Court, on the same facts, did not quash the entire proceedings accordingly it is humbly prayed that in the instant case also, at worst, the proceedings may kindly be remitted back to the Assessing Officer for passing the assessment order after inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but knowingly it proceeded to disagree with the said judgment against all known rules of precedents. Precedents which enunciate rules of law form the foundation of administration of justice under our system. This is a fundamental principle which every presiding officer of a judicial forum ought to know, for consistency in interpretation of law alone can lead to public confidence in our judicial system. This Court has laid down time and again that precedent law must be followed by all concerned; deviation from the same should be only on a procedure known to law. A subordinate court is bound by the enunciation of law made by the superior courts. A Coordinate Bench of a Court cannot pronounce judgment contrary to declaration of law made by another Bench. It can only refer it to a larger Bench if it disagrees with the earlier pronouncement. We respectfully concur with these observations and are confident that all the Courts and various Tribunals in the country shall follow these salutary observations in letter and spirit. Thus it is humbly prayed that in line with the above noted decision of the Hon'ble Supreme Court, the decision of the Hon'ble coordinate bench in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y assessee and also of a jurisdiction Tribunal. (J) Assessee's prayer for quashing of assessment proceedings. The assessee counsel, very surprisingly has also prayed for quashing of assessment proceedings which appears to be made only to hide its failure in discharging the primary onus cast u/s 68 of the IT Act. As it is discussed and explained in detail that the AO has followed the DRPs directions in totality and the assessee's contentions are without any basis and misleading but even without prejudice to that even asking for quashing of assessment proceedings is very far fetched prayer considering the facts of the instant case. Also quashing of assessment proceedings is an extreme step and the Hon'ble Apex Court in series of judgements have directed the Tribunals to desist from taking such steps as it results in a undue loss of revenue to the Government exchequer and at max, if the Tribunal finds any error in the order, then the same should be rectified. Some of the judgements of Hon'ble Apex Court are mentioned below for the reference of the Hon'ble Bench. (K) Tribunals duty does not end with merely cancelling the assessment orders: It is further prayed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o complete the inquiry before the last date before which the assessment must be completed. In the instant case, however, since it is not established that the claim was a belated one the proper order to be passed is to set aside the assessments and to direct the ITO to make fresh assessments in accordance with the procedure prescribed by law. The Tribunal, therefore, erred in merely cancelling the assessment orders and in not issuing further directions as stated above. [L] Reliance is also placed on the decision of Hon'ble Supreme court in the case of THE PRINCIPAL COMMISSIONER OF INCOME TAX-4, MUMBAI Vs Mis. S.G. ASIA HOLDINGS (INDIA)PVT. LTD. in CIVIL APPEAL NO.6144 OF 2019, wherein the Hon'ble court did not quash the entire assessment proceedings even when no reference was made by AO to TPO with regard to transfer pricing issues and decided the ALP on his own in complete violation of the instruction of the department. The relevant extract of the relevant portion is reproduced below: 7. In view of the guidelines issued by the CEDT in Instruction No.3/2003 the Tribunal was right in observing that by not making reference to the TPO, the Assessing Officer had breached the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd relied upon several judgment of Hon'ble Supreme Court/High Courts. (O) As several courts including the decisions placed above have held that the non following of DRPs directions is procedural/technical error, accordingly reliance is also placed on the judgment of Hon'ble Supreme Court in the case of Sugandi vs. P. Raj Kumar in 3427/2020 wherein the Hon'ble Supreme Court has held that the courts should decide on merit and not on procedural/technical issues. The decision of the Hon'ble Supreme Court is very pertinent and relevant extract is reproduced below: 9. It Is Often Said That Procedure Is The Handmaid Ofjustice. Procedural And Technical Hurdles Shall Not Be Allowed To Come In The Way Of The Court While Doing Substantial justice. If The Procedural Violation Does Not Seriously Cause Prejudice To The Adversary Party, Courts Must Lean Towards Doing Substantial justice Rather Than Relying Upon Procedural And Technical Violation. We Should Not Forget The Fact That Litigation Is Nothing But A journey Towards Truth Which Is The Foundation Of Justice And The Court Is Required To Take Appropriate Steps To Thrash Out The Underlying Truth In Every Dispute. Therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the very same paras in the draft assessment order dated 21.09.2021 [except that some reproductions in the draft order as missing in the final assessment order] passed by the NFAC. There is thus, not only blatant violation of the directions of the DRP but complete non-application of mind while passing the final assessment order. (d) Fourthly, regarding disallowance of delayed payment of contribution, the DRP had directed the NFAC to consider the judicial precedents as highlighted by the appellant [refer para 3.4.2 of DRP order], which has again been completely ignored by the JAO while passing the final order. (e) Fifthly, even while passing the impugned final order, JAO has not even cared to comply with the principles of natural justice and the mandatory requirement of granting personal hearing, thereby, perpetuating the jurisdictional error committed by the NFAC while passing the draft order. 5. As per provisions of section 144C(10) read with section 144C(13) of the Act, it is mandatory for the assessing officer to pass the final order in conformity with the directions issued by the DRP. Not following the directions of the DRP renders the final assessment order as beyond ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the observation of the jurisdictional Delhi High Court in the case of ESPN Star Sports Mauritius SNCET Compagnie vs. UoI[2016] 388 ITR 383 (Del), wherein the Hon'ble Delhi High Court has categorically held that- "section 144C(10) read with section 144C(13) makes it abundantly clear that there is no option with the assessing officer but to be bound by orders and subject to review by the Disputes Resolution Panel. It is bound by the Disputes Resolution Panel." Ergo,the Hon'ble High Court observed that since the final assessment order was passed in complete violation of the directions of the DRP, the same renders the final assessment order void ab intio and liable to be quashed on this account alone. 12. The Bombay High Court in the case of Vodafone Idea Ltd v. CPC:[2023] 459 ITR 413 (Bom)held that failure on part of department to follow procedure under section 144C of the Act is not merely a procedural irregularity but is an illegality and vitiates entire proceeding. 13. To the similar effect is the case of Louis Dreyfus Co. India (P.) Ltd. vs. DCIT: [2024] 159 taxmann.com 244 (Del) dated 30.01.2024. 14. Attention is also invited to the following pertinent observations of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given by learned DRP and made addition of Rs. 26,56,35,337/-, which he himself accepted as explained in the draft assessment order. Thus, the impugned assessment order has been passed in clear violation of the directions of learned DRP. Therefore, the assessment order is a nullity in the eyes of law as it is against the provisions contained under sub-section (10) and (13) of section 144C of the Act. That being the factual and legal position, we quash the final assessment order. 13. Before parting, we must observe, in recent times, we have come across several instances of open defiance and non-implementation of directions issued by DRP by the Assessing Officers. This, in our view, is a very disturbing trend and reflects poorly on the credibility of the department and shakes the confidence of tax payers. Therefore, it goes against the Government's policy of adopting taxpayer friendly approach. In any case of the matter, the DRP is constituted by three senior Commissioner level officers of the department and is a dispute resolution mechanism set up by the Government under the statute. As per the Statute, the Assessing Officer is duty-bound to implement the directions of the DRP. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t; and in objection filed by the assessee before Ld. DRP and Ld. DRP has held that the above receipts received by the assessee is involvement of support services to the extent of Rs. 36,37,596/- and other portion of the income includes sale of software and hardware. Without going into merits of the findings of the Ld. DRP, we observe that Ld. DRP has come to the conclusion on their own analysis that the case of the assessee falls under FTS. We observe that while passing the final Assessment Order Assessing Officer has not followed the directions of the Ld. DRP and passed his own Assessment Order by merely reproducing his analysis in draft Assessment Order. 19. From the record we observe that the final Assessment Order passed by the Assessing Officer is not as per section 144C(13) of the Act. However, Assessing Officer has filed a note in support of his final Assessment Order in which he has made submissions that the order passed by him is analyzing the various issue which are without prejudice views which Ld. DRP has not rejected. He is of the view that the final Assessment Order passed by him is as per section 144C(13) of the Act. After considering the submissions of both the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Accordingly, we quash the assessment order passed by the Assessing Officer and grounds raised by the assessee are allowed in this regard."(emphasis supplied) 16. To the similar effect is the decision of the Delhi Bench of the Tribunal in the case of Bechtel Ltd. v. ACIT: [2024] 159 taxmann.com 319 (Delhi - Trib.)[31-01-2024]. 17. For the aforesaid reason, the final assessment order passed is beyond jurisdiction, illegal and bad in law and calls for being quashed at the threshold. Re: Violation of section 144B of the Act 18. During the course of last hearing, the ld. Departmental Representative (DR) cited certain case laws to contend/ argue that since the impugned order was passed without issuing SCN and without affording personal hearing, the matter may kindly be remanded to the file of the assessing officer. 19. In respect of the aforesaid, it is vehemently submitted that the impugned order deserves to be quashed (and not remanded), inter alia, for the following reasons: 20. It is submitted that provisions of section 144B of the Act provides for a mandatory procedure in law to be followed for completion of assessment, which is sacrosanct and cannot be done away with; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer & Anr. (2013) 10 SCC 765, wherein the apex Court observed as under: 16. It is a settled legal proposition that law of limitation may harshly affect a particular party but it has to be applied with all its rigour when the statute so prescribes. The court has no power to extend the period of limitation on equitable grounds. The statutory provision may cause hardship or inconvenience to a particular party but the court has no choice but to enforce it giving full effect to the same. The legal maxim dura lex sed lex which means "the law is hard but it is the law", stands attracted in such a situation. It has consistently been held that, "inconvenience is not" a decisive factor to be considered while interpreting a statute. "A result flowing from a statutory provision is never an evil. A court has no power to ignore that provision to relieve what is considers a distress resulting from its operation." (See Martin Burn Ltd. V. Corpn. of Calcutta10, AIR p.535, para 14 and Rohitash Kumar v. Om Prakash Sharma11.) Emphatic reliance is placed on the decision of the apex Court in the case of Hope Textiles Ltd. v. UoI: [1994] 205 ITR 508 (SC). In that case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the apex Court has merely set-aside the decision of the High Court and have remanded the matter to the High Court to consider the aspect that provisions of section 144B(9) of the Act have been omitted. The apex Court has not held that the matter is required to be remanded to the assessing officer in violation of section 144B of the Act. 2. NFAC vs. Automotive Manufacturers Pvt. Ltd. [CA No.1829/2023] DCIT vs. Abacus Real Estate Pvt. Ltd. [CA No.1830/2023; decided on 21.03.2023] Additional Joint Deputy ACIT vs. Multiplier Brand Solutions Pvt. Ltd. [CA No.1831/2023; decided on 21.03.2023] The said decisions are not applicable since: - the said decisions merely deal with issue where assessment order is passed with issuance of SCN. On the contrary, the case of the appellant deals with multiple jurisdictional defects as pointed out supra(and in earlier synopsis). - the matter has been remanded merely because in view of the Court, the Revenue ought to have been given some leverage to correct themselves since the faceless assessment scheme was introduced recently. - the judgments were, most importantly, rendered by the Court pursuant to writ petitions filed before the High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the said reason alone. 23. In view of the aforesaid, it is submitted that the submissions of the CIT(DR) regarding remanding the matter to the assessing officer deserves to be dismissed and the impugned assessment calls for being quashed. 24. Submissions with respect to other issues and addition on merits are dealt with as part of synopsis dated 29.08.2022 already placed on record." 13. Considered the rival submissions and material placed on record. We observe from the record that the case of the assessee was selected for scrutiny under faceless assessment scheme and accordingly the assessment was completed by issue of draft assessment order (DAO) by NFAC and subsequently final assessment order (FAO) passed by the jurisdictional assessing officer (JAO). Before us, the assessee has raised grounds expressing objections to the process adopted by the NFAC and JAO in completing the assessment in its case. The assessee has raised following issues: i. DAO was not passed as per sec.144B (1)(xiv)(b) ii. NFAC passed the DAO without allowing personal hearing in gross violation of mandatory provisions of the Act. iii. FAO passed by the JAO instead of NFAC is beyond jurisdiction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f assessment u/s 144C is different, the final outcome of assessment from the NFAC is the draft assessment order, even there is violation, there is no prejudice caused to the assessee. Assessee gets one more opportunity before the Dispute Resolution Panel (DRP). The issue raised by the assessee that the draft assessment order passed without giving opportunity of being heard to the assessee at the stage of DAO is beyond comprehension and there is if at all violation of section 144B(1)(xiv) in the case of assessments falling u/s 144C of the Act, the same can be rectified at the stage of DRP by filing the relevant objections, this will fall under the category of rectifiable mistake. Therefore this is issue accordingly dismissed. 16. In this regard, we observed that Ld AR has relied on several case law to make submissions that not giving opportunity of being heard to the assessee before forwarding the DAO is bad in law and deserves to be quashed. We observed that all the case law relied by the assessee are relating to the assessments framed u/s 143(3), 144 and 147 of the Act. There is no case wherein the issue of 144C was adjudicated. This is the peculiar case and we already held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by JAO and has no authority to give reasons on the issues of NFAC. Beyond his capacity, therefore, we do not see any violation on the part of JAO. Ld DRP gave direction to the NFAC and ultimately the assessment was completed by the JAO. Hence, we do not see any reason to make the assessment bad in law. 19. With regard to next issue of FAO passed without considering the submissions and evidences before the AO, is a serious issue and needs to be addressed. This issue can be resolved by remitting the issue back to the file of AO. However, we observed that the issue relating to section 68 is issue of share capital to its AE's and this issue was already considered in the TP stage itself and TPO has not passed any adverse comments and accepted that there is no variation. Instead of remitting the issue back to the file of AO, we are inclined to adjudicate the issue on merit. 20. The relevant facts are, the assessee has issued share capital to its AE's during the current assessment year along with the share premium. The assessee has submitted all the details of the shareholders, complete address, PAN, number of shares issued, face value, details of share premium, total amount received. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee in respect of shareholders establish that they are non-resident entities, having independent and legal existence. The moneys have come to assessee through banking channels as is evident from FIRC, which also mentions the purpose of remittance and also the particulars of the remitting bank. FIPB approval that too with a liberty to collect share capital up to Rs. 600 crores and ROC compliance etc. clearly indicate the stand of the assessee. In our considered view, the plethora of the evidence filed by the assessee amounts to discharge of primary burden cast on the assessee in terms of s. 68 of the IT Act for identity and creditworthiness of the creditors and genuineness of transaction. ……….. 11.5 We find merit in the contentions of learned counsel and reliance on the decisions of the Tribunal in the cases of Finlay Corporation Ltd. (supra), Smt. Susila Ramasamy (supra) and Saraswati Holding Corpn. Inc. (supra) and the import of CBDT circular referred to above. Whenever remittances are made by the non-resident holding company for purchase of shares of its subsidiary in India, the money undoubtedly is capital in the nature and if documents like ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the share application money as raised in the grounds of appeal cannot be held as non-genuine and added as income of the assessee under s. 68 of the Act. Consequently, additions made on this count as raised in grounds of appeal are deleted. Assessee's grounds of appeal on this issue are allowed." 22. The above decision of the coordinate bench was also affirmed by the Hon'ble High Court of Delhi. 23. Further, we observed that the similar issue was considered by the ITAT Mumbai bench in the case of Syntensia Network Security India Pvt. Ltd (supra) and held as under: "9. Furthermore, the law is section 68 is not apply to remittances made in India by non- resident is strengthened by the proviso to u/s.68 inserted w.e.f. asst. yr. 2013-14. According to the said proviso, if an assessee company, in which public are not substantially interested, receives money by way of share capital, then the source of funds of resident shareholder has to be established by the assessee in order to get out of the kin of the deeming provision under s. 68. Hence, the proviso talks of the source being established only when the shareholder is a resident of India. There is no such requirement if sh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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