M/S.LOTUS ENTERPRISES,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-8(1), MUMBAI

These two appeals by two different assessees from the same group are taken up together for hearing as the facts germane to the issue raised in both these appeals are identical. – A.Y. 2012-13: 2. This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)- 50, Mumbai [ in short ‘the CIT(A)’] dated 30/01/2018 for the assessment year 2012-13.

Shri Madhur Agrawal appearing on behalf of the assessee submits that at this stage he would be making his submissions only in respect of ground No.3 i.e. on merits of the addition made u/s. 68 of the Income Tax Act, 1961 [in short 'the Act']. In case the assessee succeeds on ground No.3, the legal/jurisdictional issues raised in ground No.1 and 2 would become academic. 3.1 The Ld.Counsel for the assessee submits that a perusal of assessment order dated 30/03/2015 passed u/s. 153r.w.s. 143(3) of the Act would show that addition u/s. 68 of the Act Rs.45.00 lacs has been made on the premise that the assessee has failed to discharge its onus in proving creditworthiness of the lender i.e. Dhanterash Tie-up Pvt. Ltd.[in short ‘DTPL’]. 3.2 The Ld.Counsel for the assessee narrating facts of the case submits that a search action was carried out on M/s. Lotus Enpar Group on 09/01/2013. Consequent to search action, survey action also took place on Dhanterash Tie- up Pvt. Ltd, M/s. Premium Transport P. Ltd. And M/s. Lily Commodities P. Ltd. The aforesaid three companies were acquired by promoters of Enpar Group during the Financial Year 2011-12. The total investment of the promoters for acquiring the shares of aforesaid companies was Rs.70,77,750/-. The share capital and premium of the aforesaid companies before Enpar Group took over were shown to be invested in the equity shares. These investment amounting to Rs.31,29,99,000/- were realized during the Financial Year 2011-12. Subsequently, the very same amount was advanced to various group concerns including the assessee. During the course of assessment, the assessee in order to discharge its onus in proving identity and creditworthiness of the lender furnished confirmation letter from DTPL, complete address, PAN, cheque number and date, bank details vide which the amount was transferred to the assessee. In subsequent assessment years the assessee had repaid entire amount to DTPL. The amount was paid by DTPL to the assessee vide account payee cheque. The receipt of the said cheque from DTPL was duly furnished to the Assessing Officer. The Ld.Counsel for the assessee submits that the amount of Rs.45.00 lacs was added in the hands of DTPL as well as the assessee. The addition made by Assessing Officer in the hands of DTPL was deleted by the CIT(A). The Department carried the issue in appeal before the Tribunal. During the pendency of appeal before the Tribunal DTPL accepted the addition and offered it to tax under Vivad Se Vishwas Scheme (VSVS). Thus, once DTPL accepted the addition and paid tax thereon, creditworthiness of the lender is proved. Therefore, the same amount cannot be taxed in the hands of assessee u/s. 68 of the Act on the ground that the assessee has failed to discharge its onus in proving creditworthiness. The Ld.Counsel for the assessee in support of his submissions referred to declaration filed by DTPL during ‘VSVS’ and also the challans filed by the said company to pay the tax amount.

Per contra, Smt.Madhumalti Ghosh representing the Department vehemently submitted that under ‘VSVS’ DTPL has settled the dispute but that would not absolve the assessee. The ld. Departmental Representative submitted that the assessee cannot take the benefit of declaration made by DTPL under ‘VSVS’.

We have heard the submissions made by rival sides and have examined the orders of authorities below. The solitary reason for making addition u/s. 68 of the Act is that the assessee has failed to discharge its onus in proving creditworthiness of the lender i.e. DTPL. The Ld.Counsel for the assessee has pointed that DTPL has owned the amount and has offered the same to tax under ‘VSVS’. Once the amount has been offered to tax and taxes have been paid thereon, the said amount would undisputedly be available with DTPL. In the facts of the case we deem it appropriate to restore this issue back to the file of Assessing Officer for verification regarding the amount being offered to tax by DTPL. If the nexus between the said amount being advanced to the assessee is established, the addition u/s. 68 of the Act is liable to be deleted. With the above observations we restore ground No.3 of appeal to Assessing Officer. Consequently, ground No.3 is allowed for statistical purpose.

In so far as ground No.1 & 2 of the appeal, no submissions have been made by Ld.Counsel for the assessee at this stage, hence, they are left open.

In the result, appeal by the assessee is partly allowed for statistical purpose.

This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)- 50, Mumbai dated 30/01/2018 for the assessment year 2012-13.

In this appeal assessee has raised identical grounds as were raised in ITA No.1999/Mum/2018. Both sides are unanimous in stating that the facts in the present appeal giving rise to the addition u/s. 68 of the Act are identical to the facts in for assessment year 2012-13. 10. We find that in the present appeal as well the amount has been advanced to the assessee by DTPL along with its two other group concerns, M/s. Lily Commodities P. Ltd. and M/s. Premium Transport P. Ltd. The details of loan advanced are as under: Lender Amount M/s.. Dhanterash Tie-up P. Ltd. Rs.70,00,000/- M/s. Lily Commodities P. Ltd. Rs.5,45,00,000/- M/s.Premium Transport P. Ltd. Rs.3,80,00,000/- The Assessing Officer made addition of Rs.9,95,00,000/- u/s. 68 of the Act. The CIT(A) has confirmed the addition and in fact, has enhanced the amount of disallowance u/s. 68 of the Act by Rs.6,20,00,000/-. The aggregate addition made u/s. 68 of the Act is Rs.16,15,00,000/- by the CIT(A). The contention of the ld. Counsel for the assessee is that these amounts have been offered to tax by respective companies under ‘VSVS’. While adjudicating the appeal in ITA No.1999/Mum/2018, we have restored the issue to the file of Assessing Officer for verification. The findings given therein would mutatis mutandis apply to the facts of the present appeal. For parity of reasons ground No.3 of the appeal is allowed for statistical purpose.

In ground No. 1 and 2 of appeal, the assessee has raised legal ground challenging validity of proceedings u/s. 153C r.w.s. 143(3) of the Act . No submissions have been made on the said grounds at this stage, hence, they are left open.

In the result, appeal by assessee is partly allowed for statistical purpose.

To sum up, & are partly allowed for statistical purpose.