INFRA ONE VENTURES LLP,MUMBAI vs. INCOME TAX OFFICER 23(1)(2), MUMBAI

GROUND NO.1 The learned CITA) erred in upholding the order passed by the learned AO, Ward 23(1X) Mumbai, under section 143(3) of the Act, even though it is capricious in mature and has been made ignoring the established and undisputed facts. The said order is contrary to the facts and circumstances of the case and the applicable provisions of the Act. GROUND NO.2 The learned CIT(A) erred in upholding the order passed by the Ld AO u/s 143(3) of the Act, though the same unjust and is passed violating the principles of natural justice. GROUND NO. 3 The learned CIT(A) has erred in upholding the additions made by the Ld AO to the total income of the appellant of Rs.83,94,840, which is contrary to the facts and circumstances of the case and made without any basis whatsoever. GROUND NO. 4 The learned CIT(A) has erred in upholding the issuance of penalty notice u/s 271(1)e) of the Act passed by the learned AO, and the same must be quashed. The appellant craves leave to add, to alter or amend the aforesaid Group INFRA ONE VENTURES LLP called for, before the disposal of the appeal.

Brief facts of the case are that assessee is a limited liability partnership firm engaged in purchasing land for commercial purposes and industrial activities. Assessee filed its return of income on 05-08-2016 declaring total income of Rs. NIL. Case of the assessee was selected for complete scrutiny under CASS.

During the year under consideration assessee firm received partners capital contribution of Rs. 5,29,45,766/- from 6 individuals as partners contribution. It is pertinent to mention here that out of 6 partners only 2 partners i.e. Mr. Mohan Das R Lakhani and Mr. Tejbhan Lakhani only were not able to substantiate there source of contribution amounting to Rs. 83, 94,840/- (Rs. 41, 97,420/- each). AO added this figure of Rs. 83, 94,840/- u/s 68 to the income of the firm.

Aggrieved with this assessment order assessee preferred an appeal before the Ld. CIT (A). Ld. CIT (A) also confirmed the addition u/s 68 made by the AO and sustained the assessment order. Assessee being further aggrieved with this order of Ld. CIT (A) preferred this appeal before ITAT.

We have thoroughly considered the order of AO, order of Ld. CIT (A) and submissions of the assessee narrated in the orders of both the authorities. Copies of submissions made before the authorities below were not filed with ITAT for our perusal. Ground no.1 and 2 are general in nature and ground no.3 being substantive ground needs our adjudication.

As relevant submissions are not before us we relied upon the facts available on record for our consideration in the form of assessment order and order of Ld. CIT (A).

As per para 4.1of AO’s order Mr. Mohan Das R Lakhani having no PAN and Mr. Tejbhan Lakhani having PAN no. ANFIL3696K. Mr. Tejbhan Lakhani DECLARED income of Rs. 1,55,280/- for AY 2016-17 in his individual return. Whereas copy of passport of Mr. Mohan Das R Lakhani was filed to substantiate the fact that he is an NRI. It is further observed by AO that both the partners received money from one Mr. Deepak Tolani. Copy of acknowledgement of ITR of Mr. Deepak Tolani was also enclosed for AY 2016-17 declared income of Rs. 4,26,030/-.

During the assessment proceedings PIO card dated 31-01-2012 towards proof of identity and NRO bank statement of Mr. Mohan Das R Lakhani is submitted. It is further submitted that both the individuals are Indonesia based wealthy NRI’s and both of them has given a loan of Rs 41,99,975/- each to Mr. Deepak Tolani on 16-01-2015. Subsequently Mr. Deepak Tolani returned this amount of loan to both the individuals on 12-10-2015. Thereafter on 13-10-2015 both the individuals contributed Rs. 41, 97,420/- each as partners contribution to the assessee firm.

In our observation AO himself agreed that out of a huge contribution totalling Rs. 5, 29, 45,766/- only an amount of Rs. 83,94,840/- is under doubt. In totality of facts, it can be reasonably assumed that assessee LLP is being incorporated by wealthy people and other than these two individuals are able to substantiate their identity, genuineness and credit worthiness as required by sec 68.

These two individuals being NRI (as claimed by them), when they are submitting their PIO card and NRO bank statement needs to be given and another opportunity to substantiate the ingredients of sec 68. Considering our observation above and facts of the case we restore this matter back to the record of AO. We further direct to give a fresh opportunity to both the individuals to substantiate their claims about source of the funds, identity and genuineness. Assessee is directed to arrange the relevant documents about the identity, genuineness and credit worthiness of this transaction before the AO. It is further directed to the assessing officer that in case both the individuals are able to establish their identity and status as NRI, the criteria of having substantial income in India should be ignored. The main focus of the AO should be on their overall income may be in India or abroad, authenticity of loans given to Mr. Deepak Tolani and repayment by him and balances lying in their NRO bank account. In this terms Ground no.3 raised by assessee is allowed for statistical purposes.

In the result, appeal of assessee is allowed for statistical purposes. Order pronounced in the open court on 13th day of January, 2023.