ASSISTANT COMMISSIONER OF INCOME TAX-24, MUMBAI vs. BRICK AND BYTE INNOVATIVE PRODUCTS PRIVATE LIMITED, MUMBAI

2 Assessment Year:2012-13 M/s. Brick & Byte Innovative Products Private Limited आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by revenue for Assessment Year [in short referred to as ‘AY’] 2012-13 contest the order of Ld. Commissioner of Income- Tax (Appeals)-24, Mumbai, [in short referred to as ‘CIT(A)’], Appeal No. CIT(A)-24/ACIT-15(1)(2)/IT-133/2015-16 dated 31/03/2017 on following grounds of appeal: - 1. "On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition of Rs.4,14,09,894/- made u/s.68 of the Act, in respect of fresh unsecured loans received from four parties, holding that the assessee had proved three ingredients of identity, credit worthiness of share applicants and genuineness of transaction as the same were paid through their running bank accounts, without appreciating the fact that assessee has failed to discharge its onus of proving the creditworthiness of parties who advanced the loans." 2. "On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in holding that the assessee company has proved the identity, creditworthiness and genuineness of the unsecured loan parties, ignoring the recent decision of the Hon'ble Supreme Court in the case of Navodaya Castle (P) Ltd [2015] 56 taxman. com 18 (SC) wherein the Apex Court has held that certificate of incorporation, PAN, etc., were not sufficient for purpose of identification of subscriber company, when there is material to show that the subscriber was a paper company and not a genuine investor." 3. "The appellant prays that the order of Ld.CIT(A), Mumbai on the above directions be set aside and that of the Assessing Officer be restored." The assessee, upon receipt of notice of hearing, has filed cross- objections against the same on following grounds: -

1. The Ld. C1T (A) failed to appreciate that the condition precedent to proceed with scrutiny assessment proceedings was not satisfied as the notice under section 143(2) of the Act, dated 07.08.2013 was not served on the Appellant. Thus, the proceedings conducted pursuant to the notice dated 07.08.2013 and the subsequent assessment order dated 31.03.2015 are bad in law and void ab initio.

2.1 Facts in brief are that assessee being resident corporate assessee stated to be engaged in the business of manufacturing of engineering items and carrying out job work was assessed for year under 3 Assessment Year:2012-13 M/s. Brick & Byte Innovative Products Private Limited consideration u/s 143(3) on 31/03/2015 wherein the income of the assessee was determined at Rs.75.95 Lacs after certain additions u/s 68 for Rs.414.09 Lacs as against Nil return e-filed by the assessee on 25/09/2012. The case was picked up for scrutiny notice by issuance of notice u/s 143(2) on 07/08/2013 by erstwhile ITO-10(3)(2) which was duly served upon the assessee. The assessee raised objection that the said notice was not received. However, the assessee was shown copy of dispatch register wherein the assessee’s name was appearing at Sr. No.-656, a copy of which forms part of quantum assessment order. Accordingly, the case was proceeded with after rejecting the said objections raised by the assessee. 2.2 During assessment proceedings, it transpired that the assessee received fresh unsecured loans aggregating to Rs.414.09 Lacs from 4 entities as per the following details: - No. Name of Lender Amount (Rs.) 1. Resun Energy Private Limited 2,79,354/- 2. Teranuova Industrial Parts P. Ltd 14,55,026/- 3. Shri Prashant Kamat 1,94,85,514/- 4. Shradha Energy & Infraproject P.Ltd. 2,01,90,000/- Total 4,14,09,894/- After examining the supporting documentary evidences furnished by the assessee, Ld. AO came to a conclusion that although the assessee established the identity of the lenders but failed to establish the creditworthiness of the lenders and also genuineness of the said transactions since the assessee did not furnish necessary documentary evidences such as copy of return of income of the lenders, statement of total income, Balance Sheet & Profit & Loss account etc. of the lenders.

4 Assessment Year:2012-13 M/s. Brick & Byte Innovative Products Private Limited Accordingly, the said amounts were treated as unexplained cash credit u/s 68 and added to the income of the assessee. 3.1 Before learned first appellate authority, the assessee raised a plea of violation of natural justice and inter-alia, submitted that the additions were not justified since the three entities were related / associated parties whereas one of the entities was assessee’s business associates. In support of the loan transactions, the assessee filed copies of Income Tax Returns, statement of total income, ledger confirmations, copy of bank statements etc. to submit that the said loans were genuine transactions. The assessee’s submissions were subjected to remand proceedings before Ld. AO vide remand report dated 26/10/2016, a copy of which has been placed on record. 3.2 In the remand report, the assessee’s objection as to issuance of notice u/s 143(2) were again rejected in the background of observations made in the quantum assessment order as enumerated by us in preceding para 2.1. Regarding additions on merits, the attention was drawn to order sheet entries dated 03/03/2015 wherein it was noted by assessing AO that the companies from whom the loans were obtained, did not have any income to substantiate the loans given to the assessee and therefore, the additions were made u/s 68 and the same were justified. 3.3 The assessee objected to the remand report by submitting that Ld. AO mechanically repeated the contents of the assessment order with regard to issuance of notice u/s 143(2) which was never served upon the assessee. Another objection was that Ld. AO did not even bother to serve any notice to the assessee before submitting the remand report 5 Assessment Year:2012-13 M/s. Brick & Byte Innovative Products Private Limited and further, no verification was made to examine the genuineness of the loan transactions which was in violation of principal of natural justice. It was alleged that assessment order as well as remand report were furnished with biased mind. Vide other submissions dated 17/03/2017, the attention was drawn to the documentary evidences filed by the assessee so as to demonstrate the fulfilment of primary ingredients of Section 68 and therefore, a prayer was made to delete the impugned additions. 3.4 The learned first appellate authority, after due consideration of submissions and material on record, dismissed assessee’s legal objection as to issuance of notice u/s 143(2) since Ld. AO had duly followed the law and procedure and issued statutory notices after affording opportunity of being heard to the assessee. 3.5 Proceeding on merits, Ld. CIT(A), after appreciating the documentary evidences, noted that the transactions were routed through banking channels and the source thereof could not be doubted. Whatever may be the strength of presumption, the same could not substitute the evidences. Further, Ld. AO made no efforts to show that the stated transactions were sham, fictious or artificial except doubting that the loans amounts were nothing but unaccounted income of the assessee. He failed to gather any evidence to show that the unaccounted cash of the assessee changed hands consequent to cheque payments. No corroborative evidences were brought on record to support the findings. Reliance was placed on the decision of this Tribunal rendered in Anant Shelters Pvt. Ltd. (20 taxmann.com 153 2012) & the ratio of decision of Hon’ble Apex Court rendered in Lovely 6 Assessment Year:2012-13 M/s. Brick & Byte Innovative Products Private Limited Exports Pvt. Ltd. (216 CTR 195). Since the assessee, in the opinion of learned first appellate authority, furnished requisite documents to prove the fulfilment of primary ingredients of Section 68, the loan credits could not be doubted and the additions made u/s 68 could not survive. Aggrieved by the said adjudication, the revenue is under further appeal before us.