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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI S. JAYARAMAN
आदेश /O R D E R
PER N.R.S. GANESAN, JUDICIAL MEMBER:
This appeal of the Revenue is directed against the order of the Commissioner of Income Tax (Appeals) -11, Chennai, dated 28.03.2018 and pertains to assessment year 2013-14.
There was a delay of five days in filing this appeal by the Revenue. The Revenue has filed a petition for condonation of delay. We have heard the Ld. D.R. and the Ld. representative for the assessee.
We find that there was sufficient cause for not filing the appeal before the stipulated time. Therefore, we condone the delay and admit the appeal.
Shri S. Bharath, the Ld. Departmental Representative, submitted that the only issue arises for consideration is deletion of addition made by the Assessing Officer under Section 68 of the Income-tax Act, 1961 (in short 'the Act'). According to the Ld. D.R., the assessee has received share capital for allotment of shares from M/s Manian Power Pvt. Ltd. and M/s Rania Investment & Holding Ltd. According to the Ld. D.R., in respect of M/s Manian Power Pvt. Ltd., the assessee has furnished necessary confirmation for the investments. However, in respect of M/s Rania Investment & Holding Ltd., which is a British Virgins Island company, the assessee could not file the confirmation. Since the assessee could not file necessary documents to establish creditworthiness and genuineness of transaction, according to the Ld. D.R., the Assessing Officer found that the investments to the extent of ₹13,00,08,500/- was unexplained credit under Section 68 of the Act.
However, according to the Ld. D.R., the CIT(Appeals) allowed the claim of the assessee on the ground that the foreign inward remittance certificate was received from M/s Kotak Mahindra Bank Ltd., Chennai and the entire investment was accepted by the Reserve Bank of India.
According to the Ld. D.R., Reserve Bank of India does not accept the investments. Merely because the investment was received from foreign company, it does not mean that the foreign company cannot be called for proof of its creditworthiness. Whether it is foreign company or Indian company, it is for the assessee to establish creditworthiness of investment. Therefore, according to the Ld. D.R., to that extent, the order of the CIT(Appeals) is not correct.
On the contrary, Shri Y. Sridhar, the Ld. representative for the assessee, submitted that admittedly, the investments were received from two companies, namely, M/s Manian Power Pvt. Ltd. and M/s Rania Investment & Holding Ltd. In respect of M/s M/s Manian Power Pvt. Ltd., the Assessing Officer himself accepted the source. However, in respect of M/s Rania Investment & Holding Ltd., the Assessing Officer doubted the genuineness, therefore, he made addition under Section 68 of the Act. According to the Ld. representative, foreign inward remittance certificate was filed before the Assessing Officer. Moreover, the Reserve Bank of India has approved the investments. Hence, the CIT(Appeals) found that the assessee has discharged its onus. On a query from the Bench, the Ld. representative produced the copy of so called approval of the Reserve Bank of India, available at page 47 of the paper-book, which does not indicate anything about the source. It simply acknowledges the receipt of declaration in Form FC-GPR in respect of equity shares to foreign investor. It does not establish the creditworthiness of the foreign investors. The Ld. representative submitted that in that case, the matter may be remitted back to the file of the Assessing Officer so that necessary examination with regard to creditworthiness of M/s Rania Investment & Holding Ltd. can be made.
Having heard the Ld. D.R. and the Ld. representative for the assessee, we perused the relevant material available on record. As rightly submitted by the Ld. D.R. and the Ld. representative for the assessee, the so called approval of Reserve Bank of India is only acknowledgement of receipt of declaration filed by the assessee with regard to investments in equity shares. It does not say anything about the creditworthiness of creditors. For establishing the credit, the assessee has to establish three cordial principles – (i) creditworthiness of creditor; (ii) genuineness of transaction and (iii) identity of the creditor.
In this case, the identity of creditor, namely, Rania Investment & Holding Ltd. is not in doubt. However, the creditworthiness of creditor and genuineness of transaction are to be established. Therefore, this Tribunal is of the considered opinion that the matter needs to be re- examined by the Assessing Officer. Accordingly, orders of both the authorities below are set aside and the issue of investment said to be made by M/s Rania Investment & Holding Ltd. is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the matter on the basis of the material that may be filed by the assessee and thereafter decide the issue afresh in accordance with law, after giving a reasonable opportunity to the assessee.
In the result, the appeal filed by the Revenue is allowed for statistical purposes.
Order pronounced in the court on 3rd January, 2020 at Chennai.