DY, COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-3(4) , MUMBAI vs. GLINT INFRAPORJECTS PRIVATE .LTD, MUMBAI
Facts
The Assessing Officer (AO) initiated reassessment proceedings under Section 147 of the Income Tax Act, 1961, against the assessee for AY 2012-13, alleging high numbers of interconnected fund transfers without economic rationale or genuine business transactions, intended for layering of funds. The AO added a sum of Rs. 5,07,50,000/- under Section 68 of the Act. The CIT(A) deleted this addition.
Held
The Tribunal held that the assessee discharged its initial onus by providing identity, creditworthiness, and genuineness of the loan transactions through bank statements, ITRs, and annual reports of the lenders. The AO failed to conduct further inquiry to disprove the assessee's claims, relying solely on investigation wing reports and suspicions. The reassessment proceedings were also challenged.
Key Issues
Whether the addition made by the Assessing Officer under Section 68 of the Income Tax Act, 1961, for unexplained loans was justified, and whether the reassessment proceedings were valid.
Sections Cited
Section 68, Section 147, Section 143(3), Section 148, Section 151, Section 2(40), Section 139(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI PRASHANT MAHARISHI, AM & SHRI PAVAN KUMAR GADALE, JM
PER PRASHANT MAHARISHI, AM:
ITA No. 2166/Mum/2023 is filed by the Dy. Commissioner of Income Tax, Central Circle, 3(4), Mumbai (the learned Assessing Officer) against the
Aggrieved learned Assessing Officer preferred the appeal challenging the deletion of the addition of ₹5,07,50,000/- under Section 68 of the Act, raising following grounds of appeal:-
“1. On the facts and in the circumstances of the case, the learned CIT (A) is not justified in holding that the assessee has discharged onus cast upon him to prove the genuineness of loan transaction, ignoring the fact that capacity of the creditors to advance such loan or the source of it were not established in terms of section 68 of the Income Tax Act, 1961.
On the facts and in the circumstances of the case, the learned CIT (A) is not justified in holding that the assessee has proved the genuineness of its loan transaction ignoring the findings given by the Assessing Officer, which is based on the third party enquiry, detailed analysis of financials and the business activity of the loan creditors that creditworthiness and genuineness of loan transaction was not satisfactorily established.
Assessee has also filed a cross objection in CO No.131/Mum/2023, challenging the action of the learned Assessing Officer reopening the assessment order under Section 147 of the Act, upheld by the learned CIT (A). assessee has raised following grounds of appeal:-
“1. On the facts and circumstances of the case as well as in Law, the learned Assessing Officer has erred in reopening the assessment under Section 147 of the Income Tax Act, 1961, without considering the facts and circumstances of the case.”
Brief facts shows that
i. Assessee is a company engaged in construction 29th business filed its return of income on
ii. The return was processed under Section 143(1) of the Act and was not picked up for scrutiny.
iii. Subsequently, information was received from Dy. Director of Income Tax, Investigation; Mumbai that assessee has indulged in high number of interconnected fund transfer carried out in his account without economic rationale or genuine underlying business transaction.
iv. Notice under Section 148 of the Income-tax Act, 1961 (the Act) was issued on 30th March, 2019, after recording the reasons. In response to notice assessee filed return of income on 19th April, 2019, recorded reasons were requested, were provided on 9th July, 2019, against which objections were raised and speaking order was passed on 20th August, 2019, rejecting the same. The Reason as as under :-
The reasons recorded are as under:-
“1. The assessee company is engaged mainly in the business of construction. The assessee company filed its original return of income on 29.09.2012 declaring total Income at Rs.51,23,180/- Subsequently, the assessee company revised its return of income on 13.02.2013 declaring total income at Rs.50,99,480/-. The was processed u/s 143(1) of the Act.
"2. During the course of discreet enquiries conducted by this office, it has been observed that M/s.Glint Infraprojects Pvt. Ltd. is having bank Account No.06372010000610 with Kotak Mahindra Bank, Andheri (East) Branch wherein there are high number of interconnected fund transfers carried out.
From the perusal of ITRs of M/s. Glint Infraprojects Pvt. Ltd., it is seen that the assessee is filing its returns of income regularly and the latest return of income filed is for A.Y.2018-19. The year-wise details of income as per the returns of income filed by the assessee for various assessment years are as under:-
A.Y. 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 House Property 0 0 0 0 0 2,55,870 1,35,875 Income Normal Business -11,948 0 40,55,789 1,84,546 0 0 0 Income Capital Gains Income 0 0 10,67,388 5,34,378 8,16,438 20,03,652 72,121 Other Sources of 0 54,24,486 0 44,60,528 52,37,440 69,41,524 85,64,063 Income BFLA set off 0 0 23,693 49,246 0 0 72,121 GTI 0 15,88,268 50,99,484 51,30,20 59,48,361 66,89,123 48,63,580 Total Income 0 15,88,270 50,99,480 51,30,21 59,48,360 66,89,120 48,63,580
Sr. No. Name of the company/ entity 1. Vishwas finvest Pvt. Ltd. 2. Satguru Capital 3. Moonscape Facility Management Pvt. Ltd 4. SW Capital Pvt. Ltd. 5. Nivedita Mercantile & Financing Ltd. 6. Nifty Realty Pvt. Ltd. 7. Amish Infrastructure Pvt. Ltd. 8. Sunteck Wealthmax capital pvt. Ltd. 9. Naksh IT solutions Pvt. Ltd. 10. Brown Trading Pvt. Ltd. 4.2 For instance, in the bank Account No.06372010000610 of M/s.Glint Infraprojects Pvt. Ltd. with Kotak Mahindra Bank, Andheri(East) Branch, loan & advances of Rs.15 lakhs received on 27.04.2011 from Moonscape Facility Management Pvt. Ltd. are immediately transferred to Vishwas Finvest Pvt. Ltd. on the same day as loans & advances. The creditworthiness of the loans & advances of Moonscape Facility Management Pvt. Ltd. is found to be doubtful after analyzing its financials which are tabulated as under
MOONSCAPE SERVICES PVT. LTD.
4.3 Further, in the bank Account No.06372010000610 of M/s.Glint Infraprojects Pvt. Ltd. with Kotak Mahindra Bank, Andheri (East) Branch, loan & advances of Rs.4,92,50,000 received from Nifty Realty Pvt. Ltd on 13.09.2011 are immediately transferred to Vishwas Finvest Pvt. Ltd. on the same day as loans & advances. The creditworthiness of the loans & advances of Nifty Realty Pvt. Ltd. is found to be doubtful after analyzing its financials which are tabulated as under:-
NIFTY REALTY PVT. LTD. PAN: AACCN8298C ΑΟ : ΙΠΟ-10(3)(1), MUMBAI. A.Y. 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 Total Share Capital 0 0 0 1,00,000 0 0 0 0 Total Shareholder 5,06,806 5,10,974 5,97,176 4,78,688 16,36,907 8,55,021 8,56,111 9,21,537 fund Total Fixed assets 0 0 0 0 0 0 0 0 Total Turnover 8,13,699 8,87,000 4,00,000 0 8,29,601 0 0 0 PBT 5,92,517 6,168 1,26,341 -88235 4,85,490 69,292 1,832 83,185 Net Profit 5,92,517 6,168 1,26,341 -88,235 4,85,490 69,292 1,832 83,185 Total Income 5,92,520 6,1270 1,26,340 97,770 4,86,550 69,850 2,390 82,880
The Information has been considered and analyzed carefully. The DDIT (Inv.)- 2(1), Mumbal after analyzing statement of bank accounts of the assessee and its ITRs has inferred that there are high number of interconnected fund transfers carried out in in account No.06372010000610 maintained with Kotak Mahindra Bank, Andheri (E) Branch, without any economic rationale or genuine underlying business transactions with the intent of layering of funds.
On the basis of the information received and making further enquiries, statement of bank account No. 06372010000610 with Kotak Mahindra Bank, Andheri(E) Branch has been obtained and perused. On perusal of account statement, it is revealed that the assessee company received Rs.15 lakhs on 27.04.2011 from Moonscape Facility Management Pvt. Ltd. and on the same day, it was transferred to Vishwas Finvest Pvt. Ltd. On perusal of financial data of the M/s Moonscape Services Pvt. Ltd. for A.Y. 2011- 12 to 2016-17, it is evident that creditworthiness of M/s Moonscape Services Pvt. Ltd. is not genuine.
4.1 Further, on perusal of said bank account statement available on record, it is found that the assessee company received Rs.4,92,50,000/- on
After considering the information from the Investigation Wing, Mumbai and evidence available on record in the form of bank account statement and financial data of both the company i.e. M/s Moonscape Services Pvt. Ltd. and Nifty Realty Pvt. Ltd, it is held that the assessee company has indulged into transaction of Rs.5,07,50,000/- without any economic rationale or genuine underlying business transactions with sole intention of siphoning of funds to evade legitimate taxes. Therefore, I have reason to believe that the income of Rs.5,07,50,000/- chargeable to tax under the provisions of the Act has escaped assessment. Therefore, it is a fit case for reopening u/s 147 of the I.T. Act, 1961.
In this case a return of income was filed for year under consideration but no scrutiny assessment u/s.143(3) of the Act was made. Accordingly, in this case, the only requirement to initiate proceeding u/s.147 is reason to believe which has been recorded in above paras.
It is pertinent to mention here that in this case the assessee has filed return of income for the year under consideration but no assessment as stipulated
In this case more than four year have lapsed from the end of the assessment year under consideration. Hence necessary sanction to issue notice u/s.148 has been obtained separately from Commissioner of Income Tax as per the provision of section 151 of the Act.”
v. Therefore, the reassessment proceedings commenced by issue of notice.
vi. As per the reasons recorded, it was found that assessee is having a bank account no.610 with Kotak Mahindra Bank, wherein there are high numbers of interconnected fund transfers. It is found that there are loans and advances, investment received by the assessee and the same are immediately transferred as loans and advances, investment to other group companies. Therefore, the allegation is that assessee has received funds from group concerns and same are also given to another group concerns and such interconnected fund transfer does not have any economic rationale or underlying business transaction to support such transaction.
viii. The learned Assessing Officer stated that in case of transfer of Rs.5.07 crores to Vishwas Finvest Pvt. Ltd., assessee could not produce the ITR copy and confirmation about the loans given by the assessee.
ix. The addition under Section 68 of the Act was made and total income was assessed at ₹5,58,49,480/- by assessment order dated 9th December, 2019.
The assessee preferred the appeal before the learned CIT (A). The assessee submitted that assessee has received unsecured loan of ₹5,07,50,000/- from two parties. It received ₹15 lacs from Moonscape Facility Management Pvt. Ltd. and ₹4,92,50,000/- from Nifty Realty Pvt. Ltd. The assessee submitted bank statement of the assessee,
The learned CIT (A) deleted the addition holding as under in paragraph no.8.1 to 8.3 as under: -
“8.1 In this case the AO invoked section 68 to add loans amounting to Rs. 5,07,50,000/- received by the assessee from two parties, namely, Moonscape Facility Management Pvt. Ltd. and Nifty Realty Pvt. Ltd. During the course of the appellate proceedings, the appellant reiterated the submissions made before the AO that in order to establish the identity, genuineness and creditworthiness of the lender companies i.e Moonscape Facility Management Pvt. Ltd. and Nifty Realty Pvt. Ltd, the appellant had, during the course of the reassessment proceedings, submitted all the details called for by the AO i.e. Copy of ITR and PAN number of the lenders, copy of extract of bank account statements of the appellant highlighting transactions with above lenders, copy of extract of bank account statement of the lenders highlighting the transactions with the appellant, copy of financial statements of the lenders. According to the appellant no fault has been found by the AO in these documents.
CIT Vs. Orissa Corporation Pvt. Ltd (SC) 159 ITR 78.
PCIT-4 Vs. Hi-Tech Residency Pvt. Ltd (Del) 96 taxmann.com 403.
CIT-1 Vs. Apex Therm Packaging Pvt. Ltd (Guj) 42 taxmann.com 473.
CIT v. Nova Promoters and Finlease (P) Ltd. (2012) 342 ITR 169.
PCIT-13 vs Veedhala Tower Pvt Ltd (ITA No. 819 of 2015) (Bom).
8.3 I have gone through the assessment order and also, submissions of the appellant very carefully. I find that the AO has merely relied upon the information provided by the investigation wing to treat the two entities who have given loan to the assessee as bogus entities. While the appellant has stated in its reply that it has submitted the relevant
Accordingly, the appeal of the assessee was allowed.
The learned Assessing Officer is aggrieved with the same and has challenged the addition deleted by the learned Commissioner of Income-tax (Appeals).
The assessee has also raised the cross objection against the reopening of the assessment.
The learned Departmental Representative supported the order of the learned Assessing Officer and preferred the grounds of appeal stating that the assessee has received ₹5,07,00,000/- from two parties and has given the same to its sisters concern without any rationale. Further, the learned CIT (A) has deleted the addition without considering the findings of the learned Assessing Officer.
The learned Authorized Representative on the appeal of the learned Assessing Officer referred to paper book filed before us containing 93 pages submitting that from page no.50 to 93 with respect to the above two entities complete details were filed. He further referred to page no. 40 to 50, wherein ledger account of both the parties along with the bank statement of the assessee and lenders are submitted. He submits that when the
Coming to the Cross Objection filed by the assessee, he submitted that reopening made by the learned Assessing Officer also bad in law where he has placed blind reliance on report of the DDIT. He relied upon several judicial precedents stating that reopening is invalid.
The learned Departmental Representative submitted that there is no assessment made by the learned Assessing Officer on original return, subsequently tangible material as per the report of the DDIT was received, the learned Assessing Officer has formed prima facie reason of escapement of income and therefore, there is no infirmity in the reopening of the assessment.
First coming to the Cross Objection filed by the assessee against the reopening of the assessment, we find that the
In view of this, the cross objection filed by the assessee is dismissed.
On the issue of addition of ₹5,07,50,000/-, we find that assessee has received this sum from Moonscape Facility management Pvt. Ltd. of ₹15 lacs and Nifty Realty Pvt. Ltd. of ₹4,92,50,000/-. The assessee has submitted copy of the account of these companies from books of assessee, which is placed at page no.41 onwards of the paper book. On looking at the ledger account it is
In view of this, we do not find any infirmity in the order of the learned CIT (A) in deleting the addition under Section 68 of the Act for the reason that;
a. Assessee has shown identity, creditworthiness and genuineness of the transitions by producing, bank accounts, annual reports and income tax return and assessment order of the lender. Thus, initial onus is discharged.
c. In the reasons recorded, information received the only issue is high value transaction in bank account of the assessee does not have any rationale.
Thus, we confirm the order of the learned CIT (A), dismissing the appeal of the learned Assessing Officer and CO of the assessee.
In the result, the appeal of the learned Assessing Officer and CO of the assessee, are dismissed.
Order pronounced in the open court on 28.02.2024.
Sd/- Sd/- (PAVAN KUMAR GAADLE) (PRASHANT MAHARISHI) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Mumbai, Dated: 28.02. 2024 Sudip Sarkar, Sr.PS
Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Mumbai
