DCIT, CHENNAI vs. PVP VENTURES LTD., CHENNAI

आदेश /O R D E R

PER N.R.S. GANESAN, JUDICIAL MEMBER:

Both assessee and Revenue have filed the present appeals

against the order of the Commissioner of Income Tax (Appeals) – V,

Chennai, dated 27.03.2014, for the assessment year 2008-09.

Therefore, we heard both the appeals together and disposing of the

same by this common order.

Let’s first take assessee’s appeal in I.T.A.

No.1115/Mds/2014.

assessee, submitted that under the head “Administrative and Other expenses”, the assessee had claimed `3,70,36,474/-. The tax

deducted at source receivable amounting to `1,76,13,603/- was

also part of the sales already offered in the earlier year. Therefore,

the same qualifies for written off under Section 36(1)(vii) read with

Section 36(2) of the Income-tax Act, 1961 (in short 'the Act'). The

3 I.T.A. No.1115/Mds/14 I.T.A. No.1899/Mds/14

Ld. representative further submitted that the work-in-progress to the extent of `1,94,12,871/- was also written off in the books of account.

Since the project could not be completed as contemplated by the

company, the project was abandoned, therefore, the expenditure

incurred by the assessee, namely, the work-in-progress for the

project abandoned has to be allowed as revenue expenditure either

under Section 28 or under Section 37 of the Act. Referring to the inoperative bank account to the extent of `10,000/-, the Ld.

representative submitted that this also forms part of income of the

assessee, therefore, it cannot be disallowed.

Representative, submitted that the CIT(Appeals) called for remand

report from the Assessing Officer. The Assessing Officer clarified that in respect of receivable to the extent of `1,76,13,603/-, the

assessee has not furnished any evidence either before the

Assessing Officer or before the CIT(Appeals). In the absence of

any details, the CIT(Appeals) confirmed the addition made by the

Assessing Officer. Referring to bank balance to the extent of `10,000/- in the inoperative bank account and work-in-progress to

the extent of `1,94,12,871/-, the Ld. D.R. submitted that these are

4 I.T.A. No.1115/Mds/14 I.T.A. No.1899/Mds/14

all capital in nature. Therefore, it cannot be allowed as revenue

expenditure. Therefore, the CIT(Appeals) has rightly confirmed the

addition made by the Assessing Officer.

perused the relevant material on record. The assessee claims that a sum of `1,76,13,603/- was part of the sales already offered in the

earlier years. However, no details were filed by the assessee either

before the lower authorities or before this Tribunal. In the absence

of any particulars with regard to inclusion of income in the earlier

assessment year as claimed by the assessee, this Tribunal do not

find any reason to interfere with the order of the lower authority.

extent of `1,94,12,871/-, the assessee claims that the project could

not be completed as contemplated by the company. The fact

remains is that the investment made by the assessee is in the

capital asset. The assessee claims the same under the head

“Administrative and Other expenses”. Since the expenditure relates

to capital asset, this Tribunal is of the considered opinion that the

CIT(Appeals) has rightly confirmed the addition made by the

5 I.T.A. No.1115/Mds/14 I.T.A. No.1899/Mds/14

Assessing Officer. Therefore, this Tribunal do not find any reason

to interfere with the order of the lower authority in confirming the addition of `3,70,36,474/- being the unrecoverable advance under

the head “Administrative and Other expenses”.

Ramakrishnan, the Ld. representative for the assessee, submitted

that he was instructed not to press this ground before this Tribunal.

The Ld. representative also clarified in the note filed before this

Tribunal during the course of hearing that the ground relating to bad debts of `50 lakhs is not pressed.

disallowance of bad debts is dismissed as not pressed.

69A of the Act.

assessee, submitted that the assessee purchased the property in

the assessment year 2008-09 and sold the same in the very same

6 I.T.A. No.1115/Mds/14 I.T.A. No.1899/Mds/14

assessment year. The assessee offered the profit on sale of the

land under the head “short term capital gains” in the return of

income. The Ld. representative submitted that a copy of the return

filed by the assessee is available at pages 1 to 4 of the paper-book.

The Ld. representative further submitted that the agreement for sale

of the property and power of attorney was dated 4.2.2008, a copy of

which is available at pages 7-12 of the paper-book. The sale deed

dated 28.03.2008 is available in pages 13 to 28 of the paper-book.

Since the property was purchased and sold in the very same

assessment year, it was not reflected in the fixed asset schedule

and in depreciation statement. The Ld. representative further

submitted that both the authorities below failed to appreciate the

fact that once the property was sold in the very same year in which

it was purchased, it will not be reflected in the fixed asset statement

and depreciation schedule. Therefore, both the authorities below

are not correct in treating the profit on sale of the land as

undisclosed income under Section 69A of the Act.

that the agreement dated 04.02.2008 shows that the assessee

agreed to purchase the property. It is not known whether this

7 I.T.A. No.1115/Mds/14 I.T.A. No.1899/Mds/14

agreement was available before the Assessing Officer or not.

Referring to the assessment order, the Ld. D.R. submitted that there

was no reference of agreement in the assessment order. The

Assessing Officer found that in the fixed asset schedule of the

company for the relevant assessment year, no land was shown as

disposed of. If the land was purchased during the year under

consideration and disposed of in the very same year, the same

should be reflected in the fixed asset schedule. In other words,

according to the Ld. D.R., once the land was purchased by the

assessee, it should form part of the fixed asset of the assessee and

when it was sold, it has to be shown as dispose of. It is not the

case of the assessee that the property was purchased and sold on

the same day. In fact, there was a considerable time gap between

the date of agreement for purchase of property and the date on

which the sale was executed. Moreover, the details of advance

received and the balance amount received were not reflected in the

books of the assessee. In the absence of any details of transaction

relating to sale of land to M/s Arihant Hospitality (Chennai) Private

Limited, the CIT(Appeals) found that the Assessing Officer has

rightly upheld the addition made under Section 69A of the Act.

Even before this Tribunal, the assessee could not file any details

8 I.T.A. No.1115/Mds/14 I.T.A. No.1899/Mds/14

with regard to the amount said to be received on sale of property.

Therefore, according to the Ld. D.R., the CIT(Appeals) has rightly

confirmed the addition.

perused the relevant material on record. The Assessing Officer

disallowed the claim of the assessee and made addition of `31,07,20,000/- under Section 69A of the Act on the ground that the

purchase and sale of the property was not reflected in the fixed

asset schedule of the company. The CIT(Appeals) found that the

assessee has not filed any details before the lower authorities. The

CIT(Appeals) further found that the date on which the advance was

received as well as the balance amount was received were not

reflected in the books of the assessee-company. The CIT(Appeals)

also found that unless and until the assessee furnishes the details

of the transaction of sale made to M/s Arihant Hospitality (Chennai) Private Limited for a consideration of `31,07,20,000/-, it cannot be

decided with regard to the actual amount received by the assessee

at the end of the transaction. In the absence of any details, the

addition made by the Assessing Officer under Section 69A of the

Act was confirmed by the CIT(Appeals). We have gone through the

9 I.T.A. No.1115/Mds/14 I.T.A. No.1899/Mds/14

agreement said to be entered between M/s AGS Properties

Development (India) Pvt. Ltd. and the assessee-company on

04.02.2008. The assessee agreed to purchase the property for a total consideration of `16,26,00,084/-. A copy of the sale deed is

available at pages 13 to 28 of the paper-book shows that M/s AGS

Properties Development (India) Pvt. Ltd. in fact executed a sale

deed through their power of attorney agent in favour of Arihant

Hospitality (Chennai) Pvt. Ltd. for a total consideration of `31,07,20,000/-. This registered sale deed does not show that the

assessee became the owner at any point of time. The agreement

for sale of the property discloses the sale consideration at `16,26,00,084/-. It is not known how the very same property was

sold for `31,07,20,000/-. That means, the assessee is not willing to

disclose all the material facts relating to the above said transaction.

The sale deed dated 28.03.2008 was executed within two months

from the date of the agreement, i.e. on 04.02.2008. Within two

months period from the date of agreement, the value of the property will not go to the extent of `31,07,20,000/-. Therefore, the assessee

obviously invested undisclosed money in the transaction and on

sale of the property, now bringing the same as short term capital

gains. The sale deed dated 28.03.2008 was executed in favour of

10 I.T.A. No.1115/Mds/14 I.T.A. No.1899/Mds/14

M/s AGS Properties Development (India) Private Limited by one

Shri R.R. Aroonkumar. The power of attorney was executed in the

individual capacity of Shri Aroonkumar. Therefore, the assessee-

company invested its funds from undisclosed source in the property

and the same was sought to be brought on accounts in guise of

short term capital gains. Therefore, this Tribunal is of the

considered opinion that the CIT(Appeals) has rightly confirmed the

addition made by the Assessing Officer under Section 69A of the

Act. This Tribunal do not find any infirmity in the order of the

CIT(Appeals) and accordingly, the same is confirmed.

representative for the assessee, submitted that he was instructed by

the assessee not to press this ground of appeal. The Ld.

representative has also filed a note of agreement before this

Tribunal during the course of hearing saying that the ground relating

to writing off of capital work-in-progress to the extent of `2,28,18,258/- is not pressed.

11 I.T.A. No.1115/Mds/14 I.T.A. No.1899/Mds/14

of appeal raised by the assessee is dismissed as not pressed.

No.1899/Mds/2014, Shri P.B. Sekaran, the Ld. D.R. submitted that

the assessee-company is engaged in the business of infrastructure

development. In the course of assessment proceedings, the

Assessing Officer found that the assessee has received a sum of `377,71,78,316/- from M/s Platex Limited incorporated in Mauritius.

The assessee claimed before the Assessing Officer that the

Mauritius company M/s Platex Limited invested the above sum of `377,71,78,316/- by way of foreign direct investment for

subscription towards convertible debentures. The assessee was

asked to produce the creditworthiness of M/s Platex Limited,

Mauritius and genuineness of transaction. The assessee-company

has produced only provisional accounts of M/s Platex Ltd., Mauritius

for the financial year 2007-08. The provisional accounts produced

by the assessee does not support the claim of the assessee that it has received `377,71,78,316/- from M/s Platex Ltd., Mauritius. The

12 I.T.A. No.1115/Mds/14 I.T.A. No.1899/Mds/14

Ld. D.R. further submitted that M/s Platex Ltd., Mauritius was

carrying on its business on the borrowed funds from Deutsche

Bank. M/s Platex Ltd., Mauritius did not have any surplus fund to

make investment in assessee-company. Since the M/s Platex Ltd.,

Mauritius had no source in making investment, the Assessing

Officer found that the said company had no financial capacity to

investment in assessee-company. Therefore, the Assessing Officer

came to a conclusion that the so-called creditor has no

creditworthiness to make investment in the assessee-company and

the transaction was also not genuine.

Shri Prasad V. Potluri is a common Director in M/s Platex Ltd.,

Mauritius and in the assessee-company. The financial statement of

M/s Platex Ltd., Mauritius clearly indicates that there was no

generation of income other than the so-called investment said to be

made in the assessee-company. Therefore, the Assessing Officer

found that the assessee has not discharged it onus to prove the

source of fund claimed to be received from M/s Platex Ltd., Mauritius to the extent of `377,71,78,316/-. However, on appeal by

the assessee, the CIT(Appeals) found that the loan was sanctioned

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by Deutsche Bank which was invested in M/s PVP Enterprises Pvt.

Ltd., which was subsequently merged with the assessee-company.

Therefore, under Section 170 of the Act, if at all any addition was to

be made, it has to be made in the hands of M/s PVP Enterprises

Pvt. Ltd. and not in the hands of the assessee. Referring to Section

170 of the Act, the Ld. D.R. pointed out that in case of succession of

business, by way of transfer and the predecessor-company was in

existence, such predecessor shall be assessed in respect of the

income of the previous year in which the succession took place,

upto the date of succession. The Ld. D.R. clarified that it is not a

transfer of business. It is a merger of one company into another

company, namely, M/s PVP Enterprises Pvt. Ltd. merged with

assessee-company by way of amalgamation. Therefore, there is no

transfer of business involved in this case. It is a case of merger of

M/s PVP Enterprises Pvt. Ltd. into M/s PVP Ventures Ltd.

Therefore, on the date of merger, M/s PVP Enterprises Pvt. Ltd.

looses its identity and it is no longer in existence. Once the

predecessor is not in existence, in the eye of law, no assessment

could be made in the hands of the predecessor-company. If at all

any assessment was made in the hands of M/s PVP Enterprises

Pvt. Ltd., then that would amount to making assessment in favour of

14 I.T.A. No.1115/Mds/14 I.T.A. No.1899/Mds/14

the company, which is not in existence. Therefore, the assessment

order would be nullity in the eye of law. In fact, while considering

the issue, the Hyderabad Bench of this Tribunal in I.T.A.

No.1159/Hyd/2010 dated 31.07.02013 found that when M/s PVP

Enterprises Pvt. Ltd. merged with the assessee-company by way of

amalgamation, from the date of amalgamation, the assessment has

to be made in the hands of the assessee-company at Chennai.

After merger, M/s PVP Enterprises Pvt. Ltd. has no independent

existence. Therefore, it has to be assessed at Chennai in the name

of PVP Ventures Ltd. Therefore, the Hyderabad Bench found that

the order passed by the Addl. Director of Income Tax (International

Taxation) is without authority. Accordingly, it was annulled.

CIT(Appeals) is not justified in observing that the assessment has to

be made in the hands of M/s PVP Enterprises Pvt. Ltd. and not in

the hands of the assessee-company. Therefore, the Ld. D.R.

submitted that the order of the CIT(Appeals) cannot be upheld in the

eye of law.

representative for the assessee, submitted that M/s PVP Ventures

15 I.T.A. No.1115/Mds/14 I.T.A. No.1899/Mds/14

Pvt. Ltd. was a private limited company assessed in Hyderabad. Deutsche Bank, Singapore, sanctioned `508.72 Crores to M/s

Platex Ltd., Mauritius. M/s Platex Ltd., Mauritius, in turn, invested the entire amount of `508.72 Crores in M/s PVP Ventures Pvt. Ltd.

in Hyderabad. The Ld. representative further submitted that the

assessee-company was earlier known as SSI Limited. M/s PVP

Ventures Pvt. Ltd. merged with SSI Ltd. by order of amalgamation

approved by Madras High Court. Once M/s PVP Ventures Pvt. Ltd.

merged with SSI Ltd., till the date of merger, the assessment if any,

has to be made only in the hands of M/s PVP Ventures Pvt. Ltd. and

not in the hands of M/s SSI Ltd. The SSI Ltd. subsequently

changed its name as M/s PVP Ventures Ltd., the present assessee.

Therefore, according to the Ld. representative, in view of Section

170 of the Act, the predecessor-company, namely, M/s PVP

Ventures Pvt. Ltd. has to be assessed in respect of its receipts till

the date of amalgamation. Therefore, the CIT(Appeals) has rightly

found that no addition can be made in the hands of the present

assessee. Referring to page 161 of the paper-book, the Ld.

representative submitted that the Assessing Officer, while

considering the assessment of M/s PVP Ventures Pvt. Ltd. for the assessment year 2007-08, admitted the receipt of `508.72 Crores

16 I.T.A. No.1115/Mds/14 I.T.A. No.1899/Mds/14

from M/s Platex Ltd., Mauritius. Referring to paragraph 9 of the

order, the Ld. representative submitted that in view of the admission made by the Assessing Officer with regard to receipt of `508.72

Crores from M/s Platex Ltd., Mauritius, the genuineness cannot be

doubted at this stage. The Ld. representative further submitted that

the Assessing Officer has also made assessment with regard to

interest income of Platex Ltd., Mauritius in the hands of the present

assessee and also made protective assessment in the hands of M/s

Platex Ltd., Mauritius. These orders of Assessing Officer were

annulled by this Tribunal at Hyderabad on the ground that there ws

no jurisdiction for the Assessing Officer at Hyderabad after merger

of M/s PVP Ventures Pvt. Ltd.

M/s Platex Ltd., Mauritius with Deutsche Bank, Singapore Branch,

the Ld. representative for the assessee submitted that Deutsche

Bank provided loan to M/s Platex Ltd., Mauritius. Referring to page

84 of the paper-book, this is the bank statement from Development

Credit Bank Ltd. which shows that M/s PVP Ventures Pvt. Ltd., the

predecessor-company of the assessee, received credit from M/s

Platex Ltd., Mauritius through Deutsche Bank to the extent of

17 I.T.A. No.1115/Mds/14 I.T.A. No.1899/Mds/14

`40,87,50,000/-. A similar credit was received subsequently.

Therefore, all transactions were received by M/s PVP Ventures Pvt.

Ltd. from M/s Platex Ltd., Mauritius. Hence, the transactions are

genuine. The source for making investment in M/s PVP Ventures

Pvt. Ltd. was the loan borrowed by M/s Platex Ltd., Mauritius from

Deutsche Bank. Therefore, according to the Ld. representative, the

assessee has discharged its onus by proving that the entire credit of `377,71,78,316/- was the loan received by M/s Platex Ltd.,

Mauritius from Deutsche Bank. If genuineness of the transaction,

namely, the receipt of loan is doubted, according to the Ld.

representative, at the best the addition could be made only in the

hands of M/s PVP Ventures Pvt. Ltd., since the loan was admittedly

received by M/s PVP Ventures Pvt. Ltd. and not by the assessee-

company. Therefore, according to the Ld. representative, under

Section 170 of the Act, the addition, if any, has to be made only in

the hands of M/s PVP Ventures Pvt. Ltd. and not in the hands of the

present assessee. Therefore, the CIT(Appeals) has rightly deleted

the addition made by the Assessing Officer.

perused the relevant material on record. M/s PVP Ventures Pvt.

18 I.T.A. No.1115/Mds/14 I.T.A. No.1899/Mds/14

Ltd., Hyderabad was amalgamated with SSI Limited with effect from

01.10.2007 by order of Madras High Court. The assessee claims that M/s PVP Ventures Pvt. Ltd. received `377,71,78,316/- from M/s

Platex Ltd., Mauritius. The source for making investment in M/s

PVP Ventures Pvt. Ltd. was the loan said to be borrowed by M/s

Platex Ltd., Mauritius from Deutsche Bank. The assessee has

produced a statement from bank, namely, Development Credit Bank

Ltd., Hyderabad, to show that all the funds were transferred to M/s

PVP Ventures Pvt. Ltd. through banking channel. The first

contention of the assessee is that if at all any addition has to be

made, it has to be made only in the hands of the predecessor-

company, namely, M/s PVP Ventures Pvt. Ltd. and not in the hands

of the present assessee. It is also pertinent to note that after

amalgamation of M/s PVP Ventures Pvt. Ltd. with M/s SSI Limited,

Chennai, the name of the company was changed to M/s PVP

Ventures Ltd. from SSI Limited. Now, when the company M/s PVP

Ventures Pvt. Ltd. is not in existence, the question arises for

consideration is whether the addition, if any, could be made in the

hands of M/s PVP Ventures Pvt. Ltd. or in the hands of M/s PVP

Ventures Ltd., Chennai.

19 I.T.A. No.1115/Mds/14 I.T.A. No.1899/Mds/14

Act, which reads as follows:-

“170. (1) Where a person carrying on any business or profession (such person hereinafter in this section being referred to as the predecessor) has been succeeded therein by any other person (hereinafter in this section referred to as the successor) who continues to carry on that business or profession,-- (a) the predecessor shall be assessed in respect of the income of the previous year in which the succession took place up to the date of succession; (b) the successor shall be assessed in respect of the income of the previous year after the date of succession. (2) Notwithstanding anything contained in sub-section (1), when the predecessor cannot be found, the assessment of the income of the previous year in which the succession took place up to the date of succession and of the previous year preceding that year shall be made on the successor in like manner and to the same extent as it would have been made on the predecessor, and all the provisions of this Act shall, so far as may be, apply accordingly. (3) When any sum payable under this section in respect of the income of such business or profession for the previous year in which the succession took place up to the date of succession or for the previous year preceding that year, assessed on the predecessor, cannot be recovered from him, the Assessing Officer shall record a finding to that effect and the sum payable by the predecessor shall thereafter be payable by and recoverable from the successor, and the successor shall be entitled to recover from the predecessor any sum so paid. (4) Where any business or profession carried on by a Hindu undivided family is succeeded to, and simultaneously with

20 I.T.A. No.1115/Mds/14 I.T.A. No.1899/Mds/14

the succession or after the succession there has been a partition of the joint family property between the members or groups of members, the tax due in respect of the income of the business or profession succeeded to, up to the date of succession, shall be assessed and recovered in the manner provided in section 171, but without prejudice to the provisions of this section. Explanation — For the purposes of this section, "income" includes any gain accruing from the transfer, in any manner whatsoever, of the business or profession as a result of the succession.”

A bare reading of Section 170 of the Act shows that this provision is

not applicable in respect of succession which takes place on death

of a person. When the business or profession was succeeded by

other person, the predecessor shall be assessed in respect of

previous year in which the succession took place, upto the date of

succession. However, the successor-company shall be assessed in

respect of the income of the previous year after the date of

succession. Sub-section (2) of Section 170 of the Act clearly says

that notwithstanding anything contained in sub-section (1) of

Section 170, when the predecessor cannot be found, the

assessment of the income of the previous year in which the

succession took place up to the date of succession and of the

previous year preceding that year shall be made on the successor

in like manner and to the same extent as it would have been made

21 I.T.A. No.1115/Mds/14 I.T.A. No.1899/Mds/14

on the predecessor-company. In view of the express language in

Section 170(2) of the Act, whenever the predecessor-company was

not found or not in existence, then the assessment has to be made

only in the hands of the successor-company. In the case before us,

the amalgamation admittedly took place on 01.10.2007. Therefore,

on and from 01.10.2007, M/s PVP Ventures Pvt. Ltd. is not in

existence. Therefore, the question arises for consideration is when

a company is not in existence due to amalgamation with effect from

01.10.02007, whether still the assessment can be made in the

hands of the predecessor-company? This issue was considered by

the Kolkata Bench of this Tribunal in Pampasar Distillery Ltd. v.

ACIT (2007) 15 SOT 331. After referring to Section 170 of the Act,

more particularly, Section 170(2) of the Act, found that in the case of

amalgamation, when one entity takes over the business of another

entity, the same may be the case of succession of business.

Referring to the amalgamation, the Tribunal found that the

amalgamating company is not in existence, therefore, no

assessment can be made in the hands of non-existing company.

The Tribunal found that if at all any assessment can be made, it

should be made in the hands of the amalgamated company,

namely, the successor company. In this case also, M/s PVP

22 I.T.A. No.1115/Mds/14 I.T.A. No.1899/Mds/14

Ventures Pvt. Ltd. is not in existence as on 01.10.2007. Therefore,

no assessment can be made in the hands of M/s PVP Ventures Pvt.

Ltd. In fact, order passed by the Director of Income Tax

(International Taxation) was quashed by the Hyderabad Bench on

the ground that M/s PVP Ventures Pvt. Ltd. is not in existence.

Therefore, in view of Section 170(2) of the Act, the income of M/s

PVP Ventures Pvt. Ltd. has to be assessed only in the hands of the

present assessee upto the date of amalgamation and also

subsequent to the date of amalgamation. In other words, there

cannot be any assessment order in favour of the company which is

not in existence on and after 01.10.2007. Therefore, this Tribunal is

of the considered opinion that the CIT(Appeals) is not correct in

holding that the assessment, if any, has to be made in the hands of

M/s PVP Ventures Pvt. Ltd. and in the hands of the present

assessee. The observation made by the CIT(Appeals) that the

assessment, if any, has to be made in the hands of M/s PVP

Ventures Pvt. Ltd. amounts to making an assessment in the case of

non-existing company. Therefore, in view of non-obstante clause in

Section 170(2) of the Act, this Tribunal is of the considered opinion

that the provisions of Section 170(2) will override the provisions of

Section 170(1) of the Act. Therefore, the assessment has to be

23 I.T.A. No.1115/Mds/14 I.T.A. No.1899/Mds/14

made only in the hands of the present assessee in view of the

provisions of Section 170(2) of the Act. The CIT(Appeals) is not

justified in holding that the assessment has to be made only in the

hands of the predecessor-company.

Shri Prasad V. Potluri is a common Director in all the companies,

namely, M/s Platex Ltd., Mauritius, M/s PVP Enterprises Pvt. Ltd.,

M/s PVP Ventures Pvt. Ltd. and present M/s PVP Ventures Ltd.

This fact is not disputed by the assessee. It is also not in dispute

that M/s Platex Ltd., Mauritius did not have net worth to support the claim of investment made to the extent of `377,71,78,316/-. The

financial statement said to have been filed before the Assessing

Officer shows that there was no generation of income by M/s Platex

Ltd., Mauritius. Therefore, it is doubtful that Deutsche Bank granted

loan to M/s Platex Ltd., Mauritius by way of Facility Agreement.

When M/s Platex Ltd., Mauritius has no net worth and it could not

generate any income of its own, it is not known how Deutsche Bank could come forward to sanction more than `500 Crores as loan by

way of Facility Agreement. In view of financial statement of M/s

Platex Ltd., Mauritius and the fact that Shri Prasad V. Potluri is a

24 I.T.A. No.1115/Mds/14 I.T.A. No.1899/Mds/14

common Director in all the three companies, namely, M/s Platex

Ltd., Mauritius, M/s PVP Ventures Pvt. Ltd. and M/s PVP Ventures

Ltd., Chennai, creates a doubt that the money might have been

flown from the assessee-company to M/s Platex Ltd., Mauritius and

by way of investment would have come back to Chennai through

banking channel. Unfortunately, this fact was not examined by the

lower authorities. Therefore, this Tribunal is of the considered

opinion that the matter needs an investigation by the Assessing

Officer as it was done in the case before Apex Court in CIT v. P.

Mohanakala (2007) 291 ITR 278. The Assessing Officer has to

examine when M/s Platex Ltd., Mauritius had no net worth and it

could not generate any income of its own, how Deutsche Bank was able to sanction loan facility of more than `500 Crores. It also

needs to be examined whether any loan was sanctioned and

disbursed by Deutsche Bank to M/s Platex Ltd., Mauritius. Further,

it is to be examined whether any money was flown from India to

Mauritius in order to enable the Deutsche Bank to sanction the loan

to M/s Platex Ltd., Mauritius. These aspects were not examined by

the Assessing Officer. Therefore, this Tribunal is of the considered

opinion that the matter needs to be re-examined as observed by the

Apex Court in CIT v. P. Mohanakala (supra). Merely because the

25 I.T.A. No.1115/Mds/14 I.T.A. No.1899/Mds/14

funds were transferred through banking channel, that alone will not prove the genuineness of transaction. It is a mandatory requirement for the assessee to establish the creditworthiness of the creditor, genuineness of the transaction and the identity of the creditors. Therefore, this Tribunal is of the considered opinion that the matter needs a thorough investigation by the Assessing Officer. Accordingly, the orders of the lower authorities are set aside and the entire issue is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the issue afresh and bring on record all material facts as indicated above. The Assessing Officer shall thereafter decide the issue afresh in accordance with law, after giving reasonable opportunity to the assessee.

26 I.T.A. No.1115/Mds/14 I.T.A. No.1899/Mds/14

Kri.

आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. �नधा�रती /Assessee 2. Assessing Officer 3. आयकर आयु�त (अपील)/CIT(A)-V, Chennai 4. आयकर आयु�त/CIT-V, Chennai-34 5. �वभागीय ��त�न�ध/DR 6. गाड� फाईल/GF.