ACIT CIR 6(1), MUMBAI vs. INX RECRUITMENT SERVIOCES P.LTD, MUMBAI

Briefly stated relevant facts are that the assessee filed the return of income declaring the total income of Rs 2.23 cr (rounded of) on 30.9. 09. During the scrutiny assessment proceedings, AO noted from the financial statements that the assessee received loan of Rs 41.22 cr from Tiara Comtrade P Ltd in the year under consideration. AO conducted deep enquires on the said loan transaction and invoked the provisions of section 133(6) by issuing letters to the Tiara and the group

During the first appellate proceedings, assessee submitted that the assessee details on the identity, creditworthiness, genuineness of the transaction and various documents in order to substantiate the said conditions of section 68 of the Act. In view of the voluminous information filed before him, there is no failure on part of the assessee in discharge of primary onus from his side and prayed for deleting the addition made by the AO on the basis of suspicion. CIT(A) considered the same and gave elaborate discussion on the said submissions and the evidences as evident from para 3 and its sub paragraphs of his order. There is discussion on the facts of making double addition of the same amount in the hands of the assessee and the INX Media too. Eventually, the CIT(A) granted relief to the assessee and the discussion in subpara 3.11 to 3.13 of his order is relevant. Aggrieved with the said order of the CIT(A), the Revenue is in appeal before us with the solitary ground extracted above. Proceedings before the Tribunal

Sri Jahangir Mistry, Ld Counsel for the assessee, at the outset submitted that the addition of Rs 41.22 cr made u/s 68 of the Act is the core issue. In this regard, Ld Counsel submitted that identity, creditworthiness and genuineness of transaction were proved by the assessee in the assessment proceedings. Assessee discharged the primary onus on all the ingredients of the said section 68 of the Act. However, AO suspected without any basis the transactions and proceeded to make addition. On top of it, AO added the same amount as unexplained cash credit, when

On facts, Sri J Mistry submitted that the assessee received convertible loan Rs 41.22 cr from Tiara Comtrade P Ltd (in short „Tiara‟)as per the written agreement between them. Tiara got the said funds from four of the companies of the Reliance group. Reliance group (ie Reliance Gas P Ltd; Reliance Extrusion P Ltd; Reliance Exploration P Lrd and Ornate Traders P Ltd) is the original source of funds for Tiara and in turn to the assessee under consideration. In this regard, ld Counsel submitted that the CIT (A) deleted the addition appreciating the evidence placed before the AO. The evidence includes (i) the confirmation letters from the creditor -Tiara; (ii) Balance Sheet and the P&L accounts of the creditor and (iii) the written agreements between the parties. He also submitted the said loan is convertible into equity and therefore, there is no requirement of the securities or payment of interest. Since the said sum is finally assessed in the hands of the ultimate beneficiary (INX Media P Ltd), the present addition made in the hands of the assessee constitutes „double addition‟ and, on this ground alone, the order of CIT(A) should be upheld. He heavily relied on the order of the CIT(A). Decision of the Tribunal

Per contra, Ld DR for the revenue read out the argument filled ground of the revenue and relied on the order of the AO. As per the Ld DR, when the loan transactions pass through multiple layers of the companies before it reaches the ultimate beneficiary, the said transactions fall within the mischief of the provisions of section 68 of the Act. Otherwise, without conceding, he admitted that the said amount was added as „unexplained income‟ of another assessee-INX Media Ltd (in short -INX Media). This company is the destination point for the said funds of Rs 41.22 cr.

We heard both the parties and perused the orders of the revenue. The issue raised by the revenue in this appeals revolves around (i) real source of credit; (ii) genuineness of local funding; and (iii) necessity of involving several company to transfer the funds from Reliance group companies (original source of funds) to INX Media (final destination of funds). There is no dispute on this fact. Further, there is no dispute on the involvement of various companies by both the sides ie Reliance ground and INX Media group. Further, we find that the said sum of Rs 41.22 cr is finally assessed to tax again u/s 68 of the Act in the hands of the INX Media. As seen from the ground of the Revenue, there is no dispute on the identity and credit worthiness of the creditor – Tiara who undisputedly confirmed the transaction by filing the written confirmation. It is not the case of the revenue that the Reliance group is not creditworthy for the said sum of Rs 41.22 cr. Regarding the issue of genuineness of the transactions, AO has not made out with any evidence that the transaction involved is not genuine. He merely suspects that, with multiple layers of the companies between the reliance group and the INX Media group, the transaction is straight forward and therefore, it falls in the ambit of the provisions of section 68 of the Act.

Further, we perused the order of the CIT(A) and contents of the paragraphs 3.11 and 3.13 are relevant. Para 3.12 merely distinguishes the case laws cited by the AO. The said para 3.11 and 3.13 read as under:

We find that the assessee furnished valuable informmation on the identity of the creditor by filing the copy of the return of income of Tiara and AO procured valuable information relating to other companies of the Reliance group evidencing the transfer funds to the Tiara and in turn to the assessee. These amounts are eventually transferred to the INX Media related companies. Confirmation letters, financial statements of related companies, related bank statements are furnished. From the above facts, the discussion given above and the contents of 3.11 and 1.13, we find the assessee is company has not done any business to earn the unexplained income of Rs 41.22 cr for taxation in its hands. It is appropriate to tax the same either hands of the original giver, the source of source, or in the hands of the receiver –INX Media, if conditions specified in the statute are violated. It is settled proposition in law that the suspiciousness cannot be the ground for invoking the provisions of section 68 of the Act. How the nil income companies like the present assessee, who has not done any business activities, shall earn the unexplained income for making addition as done by the AO in this case? We do not agree with the decision of the AO in doubly taxing the said amount on multiple hands on substantive basis. Considering the above, we are of the view that the final conclusion of the CIT(A) appears fair and reasonable. Therefore, it does not call for any interference. Accordingly, the solitary ground raised by the Revenue is dismissed.

In result, the appeal of the revenue is dismissed. Order pronounced in the open court on 8th December, 2015. (SANDEEP GOSAIN) ACCOUNTANT MEMBER भुंफई Mumbai; ददनांक 8/12/2015 व.नन.स./ OKK , Sr. PS

ITAT, Mumbai गार्ड पाईर / Guard file. 6. सत्मावऩत प्रनत //// आदेशानुसार/ BY ORDER, उि/सहायक िंजीकार (Dy./Asstt.