Ita/319/2019 Of The Pr. Commissioner Of Income Tax, Patiala v. M/S Mahakali Developers And Resorts Pvt. Ltd

102.IN THE HIGH COURT OF PUNJAB AND HARYANAAT CHANDIGARH. ITA-319-2019 (O&M)Date of decision : 30.09.2021 The Pr. Commissioner ofIncome-T|'ax Patiala .... Appellan Vs_ M/s Mahakali Developers & >Resorts Pvt. Ltd. | ....Respondent. CORAM: HON'BLE MR. JUSTICE AJAY TEWARIHON'BLE MRS. JUSTICE ALKA SARIN Present:Mr. Kunal Sharma, Advocate, for the appellant. AJAY TEWARI, J. (ORAL) Taken up through video conferencing. By this appeal the revenue has challenged the orders of theCommissioner Appeals and the Income Tax Appellate Tribunal, wherebythey had set aside the orders passed by the Assessing Officer under Section68 read with Section 147 and 148 of the Income Tax Act, 1961.) The brief facts are that the respondent had received some sharecapital from some foreign parties. The Assessing Officer issued notice toassessee to explain investment made by them, its source of fund, object andpurpose of investment, identity and creditworthiness of the investingcompany as also mode and genuineness of the transaction. The followingreply was given:- *It may be submitted there the blessing investment ltd is ainvestment company hence there cannot be large no oftransaction. In regard to loan raised from HA WK_ frightServices FZE there is nothing wrong The copy of the loanagreement is enclosed. Further interest has been paid byBlessing Investment Ltd to M/s HAWKfright Services FZE. ITA-319-2019 (O&M) Yearly balance received confirmation received from HAWKfright Services FZE advanced the loan is enclosed and alsoenclosed the copy ofbank account when the loan was receivedback by M/s HAWK fright Service. It may be further mention |that in the first year balance sheet provision of interest on theloan was there which was paid in subsequent years. We are also enclosing complete balance sheet ofthe M/s Blessing Investment Ltd as on 31/03/2007 and31/03/2013. As on 31/03/2013 where totalfunds are to the tuneofRs.28.00 Cr (4702131 US Dollars converted at the rate ofRs59.55. In the said balance sheet also M/s Blessing Investmentthe said investment Ltd owns the sqid investment. We further submit that the company t.e. M/sBlessing Investment Ltd. Still hold the said investment. TheCertificate from the said company is also enclosed. It may befurther submitted that total 456710 shares were issue to NRIS’out ofwhich 108034 shares were issued to Blessing InvestmentLtd. All the said shareholder still own the said shares..... The Assessing Officer came to the conclusion that the saidentity seems to be shell company. He consequently concluded that thismoney was actually undisclosed income of the assessee, which had beenrecycled by the said entity into the company of the assessee. | In appeal, the Commissioner Income Tax held that this materialcould not be held to be justified for adding the amount of investment into thecompany as income of the assessee and consequently set aside the order.This finding was confirmed by the Tribunal in the appeal filed by theRevenue holding as follows:- | ITA-319-2019 (O&M) The Assessing Officer came to the conclusion that the saidentity seems to be shell company. He consequently concluded that thismoney was actually undisclosed income of the assessee, which had beenrecycled by the said entity into the company of the assessee. | In appeal, the Commissioner Income Tax held that this materialcould not be held to be justified for adding the amount of investment into thecompany as income of the assessee and consequently set aside the order.This finding was confirmed by the Tribunal in the appeal filed by theRevenue holding as follows:- | ITA-319-2019 (O&M) oeAnother fact on the file is that the reopening in this case|has been done by the Assessing Officer beyond the four years. |The another important fact is that such reopening has beendone even after 03 years from the date of information receivedfrom the Foreign Tax Division. Why the Income TaxAuthorities/Assessing Officer/Departmental authorities weresitting on the said informationfor such a long time has not beenexplained. Even otherwise, the first proviso to Section 147comes into play. The assessee during the original assessmentproceedings provided all the information whatever was calledfor by the Assessing Officer. Hence, it was not a case wherethere was any failure on the part of the assessee to disclosefully and truly all material facts necessary for his assessment . |Ifsome information was received by the Assessing Officer lateron, though creates some suspicion, but in our view, that is notenough for holding that investment made by the M/s BlessingInvests Ltd. was out ofunaccounted income ofthe assessee. Wetherefore, do not find any merit in the appeal of the Revenueand the same is accordingly dismissed. has been done by the Assessing Officer beyond the four years. |The another important fact is that such reopening has beendone even after 03 years from the date of information receivedfrom the Foreign Tax Division. Why the Income TaxAuthorities/Assessing Officer/Departmental authorities weresitting on the said informationfor such a long time has not beenexplained. Even otherwise, the first proviso to Section 147comes into play. The assessee during the original assessmentproceedings provided all the information whatever was calledfor by the Assessing Officer. Hence, it was not a case wherethere was any failure on the part of the assessee to disclosefully and truly all material facts necessary for his assessment . |Ifsome information was received by the Assessing Officer lateron, though creates some suspicion, but in our view, that is notenough for holding that investment made by the M/s BlessingInvests Ltd. was out ofunaccounted income ofthe assessee. Wetherefore, do not find any merit in the appeal of the Revenueand the same is accordingly dismissed. The first argument of the learned counsel is that both theCommissioner and the Tribunal erred in holding that this material was notsufficient to Justify re-assessment. In our considered opinion, even 1f for thesake of arguments this assertion 1s accepted, the crux of the matter iswhether the conclusion that the entity was a shell company, could inevitablygive rise to the subsequent conclusion that the money received from thatcompany was actually undisclosed income of the assessee without anymaterial to show any link between the said entity and the assessee. Learned counsel for the appellant - revenue has argued that ITA-319-2019 (O&M) -4. considered opinion this argument is too far-fatched It may have beendifferent 1f some link had been established between the said entity and theassessee, but in the absence thereof, it cannot be held that the presumptionunder Section 68 of the IT Act, 1s available. and the Tribunal. No fault can be found with the judgments of the Commissioner Accordingly, the appeal is dismissed. miscellaneous application, if any, also stands disposed of. Since the main case has been dismissed, the pending civil (AJAY TEWARI )JUDGE September 30, 2021tripti ( ALKA SARIN )JUDGE Learned counsel for the appellant - revenue has argued that ITA-319-2019 (O&M) -4. considered opinion this argument is too far-fatched It may have beendifferent 1f some link had been established between the said entity and theassessee, but in the absence thereof, it cannot be held that the presumptionunder Section 68 of the IT Act, 1s available. and the Tribunal. No fault can be found with the judgments of the Commissioner Accordingly, the appeal is dismissed. miscellaneous application, if any, also stands disposed of. Since the main case has been dismissed, the pending civil (AJAY TEWARI )JUDGE September 30, 2021tripti ( ALKA SARIN )JUDGE NOTE: Whether speaking/non-speaking: SpeakingWhether reportable: YES/NO