The Principal Commissioner Of Income Tax-2 v. Moh Limited

IN THE HIGH COURT OF GUJARAT AT AHMEDABADR/TAX APPEAL NO. 237 of 2020 ========================================================== THE PRINCIPAL COMMISSIONER OF INCOME TAX-2 VersusMOH LIMITED ==========================================================Appearance:MRS MAUNA M BHATT(174) for the Appellant(s) No. 1 for the Opponent(s) No. 1 ========================================================== CORAM: HONOURABLE MR. JUSTICE J.B.PARDIWALAand HONOURABLE MR. JUSTICE ILESH J. VORA Date : 18/01/2021 ORAL ORDER (PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA) 1.This Tax Appeal under Section-260A of the Income-tax Act, 1961 [for short 'The Act, 1961'] is at the instance of the revenue and is directed against the order passed by the Income Tax Appellate Tribunal, Ahmedabad Bench 'A', Ahmedabad dated 18/12/2019 in the ITA No.1928/Ahd/2014 for the A.Y.2001-02. 2.The revenue has proposed a solitary question of law for the consideration of this Court. Whether the Appellate Tribunal had erred in law and on facts in upholding the order of the CIT(A) deleting the addition of Rs.9,33,00,000/- made u/s.68 of the Act without appreciating the facts of the case? 3.We have heard Ms. Mauna Bhatt, the learned senior standing counsel appearing for the revenue. We take notice of the following findings recorded by the CIT(A) in its order dated 30/03/2004 partly allowing the appeal filed by the assessee. The findings read as under:- 2.The revenue has proposed a solitary question of law for the consideration of this Court. Whether the Appellate Tribunal had erred in law and on facts in upholding the order of the CIT(A) deleting the addition of Rs.9,33,00,000/- made u/s.68 of the Act without appreciating the facts of the case? 3.We have heard Ms. Mauna Bhatt, the learned senior standing counsel appearing for the revenue. We take notice of the following findings recorded by the CIT(A) in its order dated 30/03/2004 partly allowing the appeal filed by the assessee. The findings read as under:- I have carefully considered all the facts on record and various submissions. It is noted that there is no dispute that both purchase and sales transactions recorded in the books of the appellant in relation to software business were sham merely on paper and were bogus. These facts are clearly brought out as a result of the enquiry made by the AO in first-round of assessment. It is also noted from the chart given by the appellant which show the rotation of fund started from bank accounts of Trance Techno Group and the funds have reached back to that account again. These transitions were conducted in the subsequent financial year and therefore, the creditors were shown as outstanding in the books of accounts of the appellant company. Since these creditors have actually been paid through cheque and the transactions have also been placed by the AO on record during the first round of assessment proceedings the addition under section 68 in the name of three parties that is Carrier Information Technology amounting to Rs.3,24,50,000/-; Gap Corporate services Pvt. Ltd. amount to Rs.3.5 crores and Maxim Info Systems amounting to Rs.2,58,50,000/- was therefore, not correct. These accounts have been subsequently squared up either by rotation of funds through bank account without retaining or enjoying any funds by the appellant or by book entry adjustments by introducing another fictitious account for purchase of sale software in subsequent year and by reversing the entry in subsequent year. The account of Gap Corporate Services Pvt. Ltd. and Maxim Info Systems have been squared up by rotating funds between the Skylid Telecommunications Limited appellant and Gap Corporate Services Pvt. Ltd./Maxim Info System Ltd. through bank accounts maintained with Vijaya Bank. For this purpose the funds were first brought in by Skylid Telecommunications Ltd. then such funds were transferred to appellant's bank account, then to the bank account of Corporate Services Pvt.Ltd/Maxim Info Systems and then from the bank account to Skylid Telecommunications Ltd. Such rotation of fund is clearly evidence from the table on page 28 to 32 of the paper book. It is noted that the appellant has furnished information with regard to circulation of funds in the bank account between the parties brought in the books as suppliers and buyers of software which were not in existence at all in those pages of the paper book. A careful scrutiny of financial transactions it is noted that the appellant has received Rs.1.25 crores by cheque from Trance Techno Foods Ltd. in HDFC, Vejalpur branch account on 19/2/2001 and claimed that the said amount was paid back to A & A Software to the extent of Rs.1,11,50,000/- and to Carrier Information Technology to the extent of Rs.13.5 Lacs on the same date as part of rotation of funds. Similarly an amount of Rs.21 Lakh was received from Skylid Telecommunications Ltd. on 23/03/2001 and was claimed to be paid back Carrier Information Technology on and 07/03/2001 to the extent of Rs.20 lakh and, therefore, the appellant had claimed that only Rs.1 lakh was retained and earned from the amount so received. It is also seen that ROC fees of the appellant were paid by Trance Techno Foods Ltd. amounting to Rs.7500 on 19/02/2001. Similarly, the appellant has also admitted to have earned Rs.1.5 lacs in cash which were brought in the books in the name of Shri Nilesh Kadiwala. Therefore, the appellant had accordingly claimed that the only income earned but not disclosed in the books worked out to Rs.2,57,500/-. On examination of the flow of funds mentioned in the paper book, it is noted that the appellant had explained the sources of funds received in HDFC, Vejalpur branch from Trance Techno Foods Ltd. and Skylid Telecommunications Ltd. amounting to Rs.1.46 crores as well as payment of ROC fees of Rs.7500/- by Trance Techno Foods Ltd. for the appellant and therefore, these sums cannot be taxed under section 68 as unexplained credit as contra accounts, PAN and confirmations have been furnished. However, it is noted that the appellant had not been able to establish the payment of Rs.1,11,50,000/- and Rs.33,50,000/- which are claimed to have been made to A&A Software and Carrier Information Technology as part of circulation of funds in the guise of software business as neither confirmation have been furnished nor the bank account of both the forms have been given so that the claim of the appellant regarding onward movement of funds to Trance Techno Group could be established. It is therefore, clear that the appellant has retained these funds with him or has earned that much profit for which the appellant has not been able to explain forward flow of funds. Therefore, these payments made to a Software and Carrier Information Technology were nothing but unexplained investment of the appellant and therefore, should be taxed under section 69B of the Act. The amount is worked out as under:- 4.The afore-said findings recorded by the CIT(A) came to be affirmed by the appellate tribunal while dismissing all the appeals. We quote the relevant observations. 4.The afore-said findings recorded by the CIT(A) came to be affirmed by the appellate tribunal while dismissing all the appeals. We quote the relevant observations. “8.AA perusal of the above order would indicate that the ld. CIT(A) has recorded a finding of fact demonstrating that creditor amounting to Rs.9.33 crores did not deserve to be added in the hands of the assessee, because the ld. CIT(A) had made detailed analysis of fund flow statement and bank accounts placed before him. The ld. CIT(A) was of the view that amounts have been generated from group concerns, and they were routed and ultimately a cheque of Rs.1.25 crores was received from Trance Techno Foods Ltd. in HDFC Bank, Vejalpur Branch on 19.2.2011 and out of that amount, a sum of Rs.1,11,50,000/- was paid to A&A Software, and Rs.13.5 lakhs paid to Carrier Information Technology. Thus, the ld. CIT(A) found a reconciliation of fund flow, and thereafter observed that addition under section 68 was not required to be made in the hands of the assessee. In other words the ld. CIT(A) has recorded a finding of fact that nothing has been retained by the assessee, which has been considered as unexplained cash credit. The assessee has explained fund flow i.e. demonstrating transactions were back to back, and were in the nature of accommodation entries. Similarly, the ld. CIT(A) has held that alleged Rs.1,57,10,000/- was not earned from any business activity but from other sources of income. This was to be assessed under the head “income from other sources”. Contrary to the above factual finding of the ld. CIT(A), neither Revenue has filed any evidence, nor assessee has filed any paper book. It has not been brought to our notice, as to how these analysis are contrary to the record. Therefore, we are of the view that the ld. CIT(A) has made a lucid analysis of the record available before her, and appreciated the controversy in right perspective. We do not find any merit in the ground of appeal raised by the Revenue challenging deletion of Rs.9.33 crores as well as ground of appeal raised by the assessee pleading therein that the income of Rs.1,57,10,000/- ought to have been assessed as “business income” instead of “income from other sources”. 5.Having regard to the afore-said findings of fact recorded by the two authorities, we do not deem fit to interfere with the order passed by the Tribunal. In our opinion, the question of law as proposed by the revenue cannot be termed as a substantial question of law. C/TAXAP/237/2020 ORDER 6.In the result, this appeal fails and is hereby dismissed. (J. B. PARDIWALA, J) A. B. VAGHELA (ILESH J. VORA,J)