DCIT Vs Satya Prakash Gupta (ITAT Delhi)
We have heard the rival submissions, perused the relevant findings given in the impugned orders as well as material referred to before us during the course of hearing. We have already discussed the facts and material herein above, however in a succinct manner the facts and issues relevant for adjudication of additions made in the present appeals are that the assessee had entered into an agreement with a foreign entity, CMF on 25.03.2006 for rendering services for participation in the possible tenders for supplying currency notes to RBI and its subsidiaries. This agreement was valid up to 31.12.2007. Thereafter it was extended upto 31.12.2012. Till AY 2011-12, the assessee had shown its commission income received from Fedrigoni for carrying out operations in India, i.e. assisting CMF for supply of currency notes to RBI and its subsidiaries. The relevant figures of income shown by the assessee in various years starting from AYs 2008-09 to 2011-12 has already been incorporated above. From AY 2012-13, no income has been shown by the assessee for such activities. Admittedly, there was no agreement post 31.12.2012 and secondly, even after 01.04.2011 as discussed herein fore that there was no iota of evidence or any material information which could remotely prove that assessee received any money from CMF for any India operation. The entire premise of the AO is based on certain hypothetical presumption that even after the termination of the agreement or end of the agreement on 31.12.2012, assessee might have continued to render services for supply of currency notes which has not been shown in the return of income in India, albeit has diverted his income through certain alleged foreign entities abroad and now the income has been shown outside India. Even if such allegations are correct that assessee was having some kind of interest in these entities as discussed in the assessment order and appellate order, but there is not an iota of any evidence that these entities or the assessee had carried out any operation in India either for supply of currency notes or otherwise on or behalf of CMF or Fedrigoni. The Revenue has not brought anything on record that there was any business connection with assessee in India for carrying out such activities or either RBI or the CMF has stated that any payment for supply of currency notes or rendering of any services was made to assessee post 01.04.2011 to AY 2017-18. The allegations made by the AO and the interpretation on which he has drawn his presumption after referring to certain foreign entities, has been duly explained by the ld. counsel as stated above which has not been rebutted before us nor has been found favour by the ld. CIT (A). Ld. CIT (A) has given a very categorical finding that no evidence has been found in the form of seized material or statement to prove that agreement of 2006 between CMF and assessee was extended beyond 31.12.2012 and beyond this period, CMF was under any obligation to share the profits with the assessee. Even in various information received through FTTR, not single information has been received that either Fedrigoni or CMF has given any money for their India operation for supply of currency notes to Assessee. This finding of ld. CIT (A) without any rebuttal or material information on record cannot be tinkered with. Accordingly, the finding of the ld. CIT (A) that after the assessee had become NRI, no income has arisen or accrued in India, i.e. after 01.04.2015 and, therefore, even in terms of section 9(1)(i) no income is taxable in the hands of the assessee is upheld.
In fact, the ld. CIT (A) has held that post 31.12.2012, the assumption made by the AO after the period 01.01.2013 is purely based on presumption that there might be continuation of terms and conditions of this agreement which was without any basis or evidences albeit on conjectures and surmises. The alleged money received by the assessee through various dubious entities during FYs 2015-16 & 2016-17 as alleged by the AO that assessee might have received money on account of share of profit from CMF in connection of its Indian activities is wholly erroneous and none of these informations or material found which he has been referred to by the ld. CIT DR or by the AO even remotely point out that through these dubious entities, assessee had carried out any activities in India and accordingly, independently also, we find that no income has been taxed in India from AYs 2013-14 to 2017-18.
Now, coming to the additions sustained or enhanced by the ld.CIT (A) in AY 2012-13, first of all, even though ld. CIT (A) had admitted that there is no incriminating material or document or any evidence either found during the course of search or even after the post search in the year that post 2012, any payment received by the assessee from CMF or any of its entities. Once it is an admitted fact then in the case of unabated assessment where the assessment has attained finality at the time of search, no addition can be made on presumption or estimate basis without any reference to any seized material. Therefore, entire addition/ enhancement made by the ld. CIT (A) has no legs to stand and the same is directed to be deleted in view of the judgment of Hon’ble jurisdictional High Court in the cases of Kabul Chawla and Meeta Gutgutia (supra).
In fact, this proposition that no addition can be made without any incriminating material would be applicable for AYs 2013-14, 201415 & 2015-16 also, therefore, on legal ground also, no addition can be made for these years.
Insofar as additions made in AYs 2016-17 and 2017-18 are concerned which are abated assessment and assessment of year of search, there is no evidence indicating that assessee had carried out any operation in India or has received any payment from any entity for business carried out in India. In so far as strong reliance made by the CIT DR to FTTR information as incorporated above, we find that, none of these informations even remotely suggest that assessee has earned or received any payment in any account for supply of currency paper notes from CMF or Fedrigoni entity for Indian supply. The observation and the information as supplied by the CIT DR has been rebutted by the ld. counsel for the assessee as incorporated above and from the perusal of the same, we find that there is nothing which can lead to any inference or the conclusion that the receipts from foreign companies were in relation to services rendered by the assessee to Fedrigoni in India. Thus, even the FTTR reference cannot be considered as material on record to support the case made out by the Assessing Officer, which goes to prove that his assessment of income was purely based on surmises and presumptions as noted above. Thus, not only the finding of the ld. CIT (A) is confirmed but the information supplied by the CIT DR has no correlation or effect so as to reverse the finding of the ld. CIT (A). Accordingly, the submissions of the ld. CIT DR are rejected and the order of the ld. CIT (A) is affirmed.
FULL TEXT OF THE ORDER OF ITAT DELHI
The aforesaid appeals have been filed by the assessee for the Assessment Years 2012-13 & 2013-14; and by the Revenue for the AYs 2013-14 to 2017-18; and cross objections have been filed by the assessee for the AYs 2014-15 to 2017-18, against the consolidated impugned order dated 22.04.2021 passed by the ld. CIT(A)-27, New Delhi for the quantum of assessments passed under section 153A/143(3) of the Income-tax Act, 1961 (for short ‘the Act’).
2. Since issues involved in all the years are common arising out of identical set of facts and similar findings given by the AO and ld. CIT (A) has passed consolidated order for all the years, therefore, same were heard together and are being disposed off by this consolidated order for the sake of convenience.
3. Before dealing with various additions made by the AO in different assessment years, the relevant facts for the purpose of adjudicating the issues as raised before and the background of the case as culled from the impugned order are narrated here under :-
4. Assessee is an individual who through his sole proprietary concern, Sterling Security System entered into a contract with Italy based non-resident entity called, Cartiere Milani Fabriano (hereinafter referred to as ‘CMF’) which is part of Fedrigoni SPA International Group (hereinafter referred to as ‘Fedrigoni’). Fedrigoni, is an international group, specialized in production of bank note paper. The assessee had entered into an agreement with Fedrigoni on 25.09.2006 which was valid till 31.12.2007 for sharing of profits in lieu of services to CMF on supply of currency paper by CMF to Reserve Bank of India (RBI) including its subsidiaries. As per the agreement, the assessee was required to provide services for preparation and participation in the possible tenders and carrying out supplies in favour of the concerned buyers relating to bank note paper in South-Asia. As the consideration for aforesaid services which were in the nature of commission income, it was agreed between the parties that 41% of the net profit margin or 14% of the payment received by the Fedrigoni from the buyer, which here in this case is RBI, whichever is higher. The agreement was initially valid up to 31.12.2007 and thereafter it was extended up to 31.12.2012 vide amended deed dated 20.12.2007 with slight modifications in the terms and conditions of payment where consideration was fixed at 41% of the net margin. The assessee had received the amount of profit in the form of commission from CMF in foreign currency during the FYs 2006-07 to 2010-11. Since these profits were rendered from Special Economic Zone (SEZ), therefore, the same were claimed as exempt u/s 10AA of the Act. It is a matter of record that assessee had not received any amount of profits or any payment as per the agreement from CMF from FY 2011-12 onwards which is also evident from return of income for AYs 2012-13 to 2016-17, and also the observations made by the Assessing Officer in his assessment order.
5. Assessing Officer has noted the details of the turnover, net profit and exemption claimed for AYs 2008-09 to 2016-17 , for the sake of ready reference, is reproduced as under :-
