Case Law Details
Armajaro Trading India (P) Limited Vs ITO (ITAT Cochin)
In the instant case, one of the reasons for limited scrutiny was for the purpose of examining whether the share application money received by the assessee was genuine and was from disclosed sources. It is seen that the assessee had shown an amount of Rs.2,55,94,110 as liability on account of share application money in the Balance Sheet as on 31.03.2016. The assessee-company had furnished details of the share application money received, FIRCs, bank statements regarding the credit of share application money received, share application general ledger account extracts during the course of assessment proceedings to prove the genuineness of the amount received. The details and documents furnished were verified during the course of scrutiny proceedings. The total amount in foreign exchange towards allotment of equity shares is USD 395637.35. The foreign exchange loss of Rs.11,94,826 was recognized by the assessee in the Profit and Loss account and credited to the share application money pending allotment to match with the dollar rate as on 31.03.,2016. The Assessing Officer had treated the said foreign exchange loss as unexplained cash credit and brought the same to tax net. The assessee had preferred an appeal for treating the foreign exchange loss as unexplained cash credit and the appeal filed before the first appellate authority (filed on 02.01.2019) was pending adjudication. Therefore, from the above factual position, it is not correct on the part of the PCIT to come to a conclusion that the A.O. not examined the issue in question.
Secondly, the assessee had submitted that the bank had inadvertently mentioned in FIRCs that the amount received were for service management related advisories. It was stated that the assessee had not noticed the said reference in the FIRCs. On noticing the inadvertent error, the assessee had requested the bank officials and brought the matter to the notice of the bank. The assessee had sent communication to the bank requesting for correction of FIRCs deleting purpose as service and to mention as towards equity shares. The bank has also sent a confirmatory mail dated 29.09.2015 stating that the bank is working on the said request and shall update the assessee shortly. Copies of the emails communications dated 22.09.2015 and 29.09.2015 are placed on record from pages 168 and 169 of the paper book submitted by the assessee. However, the bank has not updated the request of the assessee inspite of repeated communications.
Thirdly, from evidence on record (refer pages 110 to 142 of the paper book), it is clear that the assessee had actually allotted equity shares to the holding company in UK on 07.04.2017 pertaining to the assessment year 2018-2019. The assessee has also furnished evidences to prove how the shares have been actually allotted and name and details of the allottees.
Lastly, even assuming the amounts received are for “service fees (for management related advisories)”, the same cannot be brought to tax during the relevant assessment year, since the amounts were received in assessment years 2014-2015 and 2015-2016 (Rs.1,50,68,858 received in assessment year 2014-2015 and Rs.95,78,702 received in assessment year 2015-2016). For the aforesaid reasons, we quash the order passed by the PCIT u/s 263 of the I.T.Act. It is ordered accordingly.
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