Case Law Details
Veritas (India) Ltd. Vs ACIT (ITAT Mumbai)
Conclusion: Assessee had established identity of investors and submitted documents to establish creditworthiness and the certificate issued by the Firm of Accountants for proving the movement of funds from ultimate investors to the foreign companies which establish genuineness of transactions thus, assessee had discharged initial burden placed upon it under section 68 by proving three main ingredients, accordingly, addition made under section 68 could not be sustained.
Held: AO noticed that assessee had received funds aggregating to Rs.50.00 crores from two foreign companies which was considered to be a tax haven. He further noticed that assessee-company had applied for post facto approval to FIPB division of Government of India for approving the receipt of Rs.50.00 crores as share capital from the above said two foreign companies. AO noticed that the FIPB division of Government of India had rejected application of assessee and further investor companies were only front companies and the real investors were different persons. AO finally took the view that assessee had established identity of investors and submitted documents to establish creditworthiness also, but failed to establish genuineness of transactions, as the remittances had not been linked to the investments made in the assessee company. Accordingly, AO assessed the share capital amount of Rs.50.00 crores received from the two foreign companies, as deemed income of assessee within the meaning of section 68 . It was held assessee had failed to furnish financial statements of ultimate investors. In terms of sec.68, the same might not be required, as the immediate investors were foreign companies, whose source had been proved by the financial statements filed by them. The certificate issued by the Firm of Accountants proved the movement of funds from ultimate investors to the foreign companies, which invested in the shares of the assessee company. Thus, the source of sources also proved, while it may not be necessary for the purposes of sec.68. Assessee had also furnished details of commission paid by it for arranging funds. All these documents/information, proved the genuineness of transactions. Hence, AO was not right in observing that the assessee had failed to prove genuineness of the transactions. Thus, assessee had discharged initial burden placed upon it under section 68 by proving three main ingredients, accordingly, addition made under section 68 could not be sustained.
FULL TEXT OF THE ITAT JUDGEMENT
The Revenue has filed appeal and the assessee has filed cross objection challenging the order dated 22.2.2016 passed by learned CIT(A)-8, Mumbai and it relates to A.Y. 2010-11. The Revenue is aggrieved by the decision of learned CIT(A) in deleting the addition of Rs.50.00 crores made by the Assessing Officer u/s. 68 of the Act.
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