2015 (12) TMI 512 - AT - Income Tax

Disallowance of unrecoverable advance - Held that - The assessee claims that a sum of Rs. 1, 76, 13, 603/- was part of the sales already offered in the earlier years. However no details were filed by the assessee either before the lower authorities or before this Tribunal. In the absence of any particulars with regard to inclusion of income in the earlier assessment year as claimed by the assessee this Tribunal do not find any reason to interfere with the order of the lower authority. Coming to the balance amount standing as inoperative bank account to the extent of Rs. 10, 000/- and work-in-progress to the extent of Rs. 1, 94, 12, 871/- the assessee claims that the project could not be completed as contemplated by the company. The fact remains is that the investment made by the assessee is in the capital asset. The assessee claims the same under the head Administrative and Other expenses . Since the expenditure relates to capital asset this Tribunal is of the considered opinion that the CIT(Appeals) has rightly confirmed the addition made by the Assessing Officer. Therefore this Tribunal do not find any reason to interfere with the order of the lower authority in confirming the addition of Rs. 3, 70, 36, 474/- being the unrecoverable advance under the head Administrative and Other expenses . - Decided against assessee. Addition under Section 69A - Held that - The agreement for sale of the property discloses the sale consideration at Rs. 16, 26, 00, 084/-. It is not known how the very same property was sold for Rs. 31, 07, 20, 000/-. That means the assessee is not willing to disclose all the material facts relating to the above said transaction. The sale deed dated 28.03.2008 was executed within two months from the date of the agreement i.e. on 04.02.2008. Within two months period from the date of agreement the value of the property will not go to the extent of Rs. 31, 07, 20, 000/-. Therefore the assessee obviously invested undisclosed money in the transaction and on sale of the property now bringing the same as short term capital gains. The sale deed dated 28.03.2008 was executed in favour of M/s AGS Properties Development (India) Private Limited by one Shri R.R. Aroonkumar. The power of attorney was executed in the individual capacity of Shri Aroonkumar. Therefore the assessee company invested its funds from undisclosed source in the property and the same was sought to be brought on accounts in guise of short term capital gains. Therefore this Tribunal is of the considered opinion that the CIT(Appeals) has rightly confirmed the addition made by the Assessing Officer under Section 69A - Decided against assessee. Validity of assessment in the hands of assessee or predecessor-company - undisclosed loan - Held that - As in view of non-obstante clause in Section 170(2) of the Act this Tribunal is of the considered opinion that the provisions of Section 170(2) will override the provisions of Section 170(1) of the Act. Therefore the assessment has to be made only in the hands of the present assessee in view of the provisions of Section 170(2) of the Act. The CIT(Appeals) is not justified in holding that the assessment has to be made only in the hands of the predecessor-company. Now coming to the genuineness of the loan in view of financial statement of M/s Platex Ltd. Mauritius and the fact that Shri Prasad V. Potluri is a common Director in all the three companies namely M/s Platex Ltd. Mauritius M/s PVP Ventures Pvt. Ltd. and M/s PVP Ventures Ltd. Chennai creates a doubt that the money might have been flown from the assessee-company to M/s Platex Ltd. Mauritius and by way of investment would have come back to Chennai through banking channel. Unfortunately this fact was not examined by the lower authorities. Therefore this Tribunal is of the considered opinion that the matter needs an investigation by the Assessing Officer as it was done in the case before Apex Court in CIT v. P. Mohanakala (2007 (5) TMI 192 - SUPREME Court). The Assessing Officer has to examine when M/s Platex Ltd. Mauritius had no net worth and it could not generate any income of its own how Deutsche Bank was able to sanction loan facility of more than Rs. 500 Crores. It also needs to be examined whether any loan was sanctioned and disbursed by Deutsche Bank to M/s Platex Ltd. Mauritius. Further it is to be examined whether any money was flown from India to Mauritius in order to enable the Deutsche Bank to sanction the loan to M/s Platex Ltd. Mauritius. These aspects were not examined by the Assessing Officer.Merely because the funds were transferred through banking channel that alone will not prove the genuineness of transaction.

Summary

Issues Involved:
1. Disallowance of Rs. 3,70,36,474/- as unrecoverable advance.
2. Disallowance of Rs. 50 lakhs claimed as bad debt.
3. Addition of Rs. 31,07,20,000/- under Section 69A of the Income-tax Act.
4. Addition of Rs. 2,28,18,258/-.
5. Assessment of Rs. 377,71,78,316/- received from M/s Platex Limited, Mauritius.

Detailed Analysis:

1. Disallowance of Rs. 3,70,36,474/- as Unrecoverable Advance:
The assessee claimed Rs. 3,70,36,474/- under "Administrative and Other expenses," which included Rs. 1,76,13,603/- as tax deducted at source receivable and Rs. 1,94,12,871/- as work-in-progress for an abandoned project. The Tribunal found that no details were provided regarding the inclusion of income in earlier years, and the investment in the capital asset could not be allowed as revenue expenditure. Thus, the Tribunal upheld the disallowance.

2. Disallowance of Rs. 50 Lakhs Claimed as Bad Debt:
The assessee's representative did not press this ground during the hearing. Consequently, the Tribunal dismissed this ground of appeal as not pressed.

3. Addition of Rs. 31,07,20,000/- under Section 69A:
The assessee claimed the profit on the sale of land as short-term capital gains. However, the Tribunal found that the property transaction was not reflected in the fixed asset schedule, and the sale deed did not show the assessee as the owner. The Tribunal concluded that the assessee invested undisclosed money in the transaction, and the addition under Section 69A was upheld.

4. Addition of Rs. 2,28,18,258/-:
The assessee's representative did not press this ground during the hearing. Therefore, the Tribunal confirmed the addition and dismissed the ground of appeal as not pressed.

5. Assessment of Rs. 377,71,78,316/- Received from M/s Platex Limited, Mauritius:
The Department argued that M/s Platex Limited, Mauritius, lacked the financial capacity to invest in the assessee-company, and the transaction was not genuine. The CIT(Appeals) had held that the addition should be made in the hands of M/s PVP Enterprises Pvt. Ltd., the predecessor company, under Section 170 of the Act. However, the Tribunal found that after the merger, the predecessor company ceased to exist, and the assessment should be made in the hands of the present assessee. The Tribunal also questioned the genuineness of the loan from Deutsche Bank to M/s Platex Ltd., Mauritius, and remitted the matter back to the Assessing Officer for thorough investigation.

Conclusion:
The assessee's appeal was dismissed, and the Revenue's appeal was allowed for statistical purposes. The Tribunal upheld the disallowances and additions made by the lower authorities and remitted the issue of the Rs. 377,71,78,316/- received from M/s Platex Limited, Mauritius, back to the Assessing Officer for further investigation.