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2015 (12) TMI 512 - ITAT CHENNAI

2015 (12) TMI 512 - ITAT CHENNAI - TMI - Disallowance of unrecoverable advance - Held that:- The assessee claims that a sum of ₹ 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 .....

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pital 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 ₹ 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 di .....

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herefore, 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 .....

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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 .....

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sing 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 ₹ 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 .....

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P B Sekaran, CIT ORDER Per N R S Ganesan, Judicial Member Both assessee and Revenue have filed the present appeals against the order of the Commissioner of Income Tax (Appeals)-V, Chennai, dated 27.03.2014, for the assessment year 2008-09. Therefore, we heard both the appeals together and disposing of the same by this common order. Let's first take assessee's appeal in I.T.A. No.1115/Mds/2014. 2. The first issue arises for consideration is with regard to disallowance of ₹ 3,70,36,4 .....

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39;the Act'). The Ld. representative further submitted that the work-in-progress to the extent of ₹ 1,94,12,871/- was also written off in the books of account. Since the project could not be completed as contemplated by the company, the project was abandoned, therefore, the expenditure incurred by the assessee, namely, the work-in-progress for the project abandoned has to be allowed as revenue expenditure either under Section 28 or under Section 37 of the Act. Referring to the inoperat .....

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ssessing Officer or before the CIT(Appeals). In the absence of any details, the CIT(Appeals) confirmed the addition made by the Assessing Officer. Referring to bank balance to the extent of ₹ 10,000/- in the inoperative bank account and work-in-progress to the extent of ₹ 1,94,12,871/-, the Ld. D.R. submitted that these are all capital in nature. Therefore, it cannot be allowed as revenue expenditure. Therefore, the CIT(Appeals) has rightly confirmed the addition made by the Assessin .....

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on to interfere with the order of the lower authority. 6. Now coming to the balance amount standing as inoperative bank account to the extent of ₹ 10,000/- and work-in-progress to the extent of ₹ 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 th .....

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med as bad debt. During the course of hearing, Sh. B. Ramakrishnan, the Ld. representative for the assessee, submitted that he was instructed not to press this ground before this Tribunal. The Ld. representative also clarified in the note filed before this Tribunal during the course of hearing that the ground relating to bad debts of ₹ 50 lakhs is not pressed. 8. In view of the above, this ground of the appeal with regard to disallowance of bad debts is dismissed as not pressed. 9. The nex .....

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bmitted that a copy of the return filed by the assessee is available at pages 1 to 4 of the paper-book. The Ld. representative further submitted that the agreement for sale of the property and power of attorney was dated 4.2.2008, a copy of which is available at pages 7-12 of the paper-book. The sale deed dated 28.03.2008 is available in pages 13 to 28 of the paper-book. Since the property was purchased and sold in the very same assessment year, it was not reflected in the fixed asset schedule a .....

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mitted that the agreement dated 04.02.2008 shows that the assessee agreed to purchase the property. It is not known whether this agreement was available before the Assessing Officer or not. Referring to the assessment order, the Ld. D.R. submitted that there was no reference of agreement in the assessment order. The Assessing Officer found that in the fixed asset schedule of the company for the relevant assessment year, no land was shown as disposed of. If the land was purchased during the year .....

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operty and the date on which the sale was executed. Moreover, the details of advance received and the balance amount received were not reflected in the books of the assessee. In the absence of any details of transaction relating to sale of land to M/s Arihant Hospitality (Chennai) Private Limited, the CIT(Appeals) found that the Assessing Officer has rightly upheld the addition made under Section 69A of the Act. Even before this Tribunal, the assessee could not file any details with regard to th .....

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CIT(Appeals) found that the assessee has not filed any details before the lower authorities. The CIT(Appeals) further found that the date on which the advance was received as well as the balance amount was received were not reflected in the books of the assessee-company. The CIT(Appeals) also found that unless and until the assessee furnishes the details of the transaction of sale made to M/s Arihant Hospitality (Chennai) Private Limited for a consideration of ₹ 31,07,20,000/-, it cannot .....

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sale deed is available at pages 13 to 28 of the paper-book shows that M/s AGS Properties Development (India) Pvt. Ltd. in fact executed a sale deed through their power of attorney agent in favour of Arihant Hospitality (Chennai) Pvt. Ltd. for a total consideration of ₹ 31,07,20,000/-. This registered sale deed does not show that the assessee became the owner at any point of time. The agreement for sale of the property discloses the sale consideration at ₹ 16,26,00,084/-. It is not k .....

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ansaction 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. Therefor .....

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see not to press this ground of appeal. The Ld. representative has also filed a note of agreement before this Tribunal during the course of hearing saying that the ground relating to writing off of capital work-in-progress to the extent of ₹ 2,28,18,258/- is not pressed. 15. In view of the above, the addition made by the Assessing Officer to the extent of ₹ 2,28,18,258/- is confirmed and the ground of appeal raised by the assessee is dismissed as not pressed. 16. In the result, the a .....

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tex Limited invested the above sum of ₹ 377,71,78,316/- by way of foreign direct investment for subscription towards convertible debentures. The assessee was asked to produce the creditworthiness of M/s Platex Limited, Mauritius and genuineness of transaction. The assessee-company has produced only provisional accounts of M/s Platex Ltd., Mauritius for the financial year 2007-08. The provisional accounts produced by the assessee does not support the claim of the assessee that it has receiv .....

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Officer came to a conclusion that the so-called creditor has no creditworthiness to make investment in the assessee-company and the transaction was also not genuine. 18. Shri P.B. Sekaran, the Ld. D.R. further submitted that one Shri Prasad V. Potluri is a common Director in M/s Platex Ltd., Mauritius and in the assessee-company. The financial statement of M/s Platex Ltd., Mauritius clearly indicates that there was no generation of income other than the so-called investment said to be made in th .....

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ddition was to be made, it has to be made in the hands of M/s PVP Enterprises Pvt. Ltd. and not in the hands of the assessee. Referring to Section 170 of the Act, the Ld. D.R. pointed out that in case of succession of business, by way of transfer and the predecessor-company was in existence, such predecessor shall be assessed in respect of the income of the previous year in which the succession took place, upto the date of succession. The Ld. D.R. clarified that it is not a transfer of business. .....

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in the hands of the predecessor-company. If at all any assessment was made in the hands of M/s PVP Enterprises Pvt. Ltd., then that would amount to making assessment in favour of the company, which is not in existence. Therefore, the assessment order would be nullity in the eye of law. In fact, while considering the issue, the Hyderabad Bench of this Tribunal in I.T.A. No.1159/Hyd/2010 dated 31.07.02013 found that when M/s PVP Enterprises Pvt. Ltd. merged with the assessee-company by way of ama .....

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CIT(Appeals) is not justified in observing that the assessment has to be made in the hands of M/s PVP Enterprises Pvt. Ltd. and not in the hands of the assessee-company. Therefore, the Ld. D.R. submitted that the order of the CIT(Appeals) cannot be upheld in the eye of law. 20. On the contrary, Sh. B. Ramakrishnan, the Ld. representative for the assessee, submitted that M/s PVP Ventures Pvt. Ltd. was a private limited company assessed in Hyderabad. Deutsche Bank, Singapore, sanctioned ₹ 5 .....

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nly in the hands of M/s PVP Ventures Pvt. Ltd. and not in the hands of M/s SSI Ltd. The SSI Ltd. subsequently changed its name as M/s PVP Ventures Ltd., the present assessee. Therefore, according to the Ld. representative, in view of Section 170 of the Act, the predecessor-company, namely, M/s PVP Ventures Pvt. Ltd. has to be assessed in respect of its receipts till the date of amalgamation. Therefore, the CIT(Appeals) has rightly found that no addition can be made in the hands of the present as .....

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e genuineness cannot be doubted at this stage. The Ld. representative further submitted that the Assessing Officer has also made assessment with regard to interest income of Platex Ltd., Mauritius in the hands of the present assessee and also made protective assessment in the hands of M/s Platex Ltd., Mauritius. These orders of Assessing Officer were annulled by this Tribunal at Hyderabad on the ground that there ws no jurisdiction for the Assessing Officer at Hyderabad after merger of M/s PVP V .....

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gh Deutsche Bank to the extent of ₹ 40,87,50,000/-. A similar credit was received subsequently. Therefore, all transactions were received by M/s PVP Ventures Pvt. Ltd. from M/s Platex Ltd., Mauritius. Hence, the transactions are genuine. The source for making investment in M/s PVP Ventures Pvt. Ltd. was the loan borrowed by M/s Platex Ltd., Mauritius from Deutsche Bank. Therefore, according to the Ld. representative, the assessee has discharged its onus by proving that the entire credit of .....

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as to be made only in the hands of M/s PVP Ventures Pvt. Ltd. and not in the hands of the present assessee. Therefore, the CIT(Appeals) has rightly deleted the addition made by the Assessing Officer. 22. We have considered the rival submissions on either side and perused the relevant material on record. M/s PVP Ventures Pvt. Ltd., Hyderabad was amalgamated with SSI Limited with effect from 01.10.2007 by order of Madras High Court. The assessee claims that M/s PVP Ventures Pvt. Ltd. received S .....

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ly in the hands of the predecessor company, namely, M/s PVP Ventures Pvt. Ltd. and not in the hands of the present assessee. It is also pertinent to note that after amalgamation of M/s PVP Ventures Pvt. Ltd. with M/s SSI Limited, Chennai, the name of the company was changed to M/s PVP Ventures Ltd. from SSI Limited. Now, when the company M/s PVP Ventures Pvt. Ltd. is not in existence, the question arises for consideration is whether the addition, if any, could be made in the hands of M/s PVP Ven .....

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sessed in respect of the income of the previous year in which the succession took place up to the date of succession; (b) the successor shall be assessed in respect of the income of the previous year after the date of succession. (2) Notwithstanding anything contained in sub-section (1), when the predecessor cannot be found, the assessment of the income of the previous year in which the succession took place up to the date of succession and of the previous year preceding that year shall be made .....

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record a finding to that effect and the sum payable by the predecessor shall thereafter be payable by and recoverable from the successor, and the successor shall be entitled to recover from the predecessor any sum so paid. (4) Where any business or profession carried on by a Hindu undivided family is succeeded to, and simultaneously with the succession or after the succession there has been a partition of the joint family property between the members or groups of members, the tax due in respect .....

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icable in respect of succession which takes place on death of a person. When the business or profession was succeeded by other person, the predecessor shall be assessed in respect of previous year in which the succession took place, upto the date of succession. However, the successor-company shall be assessed in respect of the income of the previous year after the date of succession. Sub-section (2) of Section 170 of the Act clearly says that notwithstanding anything contained in sub-section (1) .....

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de only in the hands of the successor-company. In the case before us, the amalgamation admittedly took place on 01.10.2007. Therefore, on and from 01.10.2007, M/s PVP Ventures Pvt. Ltd. is not in existence. Therefore, the question arises for consideration is when a company is not in existence due to amalgamation with effect from 01.10.02007, whether still the assessment can be made in the hands of the predecessor-company? This issue was considered by the Kolkata Bench of this Tribunal in Pampasa .....

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ssessment can be made, it should be made in the hands of the amalgamated company, namely, the successor company. In this case also, M/s PVP no assessment can be made in the hands of M/s PVP Ventures Pvt. Ltd. In fact, order passed by the Director of Income Tax (International Taxation) was quashed by the Hyderabad Bench on the ground that M/s PVP Ventures Pvt. Ltd. is not in existence. Therefore, in view of Section 170(2) of the Act, the income of M/s PVP Ventures Pvt. Ltd. has to be assessed onl .....

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y the CIT(Appeals) that the assessment, if any, has to be made in the hands of M/s PVP Ventures Pvt. Ltd. amounts to making an assessment in the case of non-existing company. Therefore, 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 S .....

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, Mauritius did not have net worth to support the claim of investment made to the extent of ₹ 377,71,78,316/-. The financial statement said to have been filed before the Assessing Officer shows that there was no generation of income by M/s Platex Ltd., Mauritius. Therefore, it is doubtful that Deutsche Bank granted loan to M/s Platex Ltd., Mauritius by way of Facility Agreement. When M/s Platex Ltd., Mauritius has no net worth and it could not generate any income of its own, it is not know .....

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t 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) 291 ITR 278. 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 s .....

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