TMI Blog2019 (9) TMI 152X X X X Extracts X X X X X X X X Extracts X X X X ..... bench in case of other share holders. In view of this fact respectfully following the decision of the coordinate bench where identical additions were deleted, we also direct the ld AO to delete the above protective additions in the hands of the assessee for Assessment Year 2006-07. Therefore, the appeal filed by the assessee for Assessment Year 2006-07 is allowed. - ITA Nos. 4662 to 4668/Del/2015, CO Nos. 416 to 422/Del/2015 - - - Dated:- 30-8-2019 - Ms Suchitra Kamble, Judicial Member And Shri Prashant Maharishi, Accountant Member For the Assessee : Shri Amit Goel, CA, Shri Nippun Mittal, CA For the Revenue : Shri Samar Bhadra, CIT DR ORDER PER BENCH 1. These are the appeals pertaining to one assessee for several years involving common issues / grounds of appeal for AY 2006-07 to Ay 2012-13 and therefore, they are disposed off by this common order. 2. ITA No. 4662/Del/2015 is filed by the DCIT, Central Circle-19, New Delhi (ld AO) for Assessment Year 2006-07 against the order of the ld CIT(A)-27, New Delhi dated 28.04.2015 raising six effective grounds of app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses wherein, the premises of the assessee at Greater Kailash-2, New Delhi was also covered. Therefore, notice u/s 153A of the Act was issued to the assessee. On 19.03.2013 the assessee filed his return of income declaring income of ₹ 107339/-. The assessment u/s 153A read with section 143(3) of the Act was passed on 31.03.2014 wherein, the total income of the assessee was assessed at ₹ 227588662/-. The above addition consists of the income of two overseas companies amounting to ₹ 227481323/-. The substantive addition was made in the hands of the respective overseas companies; however, as the assessee along with three others is the shareholder of those companies, therefore held to be beneficial owner of the two companies, addition on the protective basis was made in the hands of the assessee. 4. The assessee aggrieved with the order of the ld AO preferred an appeal before the ld CIT(A) who deleted the addition as under:- 8. Ground nos. 2, 3, 5, 5.1 to 5.4, 8 and 9 relates to an addition of ₹ 22,74,81,323/- made by the Assessing Officer on protective basis. 8.1.0 I have carefully considered the observation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s companies and in order to protect the interest of revenue, protective addition was made in respect of the amount pertaining to some of the overseas companies where the appellant had beneficial interest for assessment year 2006-07 in the hands of the appellant. 8.1.1 In the aforesaid back ground of facts, the issue now for consideration in the present appeal before me is whether the Assessing Officer was justified and correct in making a protective addition amounting to ₹ 22,74,81,323/- in the hands of the appellant. 8.1.2 On perusal of the order of the appellant, I find that the Assessing Officer made the addition on protective basis by holding that the profits of the overseas companies were to be taxed in the hands of the appellant by applying the concept of doctrine of lifting the corporate veil . The Assessing Officer also stated in para 21.2.8, that doctrine of lifting the corporate veil was readily applied in cases falling within the purview of company law, law of contract and law of taxation, when once the transaction was shown to be fraudulent, sham, circuitous or colourable device for the purpose of tax evasion. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asis while assessing the case of the appellant. 8.1.5 The Assessing Officer had drawn an adverse inference for taxing the income of the overseas companies in the hands of the appellant by lifting the corporate veil on the ground that various overseas companies were incorporated for the purpose of avoiding transfer pricing audit, which in my view is devoid of merit and contrary to the facts of the case. During the course of assessment proceedings of various Indian companies, the Assessing Officer made a reference to the Transfer Pricing Officer (TPO) International Taxation, New Delhi in respect of transactions of various overseas companies with that of the various Indian Companies. It is certainly an established fact, that such reference to the Transfer Pricing Officer could only be made if the various overseas companies were considered and treated to be separate and independent legal entities, as was rightly done by the Assessing Officer in this case. If the overseas companies were to be treated as sham , then obviously, there would be no occasion or need for the Assessing Officer to refer such transactions to Transfer Pricing Officer for determining the arms l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT Act, 1961 and thereafter, as an alternate argument also suggested application of the amended provisions of section 9 of the IT Act in case of the overseas companies and made an addition on substantive basis in their respective hands Therefore, in my opinion, based on the above discussion, I do not see any reason or justification for the Assessing Officer to make an addition on protective basis in the case of the appellant without bringing on record any substantial material or concrete evidence which was detected by him suggesting some fraud or adoption of a colourable device or method by these companies to evade payment of taxes in India. Addition on substantive basis was made by the Assessing Officer in the case of these overseas companies treating them as residents under the provisions of section 6(3) of the IT Act, 1961 but not on the basis of any fraud or illegal transactions, which was investigated by the Assessing Officer. 8.1.8 It is also a matter of record which is evident from the assessment order that an amount of ₹ 22,74,81,323/- was added to the income of the appellant on protective basis did not belong to the appellant nor pertaine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have existed. Due to lack of appreciation of facts in right perspective, the Assessing Officer is always self- contradicting his assessment. On one hand he attempted to lift the corporate veil by treating various companies as sham and on the other hand at the same time, he recognized the related transactions entered between these companies as genuine, separate and independent transactions. From the material on record, it is evident that these overseas companies are real and are of substance. The Assessing Officer accepted these transactions with various Indian companies, which is evident from the very fact that these transactions were referred to Transfer Pricing Officer, New Delhi. The income from various overseas companies was subjected to the provisions of Indian Income Tax Act, 1961, wherever it was applicable with regard to these transactions and taxes were also paid thereon. 8.1.11 The appellant Sh. Anil Aggarwal did not undertake any kind of transactions with any of these overseas companies except an amount of ₹ 48,23,000/- received during the assessment year 2009- 10 and an amount of ₹ 48,99,381/- received during the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticated, the Assessing Officer was not justified in making an addition in the case of the appellant on the basis of these emails. These e-mails do not establish even remotely that the appellant has earned any income. The E-mails, nowhere showed any income being earned by the appellant. In fact, the Assessing Officer also did not treat these e-mails to be a ground or basis for making the protective addition in the case of the appellant. 8.1.15 In the assessment order, the Assessing Officer relied on the statements of the appellant and other persons recorded during the course of search. These statements were inferred by the Assessing Officer as a ground for treating various overseas companies as resident in India u/s. 6(3) of the Income Tax Act, 1961 and consequently substantive additions were made in the case of respective overseas companies. Subsequent, to search, the appellant had challenged the veracity of these statements on several occasions. In the course of the assessment proceedings, vide letter dated 25.03.2014, the appellant challenged the veracity of the contents of the said statements extracted as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of recording of statement during the course of assessment proceedings, the undersigned did state that the contents of statement couldn't be commented upon, unless a copy of same is made available. However, copy of the statements have not yet been made available to me or my authorized representative. A similar submission had been made in the letter dt. 01.02.2014, wherein, your good office was requested you to provide the copy of statements. The reasons for not making available the statements based upon which, your good office propose to draw erroneous conclusions, are best known to you. The fact that the statements were dictated with predetermined bias and also that, in any case, the some contents of the statements are factually erroneous, is evident from the instances mentioned hereunder. The statement of the undersigned dated 23.03.2012 is stated to have started at 4:15 PM. In the statement there are 60 questions and 60 answers. After Q. No. 60 and answer thereto, it has been mentioned that the statement is temporarily concluded. It is not known when this statement was further resumed and when it was finally concluded. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he bottom-line entity? Ans. I own 100% shares of Wickwood development ltd. which has 100% owned subsidiaries geophysical substrata Ltd. which owns two subsidiaries, E1CR Cyprus and SDP services Ltd. EICR owns shares in iEnergizer Ltd. I own and control all these companies. All the controls and management of these companies effectively lies with me. Q3.) Please state what part of the activities of EICR (Cyprus) Ltd. lies outside India and who is the Director of EICR(Cyprus) Ltd. ? Ans. I am the main director of EICR Cyprus Ltd. there are other two directors provided by Secretarial Service provides investment of EICR in iEnergizer Ltd is held outside India in Cyprus, Bank A/c is held in Cyprus Secretarial and accounting records are maintained at Cyprus. Board meetings of the company are held at Cyprus. However, I clarify that all the decision taken in the Board meetings are only after my approval. Q4.) Based on the above facts, please state your opinion in respect of Taxability of Income of EICR(Cyprus) Ltd.? Ans. Since I am an Indian citizen who ultimately own EICR through Wickwood Develop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wood Development Ltd and since I have accepted ownership of Wickwood Development Ltd, I have also accepted wholly and exclusively control and management of these companies and therefore of all its subsidiaries. Entire list of the holding pattern to be provided very shortly. I do not have my ownership of the companies outside the structure. Q8. It appears that foreign companies controlled by you are liable to tax in India. Please verify whether you pay the taxes? Ans. I have considered the position of all my companies and want to make a full statement that all these companies are owned and controlled by me in India. This control and management of the companies is wholly and exclusively from India. Individual statement about each companies is as follows: a.] M/s Wickwood Development Ltd. BV1, this company was incorporated in 1991 in BVI by me and as I am 100% beneficial owner,control and management is carried by me wholly and exclusively in India. This company has no office and no employee and no infrastructure address of the company in BVI is not readily available but can be provided very shortly. This company is a 100% holdin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s exercised by me wholly and exclusively for India since the since the incorporation of the company and till date. This company holds share of iEnergizer Ltd. a company registered in Guernsey and quoted in London Stock Exchange, I will be providing the books of accounts, bank accounts as the control and management over this company is exercised from India wholly and exclusively. I agree that this company becomes resident in India for tax purpose under section 6 of Indian Income tax Act 1961 since incorporation. This company has earned capital gains on sale of Shares of iEnergizer Ltd. on September 14,2010 when EICR sold 31,930,706 shares of iEnergizer Ltd @ GBP 1.16 per share resulting in approx 37 million GBP from the sale proceeds. Capital gains arising on this sale is liable in India under the income tax act. I will be paying tax on this capital gain , other than this transaction EICR has not earned any income except interest on deposit in bank. I will be filing the returns of this company for all the A.Y. in the status of resident and pay tax. I will pay tax as soon as possible and definitely within a period of 12 months. I will submit the installment plan. e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the guise, some factually and legally erroneous contents have been taken written. It is not understandable as to how the answer to Q.4, as taken written, can be the basis for drawing adverse inference as is sought to be drawn. Further from Q.5 and answer thereto, as is self evident, there being no factual or legal basis for taxability under the Indian Income Tax Act (in fact the search party itself realized/thought that amount cannot be brought to tax in India unless brought in India), something with regard to liability and surety etc. was taken written, which are unsustainable both on facts and in law. In subsequent Q.6to Q.8, as is apparent some general and sweeping contents have been taken written as per predetermined bias which as already stated are factually and legally erroneous. y4s already stated, I am a non-resident Indian. It is a matter of record that I live outside India and comes to India only on few occasions in India and therefore any allegation / presumption that I am controlling or managing the affairs of any company wholly from India is factually erroneous. It would be imperative to mention at this juncture that the provisions of section 132(4) of the Act does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if the same is not appropriately corroborated and no credence or cognizance to the other evidence/submissions being made from time to time during the course of search proceedings and in the post investigation proceedings is given. Such bald reliance would result in miscarriage of justice and the resultant proceedings are liable to be quashed. 8.1.16 In case of the appellant, in the course of the assessment proceedings, the Assessing Officer did not contradict the contents of the letter dated 25.03.2014 nor he had re-recorded the statement of the appellant on oath again. Therefore there is no corroboration nor confirmation of the contents of the statements that were recorded at the time of search. In the absence of any corroborative evidence brought on record by the Assessing Officer to substantiate the statements in the case of the appellant. There is no relevance regarding the details declared in the return of the appellant to the contents of the statements recorded in the case of the overseas companies. The Assessing Officer relied on the statements of the appellant while determining the residential status of the overseas companies in accordance of the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest from the non-taxable territory in the hands of the assessee company. 9.1.1 The facts of the appellant s case are different from the facts of the aforesaid case and such facts cannot be parallel and similar. 9.1.2 Therefore in my considered opinion, the Assessing Officer failed to appreciate as well as distinguish the facts mentioned in the aforesaid paras with that of the appellant. In this case relied upon by the Assessing Officer, the assessment was completed in the hands of the assessee company, but not in the hands of the director-founder, even after holding him to be share holder of the assessee company as well as Bank A. 9.1.3 The Assessing Officer further placed reliance in the ratio of the decision of Life Insurance Corporation of India Vs Escorts Ltd. [(1986) 1 SCC 264] which I find is in complete ignorance of the facts of the said case to that of the appellant. The decision in Life Insurance (supra) was rendered in respect to Foreign Exchange Regulation Act, 1973, Companies Act, 1956, Constitution of India and did not consider the provisions with respect to the Income Tax Act. The Apex Court, in the aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... audit and consequent avoidance of tax. However, this was merely a doubt and allegation of Assessing Officer. To ascertain the factual position, the Assessing Officer himself referred the matter to Transfer Pricing Officer and as discussed earlier, no case of any taxevasion was detected. Contrary to the allegation and doubt of the assessing officer, all the transactions with the overseas companies which were doubted by the Assessing Officer was found to be genuine and carried out at an arm s length price. Moreover, in one of the overseas companies while referring to the emails the Assessing Officer himself accepted that it was a part of the tax-planning. Therefore, the facts of the various case laws referred by the assessing officer are distinguishable and are not applicable to the facts of the appellant s case. 11. In the view of the above discussion, the addition of ₹ 22,74,81,323/- made by the Assessing Officer for the year under consideration is hereby deleted. These Grounds of appeal are allowed. 5. Therefore, the revenue is aggrieved with the above order and has preferred this appeal. 6. The ld DR vehemently supporte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. The assessee is also raised cross objection in the above appeal. In the cross objection the assessee has challenged certain jurisdictional issues and further additions made u/s 153A of the Act by the ld AO are beyond the scope of the law. As we have already deleted the appeals of the revenue the cross objection supporting the impugned order passed by the ld CIT(A) becomes infractuous and hence cross objections is also dismissed. 10. The appeal for Assessment Year 2007-08 filed by the revenue also involves the identical additions of ₹ 495316627/- and the assessee has filed the cross objections supporting the order of the ld CIT(A). The appeal for Assessment Year 2008-09 filed by the revenue also involves the identical additions of ₹ 529475798/- the assessee has filed the cross objections supporting the order of the ld CIT(A). The appeal for Assessment Year 2009- 10 filed by the revenue also involves the identical additions of ₹ 2447420629/- the assessee has filed the cross objections supporting the order of the ld CIT(A). The appeal for Assessment Year 2010-11 filed by the revenue also involves the identical additions of ₹ 888,10,18,34 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the appellant surrendered the above cash in his hands and declared the same in the return of income filed by him for Assessment Year 2012-13 which was assessed u/s 143(3) dated 18.04.2014. As the above amount was already taxed, it amounted to double addition in the hands of the assessee as well as Mr. Atul Aggarwal. Further, addition on account of jewellery also, Mr. Atul Aggarwal explained the source in his own case and no addition was made by the ld AO in the hands of Shri Atul Aggarwal as the jewellery worth the of ₹ 1682400/- was within the limited as prescribed by CBDT in Instruction dated 11.05.1994 and the balance jewellery of ₹ 1088351/- was already offered by him in his hands as other income. The ld CIT(A) also noted that the above addition has already been taken care of in assessment of Shri Atul Aggarwal. Therefore, the addition of same sum cannot be made in the hands of the assessee. 15. The ld AO aggrieved by the order of the ld CIT(A) has preferred this appeal on ground No. 7 and 8. 16. The ld DR relied upon the order of the ld AO. 17. We have carefully considered the rival contentions ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
