TMI Blog2019 (12) TMI 972X X X X Extracts X X X X X X X X Extracts X X X X ..... l raised by the Revenue challenging deletion of ₹ 9.33 crores as well as ground of appeal raised by the assessee pleading therein that the income of ₹ 1,57,10,000/- ought to have been assessed as business income instead of income from other sources . Not to grant set off of unabsorbed depreciation and business loss from granite business under the head income from business - We do not find any merit in this ground of appeal, because, the ld.CIT(A) has rightly observed that the income of ₹ 1,57,10,000/- is not a income from any regular source of business, rather it is income from other sources, and therefore, it would not qualify for grant of set off. No details have been supplied by the assessee before us in this regard. Retaining income which was offered to tax by the appellant - CIT-A not restricting the same at loss from rotation of funds in the guise of software business by ignoring the principles of real income theory - HELD THAT:- Since no explanation was furnished by the assessee regarding this entry, the same was treated non-genuine and made addition to that extent and worked out a total addition of ₹ 20,99,934/-. However, the ld.CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct without properly appreciating the facts of the case and the material brought on record. While in the assessee s appeal following two grounds are raised: 1. The ld.CIT(A) erred on facts and in law in confirming retaining income of ₹ 1,57,10,000/- which was offered to tax by the appellant instead of restricting the same at ₹ 2,57,500/- from rotation of funds in the guise of software business by ignoring the principles of real income theory. 2. The ld.CIT(A) has erred on facts and in law in directing the AO not to grant set of unabsorbed depreciation and business loss from granite business assessed under the head income from business against income held to be assessable under the head income from other sources. 5. Ground no.1 of Revenue s appeal and the assesee s appeal is interconnected, therefore we dispose of both these grounds together. 6. Brief facts of the case emerging from the case record are that assessee is a public limited company engaged in the business of processing, polishing and trading of granites. Besides this regular business, the assessee has also routed ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccommodative; whether entire sale consideration was required to be brought to tax as directed by the ld.CIT(A), and whether income, if any, from such activities would be assessable under the head income from other sources or under the head income from business . According, the ld.AO initiated fresh assessment. In the fresh assessment assessee furnished detailed submissions and chart indicating circular movement of funds through specific bank accounts. After considering the details and submissions of the assessee, the ld.AO held that the assessee failed to establish genuineness of the so-called creditors software transaction of ₹ 9,33,00,000/- and made under section 68 of the Act. He also made addition of ₹ 1,57,10,000/- income earned from software activities. In holding so, the ld.AO observed that no new facts emerged during the fresh assessment, and even the assessee failed to prove that trading of customized software was for rotation of transaction of companies belonging to Trans Techno group or these transactions were accommodation entries or back to back transactions and treated the transaction as bogus and non-genuine. It was further observed by the AO that as o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was noted that the transactions were not genuine and could not be verified. The matter reached the honourable ITAT Ahmedabad who had set it aside to the file of the AO. The honourable ITAT directed that the AO should verify whether the trading of customized software was for rotation of transactions of companies and whether, to those transactions section 68 will apply or the entire turnover and be considered for the purpose of assessment. It was further directed that the AO should also examine that whether the transactions were back-to-back transaction or accommodation entries. It was also directed that the AO should verify whether the appellant's income was income was income from other sources or income from business. The AO in his order passed in consequence to the set-aside proceedings has held that the appellant had failed to establish the genuineness of the creditors. He held that the appellant had claimed creditors for software of ₹ 9.33 crores and it had failed to prove the genuineness of so-sailed creditors. It is also pointed out by the AO that during the course of assessment proceedings the creditor Gap Corporate Services Pvt. Ltd had denie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pliers to the account of Trance Techno Group companies who brought in the funds in the bank account for rotating the funds leading to retention of funds by Trance Techno Group companies. It is also been pointed out by the appellant that for that purpose bank account of all the parties were opened in the same bank and in the same branch. The appellant has therefore, submitted that an amount of ₹ 2,57,500/- should be brought to tax the against the income of ₹ 1,57,10,000/- recorded in the books of accounts applying principles of real income theory. I have carefully considered all the facts on record and various submissions, it is noted that there is no dispute that both purchase and sales transactions recorded in the books of the appellant in relation to software business were sham merely on paper and were bogus. These facts are clearly brought out as a result of the enquiry, made by the AO in first-round of assessment. It is also noted from the chart given by the appellant which show the rotation of fund started from bank accounts of Trance Techno Group and the funds have reached back to that account again. These transitions were conducted in the subse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... formation Technology on and 07/03/2001 to the extent of ₹ 20 lakh and, therefore, the appellant had claimed that only ₹ 1 lakh was retained and earned from the amount so received. It is also seen that ROC fees of the appellant were paid by Trance Techno Foods Ltd amounting to ₹ 7500 on 19/02/2001. Similarly the appellant has also admitted to have earned ₹ 1.5 Lacs in cash which were brought in the books in the name of Shri Nilesh Xadiwala. Therefore, the appellant and accordingly claimed that the/only income earned but not disclosed in the books worked out to ₹ 2,57,500/-. On examination of the flow of funds mentioned in the paper book it is noted that the appellant had explained the sources of funds received in HDFC, Vejalpur branch from Trance Techno Foods Ltd and Skyiid Telecommunications Ltd amounting to ₹ 1.46 crores as we!! as payment of ROC fees of ₹ 7500/- by Trance Techno Foods Ltd for the appellant and therefore, these sums cannot be taxed under section 68 as unexplained credit as contra accounts, PAN and confirmations have been furnished. However, it is noted that the appellant had not been able to establish th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business loss from the Granite business will not be available to the appellant against this income. 8. A perusal of the above order would indicate that the ld.CIT(A) has recorded a finding of fact demonstrating that creditors amounting to ₹ 9.33 crores did not deserved to be added in the hands of the assessee, because the ld.CIT(A) had made detailed analysis of fund flow statement and bank accounts placed before him. The ld.CIT(A) was of the view that amounts have been generated from group concerns, and they were routed and ultimately a cheque of ₹ 1.25 crores was received from Trance Techno Foods Ltd. in HDFC Bank, Vejalpur Branch on 19.2.2011 and out of that amount, a sum of ₹ 1,11,50,000/- was paid to A A Software, and ₹ 13.5 lakhs paid to Carrier Information Technology. Thus, the ld.CIT(A) found a reconciliation of fund flow, and thereafter observed that addition under section 68 was not required to be made in the hands of the assessee. In other words the ld.CIT(A) has recorded a finding of fact that nothing has been retained by the assessee, which has been considered as unexplained cash credit. The assessee has explained fund flow i. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om rotation of funds in the guise of software business by ignoring the principles of real income theory. 13. Qua ground no.1, the ld.CIT(A) has held that the AO has properly assumed jurisdiction under section 147 for making the assessment. There was no argument on behalf of the assessee, therefore, the same stands rejected. 14. Qua ground no.2, we heard the ld.DR and considered the material available on record. We find that the ld.CIT(A) has noted that the assessee has retained an amount of ₹ 7,79,000/-, and these receipts were not part of rotation of funds for squaring up the accounts of the parties brought on the books of the assessee by recording sale and purchase of software. These details have been noticed by the CIT(A) in his impugned order as under: Amount received by cheque no 453264 on 18/12/2001 in Vijaya Bank Account from Skylid Telecommunication Ltd and retained by the appellant ₹ 22,000/- Amount received by cheque no 453266 on 22/12/2001 in Vijaya Bank Account from Skylid Tetecommunication Ltd and retained by the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... djudicating the ground relating to disallowance of ₹ 83,250/- by invoking provisions of section 40A(3) of the Act. 4. The Ld. CIT (A) erred on facts and in law in confirming software loss of ₹ 2,33,85,000/-. 19. Brief facts of the case are that in the set aside assessment proceedings, the ld.AO determined loss of ₹ 3,64,152/- by holding that assessee has not brought on record any fresh evidence or fact which can alter the original assessment order, and therefore, the ld.AO finalized fresh assessment on the basis of original assessment order. The issue of disallowance of loss of ₹ 2,33,85,000/- and disallowance of ₹ 32,000/- being written off of advance, ₹ 1,23,392/- being the addition made under section 68 of the Act and the addition of ₹ 83,250/- made by invoking provisions of section 40A(3) of the Act were challenged by assessee before the ld.CIT(A). The ld.CIT(A) upheld order of the ld.AO by observing as under: The 2nd to 6th grounds of appeal are regarding the disallowance of loss claimed by the appellant on software transactions. The AO has disallowed the loss of ₹ 2.33 cror ..... X X X X Extracts X X X X X X X X Extracts X X X X
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