TMI Blog2021 (8) TMI 1124X X X X Extracts X X X X X X X X Extracts X X X X ..... questioned the source for the fund for the share application money and the assessee stated that an amount of ₹ 127,47,05,650/- was received from M/s.Rakeen (P.) Ltd., Mauritius and ₹ 5,00,000/- was received from Indian Promoter. The Assessing Officer has stated that there was no proof filed by the assessee to substantiate its existence and claimed to have 100% share capital transferred from Rakindo Developers PJSC (FZE) Dubai. Further, the company has no entity, but it is just a conduit to transfer funds to India from Mauritius and this, according to the Assessing Officer, is evident from the consolidated balance sheet of the Dubai company. Assessing Officer proceeds to analyse the Dubai company and has mentioned that on perusal of the balance sheet of the Dubai company, it is noticed that the promoters of the Dubai company had diverted/transferred funds to various concerns during the year. Once again, the assessee has been called upon to explain and the assessee was represented by an authorized representative, who had stated that Reyada Investment Ltd., was holding 48% of shares in the Dubai company originally. On a perusal of the above findings, as recorded by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irst respondent to the documents and records, which were placed by the assessee. The assessee would contend that the first respondent without considering any of the documents and materials, mechanically completed the assessment by order dated 30.12.2010, impugned in the writ petition. 4.3.It is submitted that the first respondent had invoked Section 68 of the Act and erroneously concluded that the entire share capital of more than ₹ 316 Crores invested by the foreign company in accordance with the provisions of the Companies Act and complying with all the applicable Rules and Regulations and after securing approval from the Foreign Investment Promotion Board (FIPB) and the Reserve Bank of India (RBI), represents unexplained investment of the assessee. Therefore, it is submitted that the order of assessment establishes an arbitrary approach and total non-application of mind. Further, it is submitted that in terms of Section 68, show cause notice was required to be issued to the assessee in the event, the Assessing Officer considering any credit in the books of the assessee to represent unexplained investment of the assessee. The said provision not only requires notice to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment is bad in law, is in violation of the principles of natural justice and is in gross violation of the provisions of the Act and therefore, liable to be set aside. 5.The Revenue resisted the prayer sought for by the assessee by raising a preliminary objection with regard to the maintainability of the writ petition on the ground that as against the order of assessment, the assessee has a remedy of filing of an appeal before the appellate authority and therefore, the writ petition was liable to be dismissed as not maintainable. 6.On facts, it was contended that the assessee had stated in the writ petition that during the period from March, 2007 to April, 2008, Rakeen (P.) Ltd., Mauritius had received a remittance of US$ 12,35,00,000 (₹ 316,36,35,930/-) from its parent company in UAE, viz., RAK Properties P J K UAE and the said amount was partly invested in the share capital of the assessee-company by the Mauritius Government. According to the Revenue, this averment is incorrect, since it is the UAE company that had invested in the assessee-company. The financial statement of the UAE company for the period ending 31.12.2008 confirms that the UAE company had only i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee during the assessment proceedings and since the assessment was getting time barred, it was hastily and hurriedly completed on 31.12.2010 without even conducting any enquiry on account of lack of time. Further, it is submitted that the Assessing Officer failed to issue show cause notice before making an assessment by invoking Section 68 of the Act and this being a statutory requirement, non-compliance of the same will vitiate the entire addition. Further, on facts, it is submitted that the investment was made by a foreign company, which was controlled by the Government of Ras Al Khaimah, UAE and cannot be treated as unexplained investment under Section 68 of the Act. Further, the entire share capital having been invested by foreign company and having been approved by FIPB, remittance of funds from abroad being through normal banking channel after grant of approval by RBI cannot be treated as unexplained investment of the assessee. Further, in spite of production of foreign inward remittance certificate issued by the authorized dealers (Banks) in respect of the share capital investment by the foreign company, the investment cannot be treated as unexplained investment. Further, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ., the authorized agents have given foreign inward remittance and ignoring all thee documents, the assessment was completed and therefore, the learned Writ Court ought to have interfered with the assessment order impugned in the writ petition. 12.Mrs.Hema Muralikrishnan, learned Standing Counsel appearing for the respondents sought to sustain the order passed in the writ petition reiterating that the appeal remedy provided to the assessee under Section 246A of the Act is an effective remedy and factual details cannot be agitated by the assessee in a writ petition and it is incorrect to state that there are no complication on facts, as the entire issue revolves around facts and the Assessing Officer has considered all the documents and the stand taken by the assessee and has discussed with regard to the nature of investment as well as the creditworthiness of the Dubai company in the assessment order and if according to the assessee, the order is erroneous, then the assessee has to challenge the same by filing an appeal before the appellate authority and the writ petition was rightly dismissed by the learned Writ Court. 13.In support of her contention, the learned counsel p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice and the assessee had participated in the assessment proceedings and submitted their explanation. The Assessing Officer has discussed about the two companies, viz., the Mauritius company and the Dubai company and pointed out that from the balance sheet of the assessee-company, a sum of ₹ 127,52,05,650/- was received as share capital from the Mauritius company and Vishwatej Project Pvt. Ltd., which was incorporated on 10.01.2007. The assessee was called upon to furnish the source for the above amount, which was received as share capital. The assessee explained stating that the company was incorporated on 20.02.2007 in the name of Rakindo Developers Pvt. Ltd., and later changed as Rakindo Kovai Township Ltd. The Assessing Officer questioned the source for the fund for the share application money and the assessee stated that an amount of ₹ 127,47,05,650/- was received from M/s.Rakeen (P.) Ltd., Mauritius and ₹ 5,00,000/- was received from Indian Promoter. The Assessing Officer has stated that there was no proof filed by the assessee to substantiate its existence and claimed to have 100% share capital transferred from Rakindo Developers PJSC (FZE) Dubai. Further, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of US$ 12,35,00,000 is more than dhirams for which Rakeen Developers PJSC (FZC) do not have the source to fund it. Thus, the Assessing Officer concluded that the transfer of amount from Rakeen Developers PJSC (FZC) to Rakeen (P.) Ltd., has not been proved. 20.Further, the consolidated balance sheet of the Dubai company ended 31.12.2008 was again examined wherein, it was found that an amount of AED 457,413,538 was shown to have invested in the shares of the associated/equity accounted investees and when compared to the previous year, it was found that Rakeen Developers PJSC (FZC) had invested AED 424,205,882 during the year. Therefore, the Assessing Officer pointed out that the funds have been directly invested by the Dubai company whereas, the assessee stated that the funds have been provided by the Dubai company to the Mauritius company and from Mauritius to the Indian companies. If it is so, it should have been reflected in the balance sheet of the Dubai company either as loan or in the form of investment in shares in the name of the Mauritius company and on perusal of the consolidated balance sheet ended 31.12.2008, more particularly, note 14 and 22, it does not indic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nuinity of the transaction and the source of the investment. To dislodge the findings recorded by the Assessing Officer, a deeper examination into the facts has to be done and such exercise cannot be undertaken in a writ petition. That apart, there is an allegation that the assessee has floated 20 shell companies for the purpose of raising funds for acquisition of the lands. The Assessing Officer has gone on record to state that the Dubai company, which was stated to be a Government company, is no longer a Government company on account of the change in the shareholder pattern. To dislodge these findings, the assessee has to necessarily bring in facts and documents to establish their stand and this cannot be permitted to be done in a writ petition. As mentioned above, the onus to prove the identity, the creditworthiness and genuineness of the transaction is solely on the assessee and merely because statutory approvals have been obtained by the assessee, viz., FIPB and RBI will not sanctify the transaction especially when according to the Assessing Officer they are all unexplained investment. The explanation offered by the assessee was found to be not acceptable. Therefore, if accord ..... X X X X Extracts X X X X X X X X Extracts X X X X
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