IN THE HIGH COURT OF JUDICATURE AT BOMBAY
\nO.O.C.J.
\nINCOME TAX APPEAL NO. 1502 OF 2016
\nPr. Commissioner of Income Tax -14
\n426, Aaykar Bhavan,
\nChurchgate, Mumbai – 400 020. .. Appellant
\nVersus
\nM\/s. Aditya Birla Telecom Ltd
\n5th Floor, Windsor Off. CST Rd,
\nKalina, Santacruz (E),
\nMumbai.
\nPAN: AAACA5315A .. Respondent
\n……………….
\n\u2022 Mr. Suresh Kumar a\/w Ms. Sumandevi Yadav for the Appellant
\n\u2022 Mr. Jehangir Mistri, Senior Counsel a\/w Mr. Madhur Agrawal i\/b
\nAtul Jasani for the Respondent
\n……………….
\nCORAM : AKIL KURESHI &
\nSARANG V. KOTWAL, JJ.
\nDATE : MARCH 26, 2019.
\nORAL JUDGMENT (Per Akil Kureshi, J.)
\n1. This appeal is filed by the Revenue to challenge the
\njudgment of the Income Tax Appellate Tribunal (“the Tribunal”
\nfor short) raising following question for our consideration:-
\n“Whether on the facts and in the circumstances of the case and in
\nlaw, the Tribunal is correct in deleting the addition of Rs. 2098.25
\ncrores made under Section 68 of the I.T. Act, 1961?”
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2. Brief facts are as under:-
\n3.1 Respondent assessee, M\/s. Aditya Birla Telecom Ltd is a
\nregistered company and is engaged in providing
\ntelecommunication services. While assessing the company’s
\nreturn of income for the assessment year 2009-10, the
\nAssessing Officer noticed that the assessee company had
\nissued 19,25,000 preference shares, each of the face value
\nof Rs. 10\/- to one P5 Asia Holding Investment (Mauritius) Ltd
\n(hereinafter referred to as “P5AHIML”) at Rs. 10,890\/- per
\nshare. Through allotment of these shares, thus, the
\ncompany had received the share amount of Rs. 1,92,50,000\/-
\nand total premium of Rs. 2096.32 crores (rounded off). The
\ncompany had thus received total sum of Rs. 2098.25 crores.
\nThe dividend would be paid at the rate of 0.00001% per
\nannum on the face value of the preference shares. Upon
\ncompletion of period of ten years of issuance of preference
\nshares, the same would be converted into equity shares at a
\npremium of Rs. 10,890\/- per share. The Assessing Officer
\nnoticed that the assessee’s holding company M\/s. Idea
\nCellular Limited and its nominee owed 1,00,00,000 equity
\nshares of Rs. 10\/- each. He was of the opinion that the
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assessee had received share capital towards preference
\nshares from P5AHIML at terms which were so adverse to
\nP5AHIML, that no prudent businessman would ever agree to
\nsubscribe to preference shares on such terms.
\n3.2 On such basis, the Assessing Officer initiated
\ninquiry into the assessee receiving such sum of Rs. 2098.25
\ncrores, whether the same would be covered by Section 68 of
\nthe Income Tax Act, 1961 (“the Act” for short). The Assessing
\nOfficer, therefore, called upon the assesee to prove the
\nidentity of the investor, its capacity to make such investment
\nand the genuineness of the transaction. In furtherance of the
\nsame, the Assessing Officer asked the assessee to provide
\nvarious details such as the proof of identity, financial
\ncapacity of P5AHIML, copy of the annual report, assessment
\norders and financial statements of P5AHIML for the last two
\nyears, justification for such huge premium charged etc.
\n3.3 The assessee supplied the desired documents and
\nmade submissions why according to the assessee, the
\ntransaction being genuine, Section 68 of the Act had no
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applicability.
\n3.4 Rejecting the submissions of the assessee, the
\nAssessing Officer passed the order of assessment holding
\nthat the assessee had failed to prove the genuineness of the
\ntransaction of the receipt of funds amounting to Rs. 2908.25
\ncrores from P5AHIML. He, therefore, invoked Section 68 of
\nthe Act and made addition of the said sum in the hands of
\nthe assessee. In the process, he relied on following factors:-
\n(i) The assessee had used only a sum of Rs. 7.31 crores
\nreceived from P5AHIML for its own operation, the balance
\namount was transferred to Idea Cellular Ltd (holding
\ncompany) or to Idea Cellular Infrastructure Services Ltd
\n(another group company) for the purpose of other
\ninvestment;
\n(ii) In his opinion, there was no reason why P5AHIML should
\nhave transferred such huge amount without any apparent
\nreturn;
\n(iii) The assessee failed to produce the assessment order of
\nP5AHIML;
\n(iv) In the opinion of the Assessing Officer, P5AHIML
\nrepresenting Province groups and the assessee
\nrepresenting Idea group were front companies;
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(v) The assessee had opened the bank account in HSBC
\nBank only for receipt of funds from P5AHIML which was
\nclosed shortly after the transfer of funds;
\n(vi) In the opinion of the Assessing Officer, culmination of
\nthese facts would be that the subscription of the preference
\nshares by P5AHIML was colourbale device and not
\ngenuine transaction.
\n3.5 The assessee carried the matter in appeal. In
\nappellate proceedings, the CIT(A) allowed the assessee to
\nproduce on record certain documents which did not form part
\nof the assessment proceedings and called for remand report
\nfrom the Assessing Officer. The CIT(A) dismissed the appeal.
\nPerusal of this order would show that the assessee having
\napproached the Bombay High Court in a Writ Petition seeking
\nstay against the recoveries, the High Court, while disposing
\nof the Writ Petition had desired that the Commissioner should
\ndispose of the appeal within three months. The
\nCommissioner in the order referred to the contentions of both
\nsides as also the decisions cited before him. He also noted
\nthat after allowing the assessee to produce additional
\ndocuments which could not be produced earlier, he had
\ncalled for remand report. In his concluding remark in the
\nappellate order, he stated as under:-
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“…. As the documents furnished by appellant are under investigation
\nand verification which was stated in remand report of A.O. Under
\nthese circumstances, I uphold the order of the A.O. These grounds
\nof appeal are dismissed. Appeal order was passed to comply with
\nHon’ble Bombay High Court direction.”
\nThe assessee thereupon approached the Tribunal. The
\nTribunal, by the impugned detailed judgment, allowed the
\nassessee’s appeal.
\n3. We will take note of the contents of the order of the
\nTribunal at a later stage. We may, however, record that the
\nTribunal in the said judgment concluded as under:-
\n“29. After analyzing the above documents we can safely conclude
\nthat P5 Asia is a company belonging to the Providence Equity
\nPartners (“PEP”), a global private investment group specializing in
\nmedia, entertainment, communication and information companies,
\nmanaging funds of USD 22 billion and having investments in over 100
\ncompanies spread over 20 countries. P5 Asia has registered itself as
\na Foreign Venture Capital Investor (“FVCI”) with Securities and
\nExchange Board of India (“SEBI”). Approvals were also taken from
\nthe Foreign Investment Promotion Board (“FIPB”). The investment in
\nCCPS of the assessee was made after PS Asia registered as a FVCI
\nwith SEBI and the assessee obtained the necessary approvals from
\nthe FIPB. In connection with the issue of CCPS, the assessee
\nsubmitted all the relevant details in the course of the assessment
\nproceedings. Accordingly, all the three ingredients of section 68 of
\nthe Act i.e. identity, genuineness and creditworthiness of investor are
\nduly established.”
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