Indian Kanoon - Search engine for Indian Law

 Approval obtained from FIPB by the foreign investor & appellant;

 RBI approval for allotment for shares by the appellant company in favour of the foreign investor;

 Copy of FIRCs establishing the source of foreign remittance and receipt of funds through banking channel;

 Incorporation certificate, Memorandum & Articles of Association of the foreign investor, ByCell Holding AG, Switzerland.

(a) Source of funds received by the appellant company from ByCell Holding AG, Switzerland;

(b) Source of funds received by the appellant company from Bitcorp Pvt Ltd. (India promoter), which was not part of the notice under section 263 of the Act nor any opportunity was granted to the appellant in this regard during the revisionary proceedings.

16. From the above, Mr. Vohra submitted that here in this case, the issue of share application money/share capital was not only examined during the course of the original assessment proceedings but very extensively during the course of reassessment proceedings also, because the case was reopened u/s.148 specifically in the case of ByCell Holdings AG, to examine the identity and creditworthiness of the creditor and also the genuineness of the transaction which is evident from the 'reasons recorded'. The assessee had duly submitted all the relevant records and documents required from time to time by the Assessing Officer and it is not the case of the Assessing Officer that any documents required has not been furnished. Here in this case the share application money has come from a foreign entity after FIPB approval and all the remittances are duly backed by FIRCs issued by the banks. The said FIRCs clearly state the name of the remitter and the purpose of the remittance.

8. Assessee failed to satisfy the conditions as per provision of section 68. It has to prove identity, creditworthiness and genuineness of the transaction in respect of the amount credited in its books of account as share capital.

9. FIPB is the deciding authority in respect of investment of foreign entity in India but it does not examine the source of investment (share capital) whether it is from disclosed sources or undisclosed sources. FIPB approval is subject to Indian laws. Assessee has claimed that creditworthiness and genuineness of the transaction proved as amount received through banking channels and FIRCs are there. It is worthwhile to mention here that amount received through banking channel could not make it genuine because bank does not examine the source of funds for which FIRC is issued.

29. Here in this case the entire exercise of doubting the genuineness of the transaction is from the fact that the Ministry of Home Affairs have raised the issue of security concern, on the basis of which FIPB approval was withdrawn. However, this fact alone does not ipso facto can lead to an inference that entire share application money received from the foreign entity has become non genuine. When the money was invested there was a due approval by Govt. Of India (FIPB) which was given for obtaining telecom license with DoT and the flow of transaction was duly certified by FIRC Certificate which was placed on record not only before the Assessing Officer but also before the learned PCIT. These FIRCs duly provide the source of entity who has given the money and also the person who had received the money in India and the purpose for which the said money was given. Further, much has been harped upon by the Ld. PCIT and ld. CIT-DR who tried to impress upon us that, M/s. Tenoch Holdings Ltd. Cyprus was just a holding company which was further held by two different entities, M/s. Quallis Inc, Panama and M/s. Kyanance Business Ltd, British Virgin Island and both these companies were held by some individuals, one of whom allegedly had some shady past or were involved in some kind of scams, though not much has not been brought on record in this regard. On these facts, she had submitted that the Assessing Officer should have inquired about the entire link while examining the creditworthiness of the foreign entities.