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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI ABY T. VARKEY, JM & SHRI AMARJIT SINGH, AM
O R D E R PER ABY T. VARKEY, JM: These are appeals preferred by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)45, Mumbai dated 22.02.2023 for AY. 2008-09 to 2015-16.
At the outset, the Ld. AR brought to our notice that the issue raised in all the captioned appeals are similar (except difference in sum/figures). This contention of Ld. AR could not be controverted by the Ld. DR. Therefore, we are inclined to take up the appeals of assessee for AY. 2008-09 as lead case for adjudication and the decision in the appeal i.e. AY. 2008-09 would cover other appeals and will be followed for other assessment years. to 1415/Mum/2023 A.Ys.2008-09 to 2014-15 M/s. Yash V. Jewels Ltd.
The grounds of appeal
of the assessee for AY. 2008-09 are as under: -
1. The learned Commissioner of income Tax (Appeal) has erred in not allowing the appellant company’s appeal for disapproving the learned Assessing officer's view of rejecting the Books of Accounts and income of appellant by invoking the provision of section 145 (3) of the income tax Act, 1961. ii. The Learned Commissioner of Income Tax (Appeal) has again erred in upholding the action of learned assessing officer of treating all the business activities as accommodation entry without appreciating the submission / documentary evidence provided to prove the genuineness of all the transaction of Income, Expenses, Business Losses, Capital Gain / Loss, purchase, sales, loans and advances and Investments etc submitted by appellant company. iii. The Learned Commissioner of Income Tax (Appeal) has again erred in upholding the addition made by the learned Dy. Commissioner of Income Tax by estimating addition at the rate of alleged commission income at 0.20% p.m. for Loans & Advances and 2% for Share Application money (Investments) during the captioned year. iv. The Learned Commissioner of Income Tax (Appeal) has again erred in upholding the proposition of the learned assessing officer and treatment of the alleged unaccounted commission income is confirmed on “Protective Basis”, A.Ys.2008-09 to 2014-15 M/s. Yash V. Jewels Ltd. v. The appellant craves to add, amend or alter the grounds of appeal at the time of or before the hearing of appeal.”
4. Drawing our attention to the grounds raised (supra), the Ld. AR submitted that the main issue is against the action of the Ld. CIT(A) confirming the protective assessment made by the AO when the substantive addition has been made by AO in the hands of Shri Praveen Kumar Jain and the same have been confirmed even at the level of this Tribunal. According to Ld. AR, since substantive addition made by AO has been confirmed by Tribunal in the hands of Shri Praveen Kumar Jain, impugned protective assessment made in the hands of assessee be deleted and for such a preposition, cited various decisions of this Tribunal which will be discussed (infra). And it is noted that no other grounds were argued and the merits of assessment even though protective in nature, has not been argued and so, not adjudicated. So, the limited plea is that since substantive addition has been confirmed in the hands of Shri Praveen Kumar jain, protective assessment in the hands of assessee be deleted.
5. Brief facts are that the assessee company is into trading of diamonds, investment and providing short term finance to borrowers. The AO noted that pursuant to search and seizure operation u/s 132 of the Income Tax Act, 1961 (hereinafter “the Act’) in the premises of Shri Praveen Kumar Jain (entry operator) on 01.10.2013 (AY. 2014- 15), it was found that assessee company was also one of the group companies controlled by Shri Praveen Kumar Jain. Pursuant to the A.Ys.2008-09 to 2014-15 M/s. Yash V. Jewels Ltd. ibid search, the case of assessee was centralized and thereafter, the AO issued notice to assessee u/s 153C of the Act and assessee filed return of income declaring total income/loss of Rs.5,40,931/-. The AO noted in the assessment order that for making assessment in the case of assessee, he considered the material/statement recorded during the course of search conducted on Shri Praveen Kumar Jain. Accordingly, he found that Shri Praveen Kumar Jain through networking of his group companies [including that of the assessee company] was involved in the business of providing accommodation entries in the garb of providing unsecured loans, share capital or issuing bills of purchase and sales. In the light of this finding, the AO issued questionnaire to the assessee to find out details of business of the assessee. After considering reply of assessee, he rejected the same and after reproducing the statement of Shri Praveen Kumar Jain wherein he accepted that he indulged in providing accommodation entries for commission through his concerns, (which fact has been retracted later by Shri Praveen Kumar Jain), AO was of opinion that Shri Praveen Kumar Jain was managing and controlling inter-alia concerns/group companies including the affairs of the assessee company and that assessee was also in the business of providing accommodation entries and consequently he rejected the books of the assessee and estimated profit of the business and held as under: - “8.4 During the course of assessment proceedings, the assessee filed the details of transaction of providing accommodation entries by different modes which are reproduced in Col. C of the A.Ys.2008-09 to 2014-15 M/s. Yash V. Jewels Ltd. following table. From the details so filed it is seen that the assessee during the year has given accommodation entries by way of different modes such as share application money/share capital, unsecured loan, bogus bills of purchase and sales upon which the net profit is worked out in the following manner- S. Particulars of Entry Amount (in Rs.) Rate of Commission Commission No provided Income 1 Loan & Advances 3,23,236,807 0.20% per month (2.4% 7,75,843 per year) 2 Bogus share application 35,44,80,000 2% 70,89,600 Total 78,65,443 8.5 The net profit of the assessee from the above bogus transactions of business is estimated at Rs.78,65,443/-. This amount of Rs.78,65,443/- is brought to tax in the hands of the assessee by Invoking the provisions of section 145(3) of the Act, net of expenses.
8.6 The expenses Incurred if any by assessee against: the above " brokerage income is also not allowed considering the fact that, there are no details or evidences filed by the assessee with respect to the expenses, if any, incurred on this activity. The claim of the expenditure cannot be allowed until and unless it is made by the assessee, it is subject to verification, TDS has been duly deducted on such expenses, mode of payment is verified and supporting evidences are produced for verification. The loss debited by the assessee on a/c of share trading (F&O) – Rs.74,83,842/- inter alia other expenses, is also not allowed as it has been categorically held that the assessee is engaged in the business of providing accommodation entries only and the relevant details have also not been filed. Therefore, the amount A.Ys.2008-09 to 2014-15 M/s. Yash V. Jewels Ltd. so earned by the assessee as per above Para is taxed as assessee’s net income for the year under consideration under the head Income from Other Sources.
Protective Assessment – From the facts discussed herein above, it is clear that it is Praveen Kumar Jain who is the kingpin of the entire net work of the companies/concerns revealed by him in his statements recorded during the course of search, no matter whether these entities are owned by him or by persons who are his relatives or employees or associate brokers, with the fact that entire show of the business of providing accommodation entries is being run by Praveen Kumar Jain. But natural, the profit/income by way of commission on the turnover done through these conduit being enjoyed by him only. The assessee company is also a concern operated and controlled by Mr. Praveen Kumar Jain as has been admitted by him in his statement recorded during the course of search action. Under the circumstances, the income earned on turnover done through this concern has been included as income in the individual case of Mr. Praveen Kumar Jain and the same is hereby assessed in this case on Protective Basis.”[Emhasis given by us]
Thus, protective assessment has been made by AO in the hands of assessee, since, substantial addition has been made in the hands of Shri Praveen Kumar Jain. Aggrieved, by the aforesaid Action of AO, the assessee preferred an appeal before the Ld. CIT(A) who was pleased to dismiss the same. Aggrieved, the assessee is before us. A.Ys.2008-09 to 2014-15 M/s. Yash V. Jewels Ltd.
We have heard both the parties and perused the records. At the outset, the Ld. AR of the assessee submitted that the action of the Ld. CIT(A) dismissing the appeal of assessee company, is wrong since the substantive addition made in the hands of Shri Praveen Kumar Jain has been confirmed at the level of Tribunal, therefore he pleads that, the protective assessment made in the hands of assessee be removed. The Ld. DR opposes and says that even if the protective assessment is deleted it should be made with a rider/condition that in case if substantive addition made in the hands of Shri Praveen Kumar Jain substantive is deleted, then protective assessment in the hands of the assessee should be revived. 8. We note that assessee is private limited company incorporated on 30.07.1999 and registered with