AMITA GUPTA,KANPUR vs. INCOME TAX OFFICER-2(1), KANPUR

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW ‘B’ BENCH, LUCKNOW BEFORE SH. KUL BHARAT, VICE PRESIDENT AND SH. NIKHIL CHOUDHARY, ACCOUNTANT MEMBER ITA No.233/LKW/2017 A.Y. 2013-14 Amita Gupta, vs. Income Tax Officer-2(1), Aaykar Prop. M/s. Gauri Traders, 357/5, Bhawan, 16/69, Civil Lines, Shastri Nagar, Kanpur-208005 Kanpur PAN: ACKPG3397G (Appellant) (Respondent) Assessee by: Sh. P.K. Kapoor, C.A. Revenue by: Sh. Koushlendra Tiwari, CIT DR Date of hearing: 03.02.2026 Date of pronouncement: 29.04.2026 O R D E R PER NIKHIL CHOUDHARY, A.M. This is an appeal filed by the assessee against the orders of the ld. CIT(A)-1, Lucknow dated 10.01.2017, wherein the ld. CIT(A) has dismissed the appeals of the assessee against the orders of the ld. Assessing Officer passed under section 143(3) for the assessment year 2013-14 on 22.03.2016. The grounds of appeal are as under:- “1. BECAUSE the "appellant" was not maintaining any books of account and the bank statement/pass book could not be construed to be an accounts book maintained by the assessee, provisions of section 68 of the "Act" were not applicable in the instant case, and consequently the addition of Rs. 15,73,20,000/- made by the assessing officer, even on protective basis, was not sustainable and the same deserved to be deleted. WITHOUT PREJUDICE TO THE AFORESAID GROUND 2. BECAUSE "CIT (A)" has erred in law and on facts in sustaining the addition of Rs 15,73,20,000/- made under section 68 of the "Act" on protective basis, on account of unexplained cash deposit found in bank account no. 20763917010 in

ITA No.233/LKW/2017 A.Y. 2013-14 Amita Gupta Allahabad Bank, owned by the "appellant", merely because she was the title owner of the said bank account 3. BECAUSE looking to the material and information on record, the ld "CIT(A)" was not correct in observing that the "appellant" was indulging in illegal activities in money laundering through her bank account in connivance with her close relative Mr. Pratik Gupta and that the "appellant" had admitted to the activity of money laundering 4. BECAUSE looking to the material and information on record, undisputedly Shri Pratik Gupta (Prateek Omar), who was authorized to operate the bank account in question, had actually conducted all the transactions of deposits and withdrawals amounting to Rs. 15,73,20,000/-, and had admitted before the D.I. Wing and the Assessing Officer that he was providing accommodation entries and deposited the cash in the said bank account and had transferred the amount there-from to the account of M/s. PCS Traders, consequently the Id. "CIT(A)" should have deleted the addition of Rs.15,73,20,000/- by holding that neither deposit nor withdrawal belonged to the "appellant" 5. BECAUSE without prejudice to the grounds here-in-fore the appellant had discharged the onus that lied upon her by furnishing complete details of the depositor and the ultimate beneficiary/s, and in the absence of anything to the contrary found by the authorities below, no addition under section 68 could have legitimately been made/sustained in the hands of "appellant" even on protective basis 6. BECAUSE the "CIT(A)" has erred in law and on facts in not only sustaining the addition of Rs 4,71,960/- on account of commission income but in further enhancing it from Rs. 4,71,960/- (as estimated by the Assessing Officer) to Rs. 7,86,600/-, by applying his own estimate of 0.5% of cash deposited in the bank 7. BECAUSE the authorities below have erred in making addition/enhancement by applying increased percentage on an arbitrary basis by mis-reading the information provided by the "appellant" and Shri Prateek Omar in the statement recorded before the D.1 Wing & the Assessing Officer 8. BECAUSE the addition of Rs. 4,71,960/- in commission income by the Assessing Officer, and further enhancement of Rs. 3,14,600/- by "CIT(A)" have been made merely on presumptions and surmises on wrongful assumption of facts, consequently the same are not sustainable 9. BECAUSE in any case the enhancement to the extent of Rs. 3,14,640/ made by the "CIT(A)" is not sustainable as the opportunity of hearing was not provided by him to the "appellant" which is in violation of the provisions contained in section 251(2) of the "Act". 10. BECAUSE the order appealed against is contrary to the law, facts and principle of natural justice.”

ITA No.233/LKW/2017 A.Y. 2013-14 Amita Gupta 2. The facts of the case are that a survey under section 133A was carried out by the Investigation Wing of the Income Tax Department on 6.03.2013. During the course of survey, documents were unearthed which showed that huge cash was deposited in the bank account of the assessee’s proprietary concern M/s Gauri Traders and that subsequently, the amount was transferred to the bank account of M/s PCS Traders, Prop. Smt. Sudha Gupta, for onward issue of cheques to different beneficiaries. The statement of the assessee was recorded by the officers of the Inv. Wing. The assessee submitted that the business affairs were being looked after by Sh. Prateek Omar. Sh. Prateek Omar also gave a statement before the Inv. Wing where he admitted to providing accommodation entries to persons in the form of fake bills and cheques for commodity trading, for which he charged cash. This cash was deposited by him in the bank account of M/s Gauri Traders. Thereafter, the money was transferred to the account of M/s PCS Traders and cheques were issued from that account to various beneficiaries. Sh. Prateek Omar admitted to receiving commission for providing entries to the beneficiaries. The case of the assessee was selected for scrutiny. During the course of assessment proceedings, the statement in respect of the aforesaid bank account maintained at Allahabad Bank, Kahoo Koti Branch, Kanpur was obtained, which revealed that during the year, an amount of Rs. 15,73,20,000/- had been deposited in cash. The assessee was summoned and examined. She reiterated the fact that her account had been used by Sh. Prateek Omar and she was not aware of the details. She admitted that for allowing this usage, she received some money from Sh. Prateek Omar, as and when she required. The money so received had been shown her account as commission receipts. Further summons were issued to Sh. Prateek Omar to confirm the aforesaid modus operandi. He submitted that he received commission of 1% from clients whose cash was deposited in the bank 3

ITA No.233/LKW/2017 A.Y. 2013-14 Amita Gupta account of M/s Gauri Traders. Out of this commission .5% was given to M/s PCS Traders and 0.1 to 0.15% to the assessee. Thus on account of these facts, the ld. AO, after noting the differential rates of commission stated to be paid by Sh. Prateek Omar in different statements, decided to adopt of commission at .3% of the cash deposited in the account of M/s Gauri Traders, during the year under consideration and he accordingly made an addition of Rs. 4,71,960/- on this account. At the same time, since the bank account stood in the name of the assessee and the cash had been deposited into it, he added back the cash deposits of Rs. 15,73,20,000/- in the hands of the assessee as unexplained cash credit under section 68 on protective basis as she could not furnish the details of deposits, depositors and their creditworthiness. 3. The assessee, aggrieved by the said assessment order went in appeal before the ld. CIT(A). Before the ld. CIT(A), she submitted that she was a registered member of the Kanpur Commodity Exchange for a long time but had never done any business activity on this account. Furthermore, M/s PCS Traders, whose proprietor is Smt. Sudha Gupta (mother of Prateek Omar) was also a registered member of the commodity exchange. Sh. Prateek Omar often approached her to carry on transactions under her license with assurances of giving money to the assessee. In these circumstances, he took authorization of running the bank account in his own favour which the assessee was unaware of and the assessee did not know about the transactions made in that account. The modus operandi had already been discussed by the AO in the assessment proceedings and there was no dispute with regard to them. Furthermore, Sh. Prateek Omar had also provided the list of beneficiaries to whom the cheques had been issued. Many of the beneficiaries had subsequently been approached by the Inv. Wing and they had confessed to the accommodation entries and paid tax on them. In the

ITA No.233/LKW/2017 A.Y. 2013-14 Amita Gupta circumstances, there was no justification for making protective addition of Rs. 15,73,20,000/- in her hands by holding that she had no explanation to offer. She further pointed out that she was not receiving the commission from Sh. Prateek Omar on the basis of percentage but rather that she received a total amount of Rs. 1,57,220/- during F.Y. 2013 which percentage arrives at .10%. She had voluntarily disclosed this income therefore, the ld. AO was not justified in applying a rate of commission at .30% which is very highly excessive and adding the same without any basis and overlooking the real facts and other surrounding circumstances. The ld. CIT(A) considered these arguments of the assessee. He noted that it was an admitted fact that the assessee was indulging in the illegal activity of money laundering through her bank account in connivance with her close relatives Sh. Prateek Gupta and Smt. Sudha Gupta. He held that since the issue has yet to be finally settled, the AO had rightfully made a protective assessment in the hands of Smt. Amita Gupta till the matter reaches finality. Till both, Smt. Amita Gupta and Sh. Prateek Gupta continued to agitate the matter and not pay taxes on this fault, this matter would linger on and the interest of revenue had to be protected. Therefore, he sustained the protective addition of Rs. 15,73,40,000/- in the hands of the assessee. On the issue of addition to commission income, the ld. CIT(A) held that the amount of commission had been under calculated by the AO. He therefore, enhanced the commission to .5% and thereby enhanced the addition to Rs. 7,86,600/- from Rs. 4,71,960/- i.e. he made a net increase of Rs. 3,14,640/-. 4. The assessee is aggrieved against this order of the ld. CIT(A) and has accordingly come in appeal before us. Sh. P.K. Kapoor, C.A. (hereinafter referred to as the ld. AR) submitted that the said order of the ld. CIT(A) was bad in law. He drew our attention to the copies of various orders passed by

ITA No.233/LKW/2017 A.Y. 2013-14 Amita Gupta ITAT on the issue that if there was no substantive addition done in the hands of any person, a protective assessment could not survive. The ld. AR invited our attention to the order of the ITAT Delhi ‘C’ Bench in ITA No. 1502/DEL/2013 in the case of G.K. Consultants Limited vs. ITO, wherein the ld. Bench had held that while there could be a substantive assessment without any protective assessment, there could not be any protective assessment/addition without a substantive assessment / addition. Since in that case, the AO had proceeded to make a protective assessment by way of reopening of assessment of the assessee company without there being a substantive assessment on the date of assumption of jurisdiction under section147, therefore relying on the decision of the ITAT Mumbai in the case of M.P. Ramachandran vs. DCIT (2009) 32 SOT 592 (Mumbai) and Surat K. Jajoo vs. ACIT (2010) 39 SOT 514 Mumbai, the Tribunal had quashed the assessment. The ld. AR thereafter drew our attention to the aforesaid decisions cited by the Mumbai Bench which had held that for there to be a protective assessment, first the ld. AO had to make a substantive assessment in the hands of that person whom the AO holds as prima facie liable for tax on that income. However, having done so and with a view to protecting the interest of Revenue, if the AO is not sure that the person in the hands of who he had made the substantive addition was the person actually liable to be taxed, he could then make a protective assessment. Thus, the protective assessment was basically based on the doubt of the AO as distinct from his belief, which is there in substantive addition. Accordingly, without substantive addition, there could not be a protective addition. Similarly, in the case of Vikash Iron & Steel P. Ltd., Kolkata vs. ITO, Ward-3(2), Kolkata in ITA No. 332-334/KOL/2012, the Tribunal has held that where the Revenue had not initiated any substantive assessment or no addition had been made on substantive basis in any other hand, there was no question of any 6

ITA No.233/LKW/2017 A.Y. 2013-14 Amita Gupta protective assessment in the present case from the reasons recorded by the AO. Accordingly, it held the re-assessment proceedings against that assessee to be invalid and quash the same. The ld. AR argued that no addition had been made in the hands of Sh. Prateek Omar. He invited our attention to a copy of the assessment order passed in the case of Sh. Prateek Omar for the A.Y. 2012-13 under section 147 r.w.s. 143(3) in which .2% of the commission income was assessed in the hands of Sh. Prateek Omar on the total accommodation entries amounting to Rs. 15,73,20,000/-. Thus, where the Department had accepted the fact that the bank account of the assessee was being used for providing for accommodation entries by Sh. Prateek Omar, then there could not be an onus upon the assessee to provide explanation to the deposits in the said bank account and therefore, there could not be any basis to hold the amount credited to that bank account as unexplained within the meaning of section 68. Furthermore, since the Department was of the view that the account was used alongwith that of M/s PCS Traders, for providing accommodation entries, no protective addition could be made in the hands of the assessee on this account. The ld. AR further pointed out that there were more than 300 beneficiaries of the said bank account and he was not in a position to show whether the Department had conducted substantive assessments in their hands or not, but he submitted that a report could be called from the Department in this regard. 5. In response, Sh. Koushlendra Tiwari, CIT (hereinafter referred to as the ld. DR) invited our attention to various reports already submitted by the Department in this regard. He pointed out that vide his letter dated 21.12.2023, the AO had pointed out that the Inv. Wing at Kanpur had discovered during the course of post survey enquiry, that huge cash had been deposited in the bank accounts of M/s Gauri Traders, Prop. Smt. Amita

ITA No.233/LKW/2017 A.Y. 2013-14 Amita Gupta Gupta and the cash so deposited was got transferred to the bank account of M/s PCS Traders, Prop. Sudha Gupta to issue the cheques onward to different beneficiaries. During the enquiry proceedings, statements of various persons were recorded which prove that Sh. Prateek Omar was providing accommodation entries in the garb of commodity trading and issuing fake bills and cheques to clients in lieu of cash. For the same, Sh. Prateek Omar received commission ranging from .10 to 1%. A list of 304 beneficiaries as provided by the Inv. Wing, related to Range-1, Kanpur, - 79 Range-2, Kanpur- 67, Range-3, Kanpur-64 Range-4, 5 & 6, Kanpur-11, Gautam Buddh Nagar-2, Allahabad-Charge-14, Range 1 and 2 Meerut-10, Agra-5 and Lucknow Charge-49. That the list of these beneficiaries had been sent to the respective range heads to take further action in respect of beneficiaries pertaining to their jurisdiction. The AO had also written to the AOs at Kanpur for seeking status of substantive assessment in respect of these persons but no such order had been received so far. The ld. CIT DR also drew our attention to a subsequent response filed by his predecessor on 2.07.2024 where again, it was submitted that the list of 304 beneficiaries had been shared with the AOs of the beneficiaries but the ld. CIT DR was not in a position to comment as to whether the additions had been made in their hands or not. The ld. CIT DR pointed out this would however not prejudice to case of the Revenue against the assessee as protective addition was done where the AO was not sure as to whose hands substantive assessment was to be done and if no substantive assessment was done then the protective assessment would become substantive. He pointed out that the bank account used was that of the assessee. No authority letter had been given to Sh. Prateek Omar that could demonstrate that the assessee was not involved in this process and therefore, the AO was justified in making addition in her hands protectively. However, if the Tribunal wished to ascertain as to whether substantive 8

ITA No.233/LKW/2017 A.Y. 2013-14 Amita Gupta assessment had been done in the hands of other persons or not, they could always send this matter back to the AO for determination of the same and thereafter the balance amount which could not be assessed in anyone’s hand, could be assessed in the hands of the assessee. 6. The ld. AR objected to this prayer of the ld. CIT DR and submitted that there was no Departmental appeal on the subject and thereafter citing the decision of the Hon’ble Bombay High Court in the case of Puranmal Radhakrishnan and Co. vs. DCIT (1957) 31 ITR 294 (Bom), he submitted that when the Department was not in appeal on the issue, the Tribunal, could not accept such a plea and send the assessee back for conduct of such an exercise if the Department could not bring the evidence on record at the time of hearing. On the issue of enhanced commission, the ld. AR pointed out that there was no basis for the ld. CIT(A) to enhance the commission. The assessee had made it clear that she did not receive commission as per any percentage and that she had disclosed the commission that she had received as part of her return and the AO was not justified in taking an average rate without showing why what the assessee has disclosed was incorrect. Furthermore, the decision of the ld. CIT(A) to enhance the same was purely on a whim and without any scientific basis. He had also not issued the necessary notice to the assessee before making enhancement. Therefore, the addition deserved to be deleted. 7. We have duly considered the facts of the case and the arguments of both parties. It is clearly apparent on the findings of the Inv. Wing and the statements of Sh. Prateek Omar, Smt. Sudha Gupta and the assessee that Sh. Prateek Omar was misusing the commodity exchange license and the bank account of the assessee for the purposes of issuing fake accommodation entries to various beneficiaries in liew of cash, which was deposited into the 9

ITA No.233/LKW/2017 A.Y. 2013-14 Amita Gupta bank account of the assessee, transferred from the to the bank account of M/s PCS Traders, which in turn issued the cheques to the beneficiaries. The Department had also initiated action against 304 beneficiaries holding them to be the real tax evaders in the transaction. Statements of Sh. Prateek Omar had been recorded where he has admitted to doing this exercise in return for commission of 1%, of which .5% was shared with M/s PCS Traders while .1 to .15% were shared with the assessee. Acting on the basis of such information covered during the survey and from the statements of Sh. Prateek Omar and the assessee, the Department had made additions of commission in the hands of the assessee, Smt. Sudha Gupta (prop. of M/s M/s PCS Traders) and Sh. Prateek Omar. That being the case, in our opinion, there was never any occasion to make a protective addition in the hands of the assessee for the cash deposited in her bank account, because there could never be any doubt in the minds of the AO that the said accommodation entries were not to be assessed in the hands of their respective beneficiaries. Therefore, the protective addition made in the hands of the assessee is bad in law on this account and the decision of the ld. CIT(A) to sustain it is also legally infirm because the failure to bring the correct amount to tax in the correct hands, cannot be an excuse to sustain an addition in the hands of another person. Furthermore, we note from the assessment order that the said amount had been regarded as unexplained cash credit under section 68. Before us, the assessee has filed a copy of the judgment of the ITAT Delhi Bench in the case of ITO, Ward-1(5), Faridabad vs. Sh. Om Prakash Sharma in ITA No. 2256/DEL/2009, where the ITAT has categorically held that the provisions of section 68 are not attracted where the assessee does not maintain books of accounts and the passbook / bank statement supplied by the bank to the assessee does not amount to a book of account of the assessee. It has been submitted that similar decisions have been taken 10

ITA No.233/LKW/2017 A.Y. 2013-14 Amita Gupta earlier in the matters of CIT vs. Bhaichand H. Gandhi 141 ITR 67 (Bom), Sampath Automobile vs. ITO 96 TTJ (D) 368, M/s Mayawati vs. DCIT, 113 TTJ 178 (Del) and Sheraton Apparels vs. Assistant Commissioner of Income Tax 256 ITR 20 (Bom). Therefore, considering all these decisions, it appears that even otherwise the said amount could not have been added back in the hands of the assessee under section 68, as the AO has done. Therefore, in view of the fact that there was never any doubt in the mind of the AO or the Department as to where the additions should be made, we hold that there is no basis to sustain the protective addition in the hands of the assessee and ground nos. 1, 2 & 4 are accordingly allowed. 8. On the issue of addition of Rs. 4,71,960/- on account of commission income by the AO and further enhancement of Rs. 3,14,600/- by the CIT(A), we notice that the assessee has admitted in her statements that she allowed the use of her commodity exchange license and her bank account to Sh. Prateek Omar in exchange for some money. Sh. Prateek Omar has submitted that he usually got interest of 1%, of which .5% was shared with M/s PCS Traders and .1 to .15% was shared with the assessee. On 22.03.2013 in another statement under oath, Sh. Prateek Omar has stated that the extent of commission given to the assessee was upto .5%. In the circumstances, when the assessee had quite clearly been a willing participant in the accommodation entry providing business by allowing the use of her license and her bank account, we cannot conclude that she did it without any percentage of commission being fixed and only for payment as per discretion of Sh. Prateek Omar. Considering the differing rates of commission cited by Sh. Prateek Omar in his various statements, we cannot find any infirmity in the decision of the AO in adopting an average rate of .3% on all deposits made into the said bank account and accordingly making an addition of Rs.

ITA No.233/LKW/2017 A.Y. 2013-14 Amita Gupta 4,71,960/- on this account. However, we do not find any justification in the enhancement of this amount by the ld. CIT(A) as it is not based upon any evidence, but only his subjective opinion and thereto it is not preceded by any notice to the assessee regarding his intention to enhance the income in this manner. Accordingly, we quash the enhancement of Rs. 3,14,600/- made by the ld. CIT(A) and uphold the addition of Rs. 4,71,960/- made by the AO. Ground nos. 7 and 8 of the grounds of appeal are partly allowed while ground no. 6 and 9 of the grounds of appeal are allowed. Given the facts of the case and the statements made by the assessee, ground no. 3 is dismissed, while ground no. 5 and 10 do not require a finding in view of the decision already taken by us in the aforesaid paragraphs.