ACIT, CENTRAL CIRCLE-2, RAJKOT, RAJKOT vs. EAGLE PETROLEUM, RAJKOT

Brief facts, as discernible from the orders of lower authorities are that assessee has e-filed his return of income on 31/10/2017, declaring total income at Rs.61,250/- for the year under consideration. The assessee has earned income from business of petrol pump. In the case of assessee a survey u/s 133A was carried out on the business premises of the assessee on 29/12/2016. Accordingly, assessee’s case was selected for compulsory scrutiny and the notice u/s 143(2) of I.T Act, 1961 was issued and served on 28/09/2018, through ITBA also. Notice under section 142(1) of the Act was also issued to the assessee, through ITBA, requesting the assessee to furnish the compliances in the matter as required on-line electronically in e-proceeding facility. The assessee has complied to the notice/questioners issued from time to time electronically. The submission made by the assessee were examined by assessing officer. On verification of bank account no. 0001110100007442 held in the Co-operative Bank of Rajkot Limited, Rajkot, it has found that the account was not in use from 01.04.2016 to 08.11.2016 and had meagre balance of Rs. 10,50,558/-. However, during the demonetization period, Rs. 70,00,000/- on 15.11.2016, Rs. 80,00,000/- on 16.11.2016, Rs. 66,60,000/- on 18.11.2016 and Rs. 37,00,000/- on 21.11.2016 have been deposited in cash. Therefore, the assessee in the said account has deposited total amount of Rs. 2,53,60,000/-.

Therefore, during the course of assessment proceedings, assessee was asked to explain the source of cash deposit of Rs.2,53,60,000/- in the Co-operative bank of Rajkot limited, Rajkot. In response to this, assessee had submitted that Shri Manishbhai Bavariya who is partner of this firm, in his statement during the survey recorded u/s 131(1A) on 30.12.2016 in answer to question no. 18 has confirmed that the amount of Rs. 2,53,60,000/- has been deposited by him from his personal saving in his said account. The Firm has no control over the said bank account, the account is not operated under our instructions and signature and we did not deposit any cash in the bank account no. 0001110100007442 of the Co-operative bank. It was also submitted by the assessee that earlier the firm was a proprietary concern of Shri Manish Bavariya and later on the firm converted into partnership firm and after the conversation into partnership firm an another account was also opened in Central Bank of India bearing account No.3155815733 and as submitted, mainly business transactions of the firm are being carried out in the account of central bank of India only. However, the assessee has failed to explain the source of such cash deposit in the above said bank account of the Co-operative Bank of Rajkot Limited as the account was in the name of assessee- firm. Further, a show cause notice was issued to the assessee asking the details explanation w.r.t. such cash deposit of amount of Rs.2,53,60,000/- and also asked as to why the same should not be added to the total income.

However, the assessing officer rejected the contention of the assessee and held that the assessee has not furnished any cogent reply and assessee has not furnished any documentary evidence to substantiate his claim. However, it was also noticed that one of the partners, Shri Manishbhai Bavariya has owned the responsibility for such cash deposit in the bank account of the Co-Operative Bank of Rajkot Ltd A/c. No. 0001110100007442, in the statement given u/s. 131(1A) of the Act, during the course of survey and he has also produced an affidavit on the same effect during the assessment proceedings but he has failed to produce any evidence whether the above cash deposit has been assessed in his case or not. Therefore, to protect the interest of revenue, an addition of Rs.2,53,60,000/-, on account of cash credit u/s 68 of the Act was therefore made to the total income of the assessee on protective basis. 7. Aggrieved by the order of the Ld. CIT(A), the assessee carried the matter in appeal before the Ld. CIT(A), who has confirmed, the addition made by the Assessing Officer, observing as follows: The factual matrix suggests that the partner of the assessee has accepted that the cash of Rs.2,53,60,000/- belonged to him individually; the said some has been assessed in his hands, and that no appeal has been filed on the subject-matter. Since the substantive assessment has attained finality, protective assessment does not survive, and is hence deleted. Ld assessing officer is directed to delete addition of Rs.2,53,60,000/-. The grounds of appeal are allowed. 8. Aggrieved by the order of Ld. CIT(A), the revenue is in appeal before this Tribunal. 9. Learned DR for the Revenue, submitted that protective addition made in the hands of the firm should continue till the substantive addition gets finality. Besides, learned DR for the revenue also has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. 10. On the other hand, Learned Counsel for the assessee argued that the assessee, is a partnership- firm, and it is engaged in the business of trading in petroleum products, that is, Motor Spirit, High Speed Diesel, Petrol, Lubricant etc. The books of accounts of the firm are regularly maintained and duly audited as per provision of section 44AB of the Income-tax Act, 1961.The assessee, has vide letter dated 20.12.2019, submitted before the assessing officer that bank account with the Co-operative Bank Rajkot limited, wherein cash of Rs.2,53,60,000/- had been deposited, does not belong to the firm. The said account belongs to Shri Manishbhai R. Bavaria who is one of the partners in firm. Further, Shri Manish Bavaria has categorically submitted in the statement recorded on oath u/s 131(1A) of the Act that amount of Rs.2,53,60,000/- had been deposited by him and bank account held with the Co-operative Bank of Rajkot is belonging to him. The assessee has also submitted duly sworn affidavit of Shri Manish Bavaria confirming the fact that account and cash deposit of Rs.2,53,60,000/- belonging to him and not to the firm.The assessing officer, however, without consideration of the above reply and supporting documents produced by the assessee, made addition of Rs.2,53,60,000/-, on protective basis, u/s 68 of the Act, which was rightly deleted by ld.CIT(A). Therefore, learned Counsel for the assessee defended the order passed by the Ld. CIT(A). 11.We have carefully considered the facts of the case, the submission of the Learned Counsel for the assessee and ld DR for the Revenue and evidences on record. We note that the assessee- firm came in to existence with effect from 01.04.2016. Prior to 01.04.2016 the business was held to be a proprietary concern of Shri Manish Rasikbhai Bavariya. After conversion of proprietary business in firm, Shri Manishbhai Bavariya remains one of the partners in the newly converted partnership- firm. Prior to 01.04.2016 the proprietary concern's business transactions were carried out in Bank account No. 000111000007442 held with Co-operative Bank of Rajkot. As per the mutual understanding amongst partners with effect from 01.04.2016, a new bank account was opened with Central bank of India under account No. 315581533.

In the above connection assessee submits that assessment in the hands of Partner Shri Manishbhai Rasikbhai Bavariya for A.Y. 2017-18 has been finalized by ITO, Ward 1(2)(5) Rajkot on 19.12.2019 wherein addition of Rs.4,93,54,500/- was made which include the amount of Rs. 2,53,60,000/- deposited in account No. 000111000007442 with Co-operative Bank of Rajkot which was run by erstwhile Eagle petroleum of Manishbhai R. Bavaria as proprietor. The assessing officer also made another addition of Rs. 2,39,94,500/- and of Rs. 4,16,02,000/- deposits being made in his other accounts. In order to appreciate the facts in proper perspective, copy of assessment order dated 19.12.2019 in the case of Shri Manishbhai Rasiklbhai Bavariya for A.Y. 2017-18 is furnished before the Bench. It may be observed from the assessment order of Shri Manishbhai Rasiklbhai Bavariya that the additions were made on absolute basis and has not expressed any doubt/opinion that that similar addition can be made on protective basis in the hands of the firm, M/s Eagle Petroleum. The findings of the assessing officer, in the case of Manishkumar Rashikbhai, Bavariya, for assessment year 2017-18, vide order dated 19.12.2019, are reproduced below:

From the above findings of the assessment order, in the case of Shri Manishbhai Rasiklbhai Bavariya, it is clear that substantive addition has been made in his case and therefore, protective addition in the case of the assessee could not be survived.From the said assessment order, it is evident that the Assessing Officer had made substantive additions, inter alia, in respect of cash deposits of Rs.2,53,60,000/- in Account No. 0001110100007442 maintained with the Co-operative Bank of Rajkot Ltd. The assessment order further records the statement of Shri Manishkumar Rasiklal Bavariya that the said bank account belonged to M/s Eagle Petroleum and that the cash deposits therein were made by him during the demonetisation period.Thus, the material placed before us demonstrates that the very same cash deposits have already been brought to tax substantively in the hands of Shri Manishbhai Rasikbhai Bavariya. The Revenue cannot subject the same income to substantive taxation in the hands of one person and again sustain the corresponding addition in the hands of another person. The concept of protective assessment is recognised only as a measure of abundant caution where there is uncertainty regarding the person in whose hands the income is assessable; it cannot result in double taxation of the same income.The Hon'ble Supreme Court in Lalji Haridas v. ITO [1961] 43 ITR 387 (SC) recognised the validity of precautionary/protective assessment in appropriate circumstances. At the same time, the settled principle is that the same income cannot ultimately be taxed in the hands of two different assessees. In the present case, the Revenue has not demonstrated that the addition made in the hands of the assessee represents any income or cash deposit different from the income already assessed substantively in the hands of Shri Manishbhai Rasikbhai Bavariya. On the contrary, the assessment order dated 19.12.2019 itself establishes the identity of the relevant bank deposits and records the Revenue's finding regarding the ownership and source thereof. Therefore, once the same income has already been substantively assessed in the hands of Shri Manishbhai Rasikbhai Bavariya, the corresponding addition in the hands of the assessee cannot be sustained, as that would result in taxing the same income twice. The conclusions arrived at by the CIT(A) are, therefore, correct and admit no interference by us. We, approve and confirm the order of the CIT(A) and dismiss the appeal of revenue.

In the result, appeal of the Revenue is dismissed.