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Income Tax Appellate Tribunal, MUMBAI BENCH “G” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI RAHUL CHAUDHARY
PER OM PRAKASH KANT, AM
This appeal by the Revenue is directed against the order dated 29.01.2019 passed by the Ld. Commissioner of Income-tax (Appeals)-51, Mumbai [in short ‘the Ld. CIT(A)’] for assessment year 2011-12, raising following grounds :
Sudama Textile Trading P. Ltd. Sudama Textile Trading P. Ltd. 2 ITA No. 2118/M/2019
1. On the facts and circumstances of the case and in law, the Ld On the facts and circumstances of the case and in law, the Ld On the facts and circumstances of the case and in law, the Ld CIT(A) erred in deleting the protective addition of Rs CIT(A) erred in deleting the protective addition of Rs CIT(A) erred in deleting the protective addition of Rs 7,50,00,000/ 0,000/- on account of unaccounted investment and of Rs on account of unaccounted investment and of Rs 18,75,000/ 18,75,000/- on account of unaccounted commission u/s 69C on account of unaccounted commission u/s 69C without considering the fact that the said entry is merely an without considering the fact that the said entry is merely an without considering the fact that the said entry is merely an accommodation entry and the assessee was a conduit for accommodation entry and the assessee was a conduit for accommodation entry and the assessee was a conduit for introducing unaccounted fun introducing unaccounted funds which has been proved ds which has been proved beyond doubt. beyond doubt. 2.
2. On the facts and circumstances of the case and in law, the 2. On the facts and circumstances of the case and in law, the 2. On the facts and circumstances of the case and in law, the Ld CIT(A) erred in deleting the protective addition of Rs Ld CIT(A) erred in deleting the protective addition of Rs Ld CIT(A) erred in deleting the protective addition of Rs 7,50,00,000/ 7,50,00,000/- on account of unaccounted investment by on account of unaccounted investment by observing that the investment reflected in observing that the investment reflected in the balance sheet is the balance sheet is out of corresponding liabilities as the assessee company is not out of corresponding liabilities as the assessee company is not out of corresponding liabilities as the assessee company is not carrying any business actually and the said entry is carrying any business actually and the said entry is carrying any business actually and the said entry is unexplained unexplained 3. On the facts and circumstances of the case and in law, the Ld On the facts and circumstances of the case and in law, the Ld On the facts and circumstances of the case and in law, the Ld CIT(A) erred in deleting the protective CIT(A) erred in deleting the protective addition of Rs addition of Rs 7,50,00,000/ 7,50,00,000/- on account of unaccounted investment and of Rs on account of unaccounted investment and of Rs 18,75,000/ 18,75,000/- on account of unaccounted commission u/s 69C on account of unaccounted commission u/s 69C without considering the fact that the addition made on without considering the fact that the addition made on without considering the fact that the addition made on substantive basis has not reached its finality substantive basis has not reached its finality
In the grounds rai In the grounds raised, the Revenue is aggrieved sed, the Revenue is aggrieved with deletion of protective addition of protective addition of ₹7,50,00,000/- and corresponding and corresponding commission of ₹18,75,000/ 18,75,000/- on the said unaccounted investment. on the said unaccounted investment.
Sudama Textile Trading P. Ltd. Sudama Textile Trading P. Ltd. 3 ITA No. 2118/M/2019
At the outset, we may like to mention that despite notifying for At the outset, we may like to mention that despite notifying for At the outset, we may like to mention that despite notifying for several times neither anyone attended on behalf of the assessee nor several times neither anyone attended on behalf of the assessee nor several times neither anyone attended on behalf of the assessee nor any adjournment was sought. The notice ournment was sought. The notices sent through registered sent through registered post on 09.02.2022, 02.05.2022 and 09.06.2022 have ret on 09.02.2022, 02.05.2022 and 09.06.2022 have returned back. on 09.02.2022, 02.05.2022 and 09.06.2022 have ret In view of the same, on the last occasion i.e. 27.07.2022, the Bench on the last occasion i.e. 27.07.2022, the Bench directed the Ld. DR to serve the notice on the assessee for hearing directed the Ld. DR to serve the notice on the assessee for hearing directed the Ld. DR to serve the notice on the assessee for hearing dated 13.10.2022. The Ld. DR has dated 13.10.2022. The Ld. DR has filed a report of service of the a report of service of the notice by affixture. . Said report is placed on record. In the on record. In the circumstances, we were were of the opinion that assessee of the opinion that assessee was not interested in responding the appeal and therefore same was heard interested in responding the appeal and therefore same was heard interested in responding the appeal and therefore same was heard ex-parte qua the assessee after hearing the arguments of the Ld. DR. parte qua the assessee after hearing the arguments of the Ld. DR. parte qua the assessee after hearing the arguments of the Ld. DR.
The only issue in the appeal is with re The only issue in the appeal is with respect to deletion of spect to deletion of protective addition by the Ld. CIT(A). The relevant finding of the Ld. protective addition by the Ld. CIT(A). The relevant finding of the Ld. protective addition by the Ld. CIT(A). The relevant finding of the Ld. CIT(A) is reproduced as under: CIT(A) is reproduced as under:
“5.3.5 It is observed that the AO has made the said additions of Rs. 5.3.5 It is observed that the AO has made the said additions of Rs. 5.3.5 It is observed that the AO has made the said additions of Rs. 7.50,00,000/- in the hands of our assessee on protective basis b in the hands of our assessee on protective basis b in the hands of our assessee on protective basis by holding that the said investments in M/s Rikosh Fashions P Ltd. (Rs 25,00,000/ that the said investments in M/s Rikosh Fashions P Ltd. (Rs 25,00,000/ that the said investments in M/s Rikosh Fashions P Ltd. (Rs 25,00,000/-),
Sudama Textile Trading P. Ltd. Sudama Textile Trading P. Ltd. 4 ITA No. 2118/M/2019
M/s. Bhagwat Textiles P. Ltd. (Rs 1,75,00,000/ Bhagwat Textiles P. Ltd. (Rs 1,75,00,000/-), M/s First Winner ), M/s First Winner Textiles (India) P Ltd (Rs 1,50,00,000/ Textiles (India) P Ltd (Rs 1,50,00,000/-) and M/s First Winner Industries ) and M/s First Winner Industries P Ltd. (Rs 4,00,00,000/ P Ltd. (Rs 4,00,00,000/-) are unexplained. It is noted that the provisions nexplained. It is noted that the provisions of section 69 can be invoked if (i) the said investment is not recorded in of section 69 can be invoked if (i) the said investment is not recorded in of section 69 can be invoked if (i) the said investment is not recorded in the regular books and (il) the assessee offers no explanation about the the regular books and (il) the assessee offers no explanation about the the regular books and (il) the assessee offers no explanation about the source or the explanation offered is not satisfactory. It is rele source or the explanation offered is not satisfactory. It is rele source or the explanation offered is not satisfactory. It is relevant to note that both these conditions are to be cumulatively satisfied. The note that both these conditions are to be cumulatively satisfied. The note that both these conditions are to be cumulatively satisfied. The Hon'ble Orissa High Court in the case of Aurobindo Sanitary Stores (276 Hon'ble Orissa High Court in the case of Aurobindo Sanitary Stores (276 Hon'ble Orissa High Court in the case of Aurobindo Sanitary Stores (276 ITR 549) has held that the primary condition to be satisfied before ITR 549) has held that the primary condition to be satisfied before ITR 549) has held that the primary condition to be satisfied before invoking the provisions of section 69 invoking the provisions of section 69 is that there should be a finding of is that there should be a finding of the AO that the investments are not recorded in the regular books. In the the AO that the investments are not recorded in the regular books. In the the AO that the investments are not recorded in the regular books. In the instant case, there is no dispute that the said amount of investment is instant case, there is no dispute that the said amount of investment is instant case, there is no dispute that the said amount of investment is duly recorded in the regular books of accounts. The source of an duly recorded in the regular books of accounts. The source of an duly recorded in the regular books of accounts. The source of an investment which is reflected in the Balance Sheet is out of the nt which is reflected in the Balance Sheet is out of the nt which is reflected in the Balance Sheet is out of the corresponding liabilities shown in the Balance Sheet including the ones corresponding liabilities shown in the Balance Sheet including the ones corresponding liabilities shown in the Balance Sheet including the ones which got squared up and therefore cannot be treated as unexplained. which got squared up and therefore cannot be treated as unexplained. which got squared up and therefore cannot be treated as unexplained. Also, the corresponding additions have been made in the ha Also, the corresponding additions have been made in the ha Also, the corresponding additions have been made in the hands of M/s Rikosh Fashions P Ltd., M/s. Bhagwat Textiles P. Ltd., M/s First Winner Rikosh Fashions P Ltd., M/s. Bhagwat Textiles P. Ltd., M/s First Winner Rikosh Fashions P Ltd., M/s. Bhagwat Textiles P. Ltd., M/s First Winner Textiles (India) P Ltd and M/s First Winner Industries P Ltd. on Textiles (India) P Ltd and M/s First Winner Industries P Ltd. on Textiles (India) P Ltd and M/s First Winner Industries P Ltd. on Vsubstantive basis have been confirmed vide my orders in No.CIT(A) Vsubstantive basis have been confirmed vide my orders in No.CIT(A) Vsubstantive basis have been confirmed vide my orders in No.CIT(A)- 51/IT-855/16- -17 dated 20.11.2018, Appeal No CIT(A)-51/IT 51/IT-328/16-17 dated 03.11.2017, Appeal No.CIT(A) 03.11.2017, Appeal No.CIT(A)-51/IT-352/16-17 dated 03.11.2017 17 dated 03.11.2017 and Appeal No.CIT(A) No.CIT(A)-51/IT-363/16-17 dated 27.07.2018. Therefore, in 17 dated 27.07.2018. Therefore, in principle, the action of the AO in making the said protective addition us principle, the action of the AO in making the said protective addition us principle, the action of the AO in making the said protective addition us 68 cannot be sustai 68 cannot be sustained.
5.3.6 Similarly, the protective addit 5.3.6 Similarly, the protective addition made by the AO u/s 69C of ion made by the AO u/s 69C of ₹18,75,000/- being the unaccounted estimated commission @ 2.5% on being the unaccounted estimated commission @ 2.5% on being the unaccounted estimated commission @ 2.5% on the accommodation entry of the said investment of Rs 7,50,00,000/ the accommodation entry of the said investment of Rs 7,50,00,000/ the accommodation entry of the said investment of Rs 7,50,00,000/- also Sudama Textile Trading P. Ltd. Sudama Textile Trading P. Ltd. 5 ITA No. 2118/M/2019 cannot be sustained in principle considering t cannot be sustained in principle considering that the protective addition hat the protective addition of unexplained investment itself has in principle been deleted and also of unexplained investment itself has in principle been deleted and also of unexplained investment itself has in principle been deleted and also because the corresponding substantive additions made us 69C by the AO because the corresponding substantive additions made us 69C by the AO because the corresponding substantive additions made us 69C by the AO in the hands of M/s Rikosh Fashions P Ltd., M/s. Bhagwat Textiles P. in the hands of M/s Rikosh Fashions P Ltd., M/s. Bhagwat Textiles P. in the hands of M/s Rikosh Fashions P Ltd., M/s. Bhagwat Textiles P. Ltd., M/s First W Ltd., M/s First Winner Textiles (India) P Ltd and M/s First Winner inner Textiles (India) P Ltd and M/s First Winner Industries P Ltd. on substantive basis have been confirmed vide my Industries P Ltd. on substantive basis have been confirmed vide my Industries P Ltd. on substantive basis have been confirmed vide my orders in No.CIT(A) orders in No.CIT(A)-51/IT-355/16-17 dated 20.11.2018, Appeal No 17 dated 20.11.2018, Appeal No 17 dated 03.11.2017, Appeal No.CIT(A)-51/IT- CIT(A)-51/IT-328/16 328/16-17 dated 03.11.2017, Appeal No.CIT(A) 352/16-17 dated 03.11.2017 and Appeal No.CIT(A) ated 03.11.2017 and Appeal No.CIT(A)-51/IT 51/IT-363/16-17 dated 27.07.2018. However, as noted earlier, the AO is directed to verify dated 27.07.2018. However, as noted earlier, the AO is directed to verify dated 27.07.2018. However, as noted earlier, the AO is directed to verify the facts in respect of the quantum of substantive and protective the facts in respect of the quantum of substantive and protective the facts in respect of the quantum of substantive and protective additions made related to MIs Rikosh Fashions P Ltd. and accord additions made related to MIs Rikosh Fashions P Ltd. and accord additions made related to MIs Rikosh Fashions P Ltd. and accordingly adopt the correct figure while computing the protective addition us 69C adopt the correct figure while computing the protective addition us 69C adopt the correct figure while computing the protective addition us 69C being the unexplained commission expenditure. Accordingly, ground being the unexplained commission expenditure. Accordingly, ground being the unexplained commission expenditure. Accordingly, ground Nos. 1 to 3 of the appeal are partly allowed. 1 to 3 of the appeal are partly allowed.”
We find that the Ld. CIT(A) has We find that the Ld. CIT(A) has sustained the the addition in the hands of the four four entities i.e. M/s Bhagwat Textile P. Ltd., M/s i.e. M/s Bhagwat Textile P. Ltd., M/s First Winner Textile (India) P. Ltd. and M/s First Winner Industries First Winner Textile (India) P. Ltd. and M/s First Winner Industries First Winner Textile (India) P. Ltd. and M/s First Winner Industries P. Ltd. on substantive basis and therefore, he has deleted the P. Ltd. on substantive basis and therefore, he has deleted the P. Ltd. on substantive basis and therefore, he has deleted the addition in the hands of the assessee which addition in the hands of the assessee which was made on protective made on protective basis.
Sudama Textile Trading P. Ltd. Sudama Textile Trading P. Ltd. 6 ITA No. 2118/M/2019 5.1 We are of the opinion that protective assessments are framed We are of the opinion that protective assessments are framed We are of the opinion that protective assessments are framed by an Assessing Officer mainly where the Assessing Officer is not Assessing Officer mainly where the Assessing Officer is not Assessing Officer mainly where the Assessing Officer is not sure enough in whose hands income is chargeable to tax or which sure enough in whose hands income is chargeable to tax or which sure enough in whose hands income is chargeable to tax or which year the income is chargeable to year the income is chargeable to tax. Main purpose of the making Main purpose of the making protective assessment is to protect from action in the hands of the protective assessment is to protect from action in the hands of the protective assessment is to protect from action in the hands of the other person or other assessment year becoming barred by other person or other assessment year becoming barred by other person or other assessment year becoming barred by limitation. But when the substantive assessment made by the limitation. But when the substantive assessment made by the limitation. But when the substantive assessment made by the Assessing Officer is upheld by the Ld. Assessing Officer is upheld by the Ld. CIT(A), then he is not justified then he is not justified in confirming the protective assessment in the case of another in confirming the protective assessment in the case of another in confirming the protective assessment in the case of another assessee. The Ld. Appellate Authority has to take a judicious call as assessee. The Ld. Appellate Authority has to take a judicious call as assessee. The Ld. Appellate Authority has to take a judicious call as to in whose hand addition has to be upheld and the Revenue has to in whose hand addition has to be upheld and the Revenue has to in whose hand addition has to be upheld and the Revenue has also to take up a stand as i stand as in whose hands the income has to be n whose hands the income has to be assessed. Same income cannot be assessed. Same income cannot be sustained in the hands of the two in the hands of the two persons, first on substantive basis on substantive basis and secondly on protective basis and secondly on protective basis. In the circumstances, we do not find any error in the order of the Ld. In the circumstances, we do not find any error in the order of the Ld. In the circumstances, we do not find any error in the order of the Ld. CIT(A) on the issue-in in-dispute and accordingly, we upho we uphold the same.
Sudama Textile Trading P. Ltd. Sudama Textile Trading P. Ltd. 7 ITA No. 2118/M/2019 The grounds of appeal raised by the Revenue are accordingly The grounds of appeal raised by the Revenue are accordingly The grounds of appeal raised by the Revenue are accordingly dismissed.
In the result, the appeal filed by the Revenue is dismissed. In the result, the appeal filed by the Revenue is dismissed. In the result, the appeal filed by the Revenue is dismissed.