DCIT- CC- 5(1), MUMBAI vs. ANAND RATHI ADVISORS LTD., MUMBAI

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ITA 5031/MUM/2018Status: DisposedITAT Mumbai20 November 2019AY 2012-135 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s order deleting the protective additions. This was because the substantive addition was made in the hands of another entity, and the Revenue could not provide information about any appeal filed against that decision.

What were the facts?

The Revenue appealed against the deletion of protective additions made by the Assessing Officer for AYs 2011-12 and 2012-13. The additions were related to success-based fees received by the assessee for managing an IPO subscription.

What were the issues?

Whether protective additions made by the AO were justified when substantive additions were made in the hands of another entity and the Revenue failed to provide details of appeals against that decision.

Which sections of the Income-tax Act were involved?

Section 153A,Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI

Before: SHRI MAHAVIR SINGH & SHRI M. BALAGANESH

For Appellant: Shri Anadi Varma, CIT-DR
For Respondent: Shri Vijay Mehta
Hearing: 03/10/2019Pronounced: 20/11/2019

PER MAHAVIR SINGH, JUDICIAL MEMBER

1.

These two appeals by Revenue are arising out of the separate orders of Commissioner of Income Tax (Appeals)-53, Mumbai in Appeal Nos. CIT(A)- 53/IT-138/DCCC-5(1)/2016-17 and CIT(A)-53/IT-139/DCCC-5(1)/2016-17 dated 20.06.2018. The Assessment was framed by the Dy. Commissioner of Income Tax, Central Circle 5(1) Mumbai (in short DCIT/ITO/AO) for AYs 2011-12 and 2012-13 vide orders dated 31.03.2016 under section 153A r.w.s 143(3) of the Income-tax Act, 1961 (hereinafter ‘the Act’).

2 M/s. Anand Rathi Advisors Ltd. & 5031/Mum/2018 2. The only common issue in these two appeals of the Revenue is against the order of CIT(A) deleting the addition made in the hands of the assessee in both the assessment years on protective basis. At the outset, the learned counsel for the assessee drew our attention to the ground raised by Revenue in assessment year 2011-12, which reads as under :-

“1. Whether on the facts and circumstance of the case and in law, the Ld. CIT(A) has failed to determine the year of taxability of the sum received at Rs.9,25,00,000/- being success based fees received by the assessee for managing the subscription of IPO ?”

Further, he drew our attention to the grounds raised in assessment year 2012- 13, which reads as under: -

“1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the entire addition made on account of undisclosed income.

2.

Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has failed to appreciate that the difference between the amount received and repaid by the assessee at Rs.9,25,00,000/- was taxable in its hand as undisclosed income?”

3.

The learned counsel for the assessee then took us through para 4.16, page 34 of the CIT(A)’s order for assessment year 2012-13 and stated that in this case the assessment was made on protective basis and substantive addition was made in the hands of Anand Rathi Capital Advisors Pvt. Ltd. for assessment year 2012-13 and even there was no indictment of assessee by SEBI in respect of the IPO of Dr. Datsons Laboratories Ltd. (DDLL). He drew our attention to para 4.16 of CIT(A)’s order, which reads as under: -

3 M/s. Anand Rathi Advisors Ltd. & 5031/Mum/2018 “4.16 It is thus noticed that the assessing officer has made protective addition in this case but has categorically stated in the assessment order in the case of DDLL that there is no trail of funds to Anand Rathi group entities. He has disbelieved the allegations of Kannan Vishwanath. The AO has not found the allegations made by Kannan Kishwanath to be supported with evidence. The report of CFSL is not conclusive of the claim by Kannan Vishwanath that the RTGS forms and cheques were filled by Rahul Porwal and funds were transferred at his behest to entities specified by him. With no valid appeal filed, as on date the assessments in the case of DDLL, where substantive addition is made, has become final. The appellant has not been allowed cross examination of Kannan Vishwanath, Deepak Shenoy and Kishore Sridharan who had alleged that funds were siphoned from the IPO proceeds as per direction of Shri Anand Rathi. The amount found to have been received by M/s. Anand Rathi Capital Advisors Pvt. Ltd. is only Rs.1.50 crores from M/s. Bhawana Interiors, a common and recurring entity with which transactions were carried out by DDLL. Addition has already been made in the case of M/s. Anand Rathi Capital Advisors Pvt. Ltd. for AY 2012- 13 by the Assessing Officer. This addition has been upheld in the appellate order dated No. CIT(A)-53/IT-157/DCCC-5(1)/2015-16 dated 21-02-2018. There is no indictment of the appellant by SEBI in respect of the IPO of DDLL. In light of the above, the protective addition made of Rs.77.35 crores is deleted. Ground of appeal no. 1 is allowed.”

4. Further, he drew our attention to para 4.15, page 24 of CIT(A)’s order for assessment year 2011-12, which reads as under: -

“4.15 It is thus noticed that the assessing officer has made protective addition in this case but has categorically stated in the assessment order in the case of DDLL that there is no trail of funds to Anand Rathi group entities. He has disbelieved the allegations of Kannan Vishwanath. The AO has not found the allegations made by Kannan Vishwanath to be supported with evidence. The report of CFSL is not conclusive of the claim by Kannan Vishwanath that the RTGS forms and cheques were filled by Rahul Porwal and funds were transferred at his behest to entities specified by him. With no valid appeal filed, as on date the assessments in the case of DDLL, where substantive addition is made, has become final. The appellant has not been allowed cross examination of Kannan Vishwanath, Deepak Shenoy and 4 M/s. Anand Rathi Advisors Ltd. & 5031/Mum/2018 Kishore Sridharan who had alleged that funds were siphoned from the IPO proceeds as per direction of Shri Anand Rathi. The amount found to have been received by M/s. Anand Rathi Capital Advisors Pvt. Ltd. is only Rs.1.50 crores from M/s. Bhawana Interiors, a common and recurring entity with which transactions were carried out by DDLL. Addition has already been made in the case of M/s. Anand Rathi Capital Advisors Pvt. Ltd. for AY 2012- 13 by the Assessing Officer. This addition has been upheld in the appellate order dated No. CIT(A)-53/IT-157/DCCC-5(1)/2015-16 dated 21-02-2018. There is no indictment of the appellant by SEBI in respect of the IPO of DDLL. In light of the above, the protective addition made of Rs.9.5 crores is deleted. Ground of appeal no. 1 is allowed.”

5. When these were put to the ld. CIT-DR, he could not answer whether substantive addition has been made in the hands of Anand Rathi Capital Advisors Pvt. Ltd. for assessment year 2012-13 and upheld by the CIT(A). When a query was raised whether appeal relating to Anand Rathi Capital Advisors Pvt. Ltd. is filed or not, the ld. CIT-DR could not answer.

6.

We have heard the rival contentions and gone through the facts and circumstances of the case. We noted that the addition is on protective basis and substantive addition has been affirmed in the hands of Anand Rathi Capital Advisors Pvt. Ltd. for assessment year 2012-13. As the Revenue could not point out whether any appeal is filed against the order of CIT(A) before the Tribunal in the case of Anand Rathi Capital Advisors Pvt. Ltd. for assessment year 2012-13, we confirm the order of CIT(A) and the appeals of the Revenue are dismissed. However, the Revenue is at liberty to get this order recalled in case they are able to establish that substantive addition has been deleted in the case of Anand Rathi Capital Advisors Pvt. Ltd. for assessment year 2012-13.

5 M/s. Anand Rathi Advisors Ltd. & 5031/Mum/2018 7. The facts are identical in AY 2011-12 also. In terms of the above, both the appeals of the Revenue are dismissed.

8.

In the result, both the appeals of the Revenue are dismissed.

Order pronounced in the open court on 20th November, 2019.

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