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Income Tax Appellate Tribunal, Kolkata Bench, Kolkata
Before: SHRI ABY. T. VARKEY & SHRI M. BALAGANESH
ORDER Per Bench:
The appeal filed by the Revenue in is against the order of Commissioner of Income Tax [Appeals] Central-I, Kolkata dated
I.T.A. No.180/Kol/2014 Assessment year 2008-09 & to 364/Kol/2014 Assessment years 2006-07, 2007-08 & 2008-09 29.11.2013 for the Asst Year 2008-09 against order of assessment passed u/s 143(3) of the Income Tax Act (hereinafter referred to as the ‘Act’) on 31.12.2010. The appeals filed by the Revenue in ITA Nos. 362 to 364/Kol/2014 are against the separate orders of Commissioner of Income Tax [Appeals] Central-I, Kolkata dated 12.12.2013 for the Asst Years 2006-07, 2007-08 and 2008-09 against separate orders of assessment passed u/s 143(3) of the Act dated 31.12.2008 , 22.12.2009 & 28.12.2010 respectively.
The one common issue to be decided in all these appeals is as to whether the ld. CIT(A) was justified in deleting the addition made towards unexplained income on protective basis. The interconnected issue involved therein is as to whether the ld. CIT(A) was justified in deleting the addition towards commission income in the hands of the respective assessees.
The appeal in in the case of M/s N K P Holdings Pvt Ltd for the Asst Year 2006-07 is taken as the lead case and the decision rendered thereon would apply with the equal force for other assessees herein except with variance in figures and change in name of the director (i.e Shri Amit Kumar Daga who is the director of M/s Platinum Commerce Pvt. Ltd).
The brief facts of this issue are that pursuant to the investigation carried out by Directorate of Income Tax (Investigations), Kolkata [‘DDIT(Inv.), Kolkata’], it revealed that some entities were involved in providing accommodation entries to various companies based in Mumbai, which in turn had used the said funds for payments to Madhepura Mercantile Co-operative Bank at Mumbai, which was said to be controlled by Shri Ketan Parekh. Since the assessee company was one of such entities, the statement of its director, Shri Kalikant Choudhury was recorded u/s 131 of the Act by DDIT(Inv.), Kolkata on 5.12..2006. In the said statement given on oath, Shri Kalikant Choudhury accepted that he had got cash of equivalent amount from the Mumbai based companies belonging to Shri Ketan 2
I.T.A. No.180/Kol/2014 Assessment year 2008-09 & to 364/Kol/2014 Assessment years 2006-07, 2007-08 & 2008-09 Parekh and thereafter deposited the said cash into bank account of the assessee company and cheques were issued to the said companies. He also furnished the list of cheques so issued against cash that had been received by him. Although, Shri Kalikant Choudhury subsequently filed an affidavit retracting his statement, the ld. Assessing Officer did not accept the same on the basis of the enquiries conducted by the investigation wing on a test check basis, which revealed that cash was deposited in various bank accounts in different stages. According to Assessing Officer, this factual position substantiated the statement of Shri Kalikant Choudhury, Director of the assessee company, that cash was indeed received by the assessee company in lieu of cheques given to various companies belonging to Ketan Parekh Group. The ld. Assessing Officer accordingly held that accommodation entries were given by the assessee company to various Mumbai based companies belonging to Ketan Parekh Group and since the accommodation entries so given during the previous year relevant to assessment year 2006-07 aggregated to Rs.15,74,87,775/-, he added the commission income @2% amounting to Rs.31,49,755/- to the total income of the assessee in the assessment completed for Assessment Year 2006-07 u/s 143(3) of the Act on 31.12.2008. In the assessment so made, the Assessing Officer also made an addition of Rs. 15,74,87,775/- in the hands of the assessee company on protective basis observing that the unexplained income to that extent of cash given by the Mumbai based companies was assessable on substantive basis in the hands of the said companies for the cash given to the assessee company.
Against the order passed by the ld. Assessing Officer, appeal was preferred by the assessee company before the ld. CIT(A) and after considering the submissions made by the assessee as well as materials available on record, the ld. CIT(A) deleted the addition made by the ld. Assessing Officer to the total income of the assessee for Assessment Year 2006-07 on account of alleged accommodation entries given to the Mumbai based companies in the form of 3
I.T.A. No.180/Kol/2014 Assessment year 2008-09 & to 364/Kol/2014 Assessment years 2006-07, 2007-08 & 2008-09 commission income @2% as well as further addition on account of protective basis for the following reasons given in Paragraphs 7 and 8 of his impugned order which are reproduced hereinbelow for the sake of convenience:
I have considered the rival submissions. I find that the addition on account of unexplained cash and commission income was made by relying on the alleged admission of Sri Kalikant Chowdhury that the assessee company issued cheques to different Mumbai- based companies in lieu of equal amount of cash received from them. However, it was contended before me that no such admission was made by Sri Kalikant Chowdhury as his alleged statement was never recorded in his capacity as the director of the assessee company. The AO has failed to rebut the contention of the assessee by producing relevant material on record. When the assessee contended that no statement of Sri Kalikant Chowdhury on which reliance was placed in the assessment order was ever recorded, the onus was on the AO to produce the alleged statement before the appellate authority. Though a period of 23/4 years has elapsed, the AO is still unable to produce the alleged statement before me. The AO even seems reluctant in giving a categorical report as to whether or not the alleged statement was actually recorded. I am not impressed with the report that the alleged statement was not readily available on the records of the AO. In case the alleged statement was actually recorded, it is unlikely and seems quite illogical that the Assessing Officer should not be able to locate the same in 23/4 years. On the contrary, the statement on which reliance was placed in the assessment order should form part of the relevant assessment record. I am unable to accept the argument of the AO that the alleged statement was not readily available on record. In this factual background, the contention of the assessee that no statement of Sri Kalikant Chowdhury in his capacity as director of the assessee company was ever recorded appears to be factually correct. The AO appears to have erred on facts in holding that the director of the assessee company admitted giving of accommodation entries in lieu of cash. I also find merit in the submission that the statement of Sri Kalikant Chowdhury recorded in his capacity as director of other companies could not be applied in the case of the assessee. I agree with the assessee that the AO has framed the assessment on wrong facts; and consequently, the additions made on the basis of such wrong facts cannot be sustained.
8. The AO has also made an alternative argument that the statement of Sri Kalikant Chowdhury was recorded in his capacity as director of various other companies wherein he had admitted that such companies were involved in providing accommodation entries; and so, even if the alleged statement was not readily available, it would still not change the material fact that the assessee company was involved in providing accommodation entry which was also apparent from its bank statement. But then, it was argued by the Ld AR that wherever admission of giving accommodation entry was made by Sri Kalikant Chowdhury, the same was retracted by filing affidavit in those cases; and, that similar additions made by the AO on account of unexplained cash and commission income in such cases was deleted by the Ld CIT(A) as well as by the jurisdictional ITAT. In other words, similar additions based on the admission of the director of the company was also deleted by the Hon'ble jurisdictional ITAT in the assessment of such company. In fact, it was once contended by the Ld AR in course of the appellate proceedings that the statement on which reliance was made in the assessment order was later retracted. However, when the AO responded by stating that there was no material on record suggesting, retraction of the 4 I.T.A. No.180/Kol/2014 Assessment year 2008-09 & to 364/Kol/2014 Assessment years 2006-07, 2007-08 & 2008-09 statement, the Ld AR reverted back to his original contention that no statement as director of the assessee company was ever recorded. The contention of the assessee that similar additions in those cases where statement of the director was recorded and later retracted were deleted by the jurisdictional ITAT is factually correct. For, the Hon’ble jurisdictional ITAT has, under identical facts and circumstances, deleted similar additions in the following cases : M/s Star Trafin (P) Ltd (ITA No 59-60/Kol/2011); M/s PNR Holding (P) Ltd (ITA No 61-62/Kol/2011); M/s Amit Goods & Suppliers (P) Ltd (ITA No 63- 64/Kol/2011); M/s Lyton Consultancy (P) Ltd (ITA No 71-72/Kol/2011); M/s Glamour Vanijya (P) Ltd (lTA No 308-309/Kol/2011); M/s Macro Leafin (P) Ltd (lTA No 310- 311/Kol/2011); M/s Cube Tralin (P) Ltd (ITA No 312-313/Kol/2011); and, M/s IRIS Commercial (P) Ltd (ITA No 394-395/Kol/2011). In these cases, admission was made by the director of the company regarding providing accommodation entry in lieu of cash; but then, such admission was later retracted. Though the Assessing Officer made similar additions on account of unexplained cash and commission income in the cases of those companies, the same was deleted by the Ld. CIT(A) as well as by the jurisdictional ITAT. In other words, similar additions which were made on the basis of the admission of the director of various companies were also deleted by the Hon'ble jurisdictional ITAT in the assessment of such companies. In view of the above, the alternative plea put forth by the AO also does not hold the field.
9. I also find from the assessment order that the addition on account of unexplained cash was made by the AO on protective basis. The AO has himself given the finding in his assessment order that the assessee company had issued cheques by taking equal amount of cash from various Mumbai-based companies; and that, such cash was assessable as unexplained income in the hands of those companies. The AO then added the same cash on protective basis as unexplained income of the assessee company without assigning any concrete reasons. I find no basis or justification for the AO to consider on protective basis such cash as unexplained income of the assessee company which he himself held was assessable as unexplained income in the hands of the various Mumbai-based companies. The addition on protective basis on account of unexplained cash is contradictory to his own findings that such cash was assessable as unexplained income in the hands of the various Mumbai-based companies.
10. In view of the above, I am of the opinion that the addition made by the AO on account of unexplained cash and commission income is neither sustainable in law nor on facts. The addition of Rs.15,74,87,775/- and Rs.31,49,755/- is directed to be deleted. Ground no.2,3 and 4 is allowed. Ground no.1 thereby contesting the legal validity of the assessment order has no merit. Ground no 1 is dismissed. Ground no 5 is general in nature.”
Aggrieved by the said order of the ld. CIT(A) giving relief to the assessee for the year under consideration, the Revenue has preferred an appeal before the Tribunal.
I.T.A. No.180/Kol/2014 Assessment year 2008-09 & to 364/Kol/2014 Assessment years 2006-07, 2007-08 & 2008-09 7. At the time of hearing of these appeals fixed on 28.03.2019, Shri Subash Agarwal, Advocate, appeared on behalf of the assessee. Shri A. K. Singh, CIT DR, appeared on behalf of the Revenue.
We have heard the rival submissions. The main issues involved in this appeal relate to the deletion by the ld. CIT(Appeals) of the additions made by the Assessing Officer on account of alleged accommodation entries given to the Mumbai based Companies on protective basis and the deletion by the ld. CIT(Appeals) of the addition made by the Assessing Officer on account of commission income allegedly received by the assessee for giving accommodation entries. It is observed that the similar issues were involved in some other cases and all these cases were adjourned in the past and also blocked for some period for getting the information about the status or outcome of the cases where the similar amounts were added on substantive basis. In spite of sufficient time given to both the parties, they have failed to furnish the said information. It is well settled that protective assessment is permissible in law and in case of a doubt or ambiguity about real entity in whose hands a particular income is to be assessed, the assessing authority is entitled to have recourse to make a protective assessment. As held by the Hon’ble Supreme Court in the case of Lalji Haridas –vs.- ITO (43 ITR 387), the Officer may, when in doubt, to safeguard the interest of the revenue can assess it in more than one hand but this procedure can be permitted only at the stage of assessment. Protective assessment becomes redundant when the substantive assessment becomes final and if the substantive assessment fails, it is protective assessment which is to be treated as substantive. Keeping in view this corollary between the substantive assessment and protective assessment, an appeal against the protective assessment should ordinarily await the outcome of the substantive assessment so that the protective assessment can be in conformity with the substantive assessment. In the case of CIT –vs.- Surendra Gulab Chand Modi (140 ITR 517), the appeal arising out of the protective assessment was disposed off 6
I.T.A. No.180/Kol/2014 Assessment year 2008-09 & to 364/Kol/2014 Assessment years 2006-07, 2007-08 & 2008-09 by the appellate authority i.e. Tribunal vacating the protective assessment without waiting for the final outcome of the proceedings arising from the substantive assessment, which matter was pending in the Hon’ble Supreme Court. The Hon’ble Gujarat High Court held that the Tribunal was not justified in proceeding with the matter and in disposing off it instead of blocking it till the disposal of the matter pending in the Hon’ble Supreme Court in order to bring it inconformity with the view of the Hon’ble Supreme Court. The Hon’ble Gujarat High Court accordingly directed the Tribunal to keep the matter alive and pending awaiting the decision of the Hon’ble Supreme Court in the proceedings arising from the substantive assessment.
In the present case, the ld. CIT(Appeals) did not await the outcome of the proceedings arising from the substantive assessment and since the said information was not forthcoming even after a considerable period from the concerned assessing officer, he proceeded to dispose off the appeal arising from the protective assessments by his impugned order and deleted the addition made on protective basis without awaiting the final outcome of the proceedings arising from the substantive assessment. Keeping in view the decision of the Hon’ble Gujarat High Court in the case of CIT –vs.- Surendra Gulab Chand Modi (supra), we hold that the ld. CIT(Appeals) was not justified in deleting the addition made by the Assessing Officer on protective basis in the year under consideration without awaiting for the final outcome of the proceedings arising from this substantive assessment. We, therefore, set aside the impugned order of the ld. CIT(Appeals) on this issue and remit the matter back to him for keeping it alive and pending till the outcome of the proceedings arising from the substantive assessment.
As regards the issue relating to the addition made on account of commission income allegedly received by the assessee for giving accommodation
I.T.A. No.180/Kol/2014 Assessment year 2008-09 & to 364/Kol/2014 Assessment years 2006-07, 2007-08 & 2008-09 entries, we find that this issue is consequential to the issue relating to the addition made on protective basis on account of accommodation entries allegedly given by the assessee-company to the Mumbai based companies. Since the said issue is remitted back by us to the ld. CIT(Appeals), we also remit the consequential issue relating to addition on account of commission income back to the ld. CIT(Appeals) for deciding the same afresh. Grounds Nos. 1 to 6 of the Revenue’s appeals in ITA Nos. 362 to 364/Kol/2014 and Grounds 1, 2, 3, 5 to 7 of the Revenue’s appeal in ITA No. 180/Kol/2014 are accordingly treated as allowed for statistical purposes.
With regard to Ground No. 4 raised by the revenue in for Assessment Year 2008-09, the ld. Assessing Officer had also made further addition of Rs.25,68,000/- towards purchase of land and Rs 40,74,010/- towards purchase of building treating it as unexplained cash and added the same to the total income of the assessee.
We find that the ld CITA had observed that the sum of Rs.21,77,010/- was shown as opening balance in the ledger account of building in the books of the assessee company and hence no addition could be made on that account. We are in agreement with the view taken by the ld CIT(Appeals) in this regard. With regard to payment of Rs.18,30,000/- made during the year, the ld CIT(Appeals) observed that the same were paid out of disclosed bank account by way of account payee cheques and hence no addition is to be made. We find no infirmity in this action of the ld CIT(Appeals). However, with regard to the cash payment of Rs 67,000/- towards purchase of building towards registration and stamp duty charges and cash payment of Rs 25,68,000/- towards purchase of land, the ld CIT(Appeals) observed that the assessee was not able to demonstrate the availability of cash through proper cash flow statement and accordingly confirmed the addition of Rs 26,35,000/- ( 25,68,000 + 67,000). Even before us, no evidences
I.T.A. No.180/Kol/2014 Assessment year 2008-09 & to 364/Kol/2014 Assessment years 2006-07, 2007-08 & 2008-09 for availability of cash balances were filed by the ld AR and hence the addition finally confirmed by the ld CIT(Appeals) does not require any interference. Accordingly, the Ground no. 4 raised by the revenue in ITA No. 180/Kol/2014 is dismissed.
To sum up, Revenue Appeals in to 364/Kol/2014 are allowed for statistical purposes and Revenue Appeal in ITA No. 180/Kol/2014 is partly allowed for statistical purposes.
Order pronounced in the Court on 03.04.2019. Sd/- Sd/- [A. T. Varkey] [M. Balaganesh] Judicial Member Accountant Member Dated : 03.04.2019 [RS, Sr.PS] Copy of the order forwarded to:
1. 1. Assessee – a. M/s. Plantium Commerce Pvt. Ltd., 51, Nalini Seth Road, Kolkata – 700 007. b. M/s. N.K.P. Holdings Pvt. Ltd, 47A, Kalikrishna Tagore Street, Kol-7.
2. Revenue – D.C.I.T., CC-VII, Kolkata 3. CIT(A)- Kolkata. 4. CIT – , Kolkata. 5. CIT(DR), Kolkata Benches, Kolkata.