D.C.I.T CC - VII,KOL, KOLKATA vs. M/S HOOGHLY VINIMOY PVT LTD, KOLKATA

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 24.11.2006. 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 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

I.T.A. Nos.1856, 1857& 1858/Kol/2013 & 513& 514/Kol/2013 Assessment years 2006-07, 2007-08 & 2008-09 & I.T.A. No.1865/Kol/2013 Assessment year 2005-06 entries so given during the previous year relevant to assessment year 2008-09 aggregated to Rs.10,05,62,523/-, he added the commission income @2% amounting to Rs.20,11,250/- to the total income of the assessee in the assessment completed for Assessment Year 2006-07 u/s 143(3) of the Act on 30.12.2008. In the assessment so made, the Assessing Officer also made an addition of Rs. 10,05,62,523/- 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.

“8. I have perused the relevant orders and considered the material placed on record. I find that the issue regarding the discrepancy in dates related to the sworn-affidavit of the director of the appellant company as mentioned in the ITAT order has been satisfactorily explained by the appellant. Copy of sworn-affidavit and other relevant material was produced by the appellant in support of its contentions. On the other hand, no adverse material has been brought on record by the AO. In course of these appellate proceedings, the AO was also supposed to ascertain about the cases where substantive additions were made corresponding to the protective addition in the present case; and also, about the fate of the appeals in those cases. However, though a substantial period of nearly one year has already elapsed, nothing has been heard from the A.O. The reminder issued on 19-12-2012 was also not responded by the AO. In this factual background, given the facts of the case and the findings of the A.O in his assessment order; the decisions of the ld. CIT(A) in the 4

I.T.A. Nos.1856, 1857& 1858/Kol/2013 & 513& 514/Kol/2013 Assessment years 2006-07, 2007-08 & 2008-09 & I.T.A. No.1865/Kol/2013 Assessment year 2005-06 case of the appellant vide his order dated 22-10-2010 in Appeal No. 403/CC-VII/CIT(A)C- I/08-09 ; and also, those of the Hon’ble jurisdictional ITAT in similar cases involving identical facts and circumstances, the present appeal is now being decided on the basis of the material available on record.

9. I find that the issues involved in the present appeal are covered by the orders of the Hon’ble jurisdictional ITAT in similar cases involving identical facts and circumstances. The additions were deleted by my learned predecessor vide his order dated 22-10-2010 in Appeal No. 403/CC-VII/CIT(A)C-I/08-09. Though the matter was restored to the file of the CIT(A) by the Hon’ble ITAT, no fresh facts or material has come up in course of the present appellate proceedings. Respectfully following the decisions of my learned predecessor in the case of the appellant as well as those of the Hon’ble jurisdictional ITAT in similar cases involving identical facts and circumstances, it is to be held that the addition made by the AO on account of unexplained income as well as on that of commission income is neither sustainable in law or on facts. The addition of Rs 1,35,000/- on account of cash deposit in bank account is also not sustainable. The addition of Rs 16,96,24,000/- , Rs 33,92,480/- and Rs 1,35,000/- is directed to be deleted. In result, the appeal of the appellant is allowed.”

I.T.A. Nos.1856, 1857& 1858/Kol/2013 & 513& 514/Kol/2013 Assessment years 2006-07, 2007-08 & 2008-09 & I.T.A. No.1865/Kol/2013 Assessment year 2005-06 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 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 6

I.T.A. Nos.1856, 1857& 1858/Kol/2013 & 513& 514/Kol/2013 Assessment years 2006-07, 2007-08 & 2008-09 & I.T.A. No.1865/Kol/2013 Assessment year 2005-06 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.

I.T.A. Nos.1856, 1857& 1858/Kol/2013 & 513& 514/Kol/2013 Assessment years 2006-07, 2007-08 & 2008-09 & I.T.A. No.1865/Kol/2013 Assessment year 2005-06 CIT(Appeals) for deciding the same afresh. Grounds Nos. 1,2,4 to 6 of the Revenue’s appeals are accordingly treated as allowed for statistical purposes.

Order pronounced in the Court on 26.03.2019.