DY. CIT-5(1), INDORE vs. M/S. SUNIL SHARE & STOCK (P) LTD., INDORE

This assessee’s appeal for A.Y. 2005-06, arises from order of the CIT(A)-II, Indore dated 07-01-2019, in proceedings under section 143(3) of the Income Tax Act, 1961; in short “the Act”.

Department has raised the following grounds of appeal:-

In appeal, Ld. CIT(Appeals) allowed the assessee’s appeal and deleted both the additions. With respect to the addition of � 1,88,79,850/- from Sahayata Marketing which were subject to tax in the hands of the assessee on protective basis, Ld. CIT(Appeals) deleted the addition of the following grounds:

The Department is in appeal against the aforesaid order passed by ld. CIT(A) deleting the additions in the hands of the assessee on protective basis. The DR relied upon the observations made by the AO in the assessment order. In response, the AR of the assessee drew our attention to page 23 of the paper book and submitted that even in the earlier years in the assessment for assessment year 2002-03, no adverse inference was drawn against the assessee on similar facts. Further, the AR drew our attention to page 6 of the assessment order and submitted that the additions under section 68 of the Act were made in the hands the assessee purely on the basis of assumptions and no documents were in possession of the AO to hold that such income was taxable in the hands of the assessee, even on protective basis. Further, the counsel for the assessee submitted that the assessee is engaged in the business of earning brokerage/commission income and as is evident from page 6 of the assessment order, various cheques were also Page No 5 DCIT vs. M/s. Sunil Share & Stock Pvt. Ltd. issued from the above bank account in favour of various parties. However, the AO proceeded to tax the entire amount of deposits made in the aforesaid bank account in the hands of the assessee. Further, counsel for the assessee submitted that in the remand report dated 05-11-2018, notices have been issued to the “beneficiaries” and accordingly, Ld. CIT(Appeals) has not erred in facts and in law in deleting the additions in the hands of the assessee, which have been made on protective basis.

We have heard the rival contentions and perused the material on record. From the facts placed before us, we are of the view that in the facts of the instant case, Ld. CIT(Appeals) has not erred in facts and in law in deleting the additions made on protective basis in the hands of the assessee. The Ld. CIT(Appeals) has categorically observed that the assessee is engaged in the business of earning brokerage/commission income and hence there is no reason why the total deposits made in the bank account held by third parties should be taxed in the hands of the assessee on protective basis. We further observed that the Department has details available regarding various beneficiaries, details of which have been placed on record at pages 25-35 of the paper book. Further, Ld. CIT(Appeals) also specifically observed that additions were made in the hands of the assessee without even issuing summons to the beneficiaries in the instant case. Therefore, accordingly, looking into the facts of the present case, we find no infirmity in the order of Ld. CIT(Appeals) who has deleted the additions made in the hands of the assessee on protective basis after passing a detailed and reasoned order and considering the facts of the instant case.

In the result, ground number 1 of the Department’s appeal is dismissed.

Regarding ground number 2 of the Department’s appeal, the brief facts are that AO made addition of � 9,43,993/- in the hands of the assessee on the ground that the assessee has earned brokerage/commission by way of providing accommodation entries. Ld. CIT(Appeals) however deleted the additions by the observing that the AO has mentioned in his order that the assessee had charged commission ranging from 2% to 3% for the beneficiaries on account of providing accommodation entries. The ld. CIT(A) observed that the assessee has already offered 5% commission income i.e. � 1,54,05,419/- which is much more than the commission that the AO had estimated and again adding it to the assessee’s income would tantamount to double taxation of the same. Accordingly, in light of the facts and circumstances of the case, the Ld. CIT(Appeals) deleted the addition on account of commission/brokerage tax made by the AO in the hands of assessee.

We are of the considered view that Ld. CIT(Appeals) in the instant set of facts has not erred in deleting the additions, since the assessee has already offered a higher amount of income as brokerage/commission income in its return of income and again adding a sum of � 9,43,993/- as commission/brokerage income would amount to double taxation.

In the result, ground number 2 of the Department’s appeal is dismissed.

In the result, the appeal of the Department is dismissed.