D.C.I.T CC - VII,kolkata, Kolkata V. M/s Welkan Vinimay (P) Ltd, Kolkata

ITA 1864/KOL/2013

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 0650 (ITAT-KOLKATA)
• Duration Of Justice: 5 year(s) 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 16-05-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 11-06-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A K NAYAK
• Keywords: Accommodation entries; Set aside
• Section: 271(1)(c); 143(3); 131

Judgement Text

I.T.A. NOS. 1862, 1863 & 1864/KOL/2013 ASSESSME NT YEARS: 2005-06, 2007-08 & 2008-09 M/S. WELKAN VINIMAY (PVT.) LIMITED 1 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, VICE-PRESIDENT (KZ) AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NOS. 1862, 1863 & 1864/KOL/2013 ASSESSMENT YEARS: 2005-2006, 2007-08 & 2008-2009 DEPUTY COMMISSIONER OF INCOME TAX,...... .........APPELLANT CENTRAL CIRCLE-VII, KOLKATA, AAYAKAR BHAWAN POORVA, 110, SHANTI PALLY, KOLKATA-700 107 -VS.- M/S. WELKAN VINIMAY (PVT.) LIMITED,....... ............RESPONDENT 137, RABINDRA SARANI, KOLKATA-700 073 [PAN: AAACW 2302 E] APPEARANCES BY: SHRI A.K. NAYAK, CIT (D.R.), FOR THE APPELLANT SHRI AMIT AGARWAL, ADVOCATE, FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : MARCH 28, 2019 DATE OF PRONOUNCING THE ORDER : MARCH 28, 2019 O R D E R PER SHRI P.M. JAGTAP, VICE-PRESIDENT (KOLKATA ZONE) :- THESE THREE APPEALS ARE PREFERRED BY THE REVENUE A GAINST THREE SEPARATE ORDERS PASSED BY THE LD. COMMISSIONER OF I NCOME TAX (APPEALS), CENTRAL-I, KOLKATA, ALL DATED 26.03.2013 FOR A.Y. 2 005-06, 2007-08 AND 2008-09 RESPECTIVELY AND SINCE THE ISSUES INVOLVED THEREIN ARE COMMON, THE SAME HAVE BEEN HEARD TOGETHER AND ARE BEING DIS POSED OF BY A SINGLE CONSOLIDATED ORDER. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY. T HE INVESTIGATION CARRIED OUT BY THE DEPARTMENT OF INCOME TAX (INVEST IGATION), KOLKATA REVEALED THAT SOME ENTITIES WERE INVOLVED IN PROVID ING ACCOMMODATION ENTRIES TO VARIOUS COMPANIES BASED IN MUMBAI, WHICH IN TURN HAD USED I.T.A. NOS. 1862, 1863 & 1864/KOL/2013 ASSESSME NT YEARS: 2005-06, 2007-08 & 2008-09 M/S. WELKAN VINIMAY (PVT.) LIMITED 2 THE SAID FUNDS FOR PAYMENTS TO MADHIPURA MERCANTILE COOPERATIVE BANK AT MUMBAI, WHICH WAS CONTROLLED BY SHRI KETAN PAREKH. SINCE THE ASSESSEE- COMPANY WAS ONE OF SUCH ENTITIES, THE STATEMENT OF ITS DIRECTOR SHRI PRAMOD SHARMA WAS RECORDED UNDER SECTION 131 BY THE DDIT(INVESTIGATION), KOLKATA ON 15.12.2006. IN THE SAID STATEMENT GIVEN ON OATH, SHRI PRAMOD SHARMA ACCEPTED THAT HE HAD GO T CASH OF EQUIVALENT AMOUNT FROM THE MUMBAI BASED COMPANIES BELONGING TO SHRI KETAN PAREKH GROUP AND AFTER DEPOSITING THE SAID CASH INT O THE BANK ACCOUNT OF THE ASSESSEE-COMPANY, CHEQUES WERE ISSUED TO THE SA ID COMPANIES. HE ALSO FURNISHED A LIST OF CHEQUES SO ISSUED AGAINST CASH THAT HAD BEEN RECEIVED BY HIM. ALTHOUGH SHRI PRAMOD SHARMA SUBSEQ UENTLY FILED AN AFFIDAVIT RETRACTING HIS STATEMENT, THE ASSESSING O FFICER 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 THE ASSESSING OFFICER, THIS FACTUAL POSITION SUBSTANTIATED THE STATEMENT OF SHR I PRAMOD SHARMA, DIRECTOR OF THE ASSESSEE-COMPANY THAT CASH WAS INDE ED RECEIVED BY THE ASSESSEE-COMPANY IN LIEU OF CHEQUES GIVEN TO VARIOU S COMPANIES BELONGING TO KETAN PAREKH GROUP. HE ACCORDINGLY HEL D THAT ACCOMMODATION ENTRIES WERE GIVEN BY THE ASSESSEE-CO MPANY TO VARIOUS MUMBAI BASED COMPANIES BELONGING TO KETAN PAREKH GR OUP AND SINCE THE ACCOMMODATION ENTRIES SO GIVEN DURING THE PREVIOUS YEAR RELEVANT TO A.Y. 2005-06 AGGREGATED TO RS.24,08,50,000/-, HE ADDED T HE COMMISSION INCOME @ 2% AMOUNTING TO RS.48,17,000/- TO THE TOTA L INCOME OF THE ASSESSEE IN THE ASSESSMENT COMPLETED FOR A.Y. 2005- 06 UNDER SECTION 143(3)/147 VIDE AN ORDER DATED 31.12.2008. IN THE A SSESSMENT SO MADE, HE ALSO MADE AN ADDITION OF RS.24,08,50,000/- IN TH E HANDS OF THE ASSESSEE ON PROTECTIVE BASIS OBSERVING THAT THE UNE XPLAINED INCOME TO THAT EXTENT IN THE FORM OF CASH GIVEN BY THE MUMBAI BASED COMPANIES WAS ASSESSABLE ON SUBSTANTIVE BASIS IN THE HANDS OF THE SAID COMPANIES. THE ASSESSING OFFICER ALSO COMPLETED ASSESSMENTS FOR A. YS. 2007-08 AND 2008-09 UNDER SECTION 143(3) VIDE ORDERS DATED 24.1 2.2009 AND I.T.A. NOS. 1862, 1863 & 1864/KOL/2013 ASSESSME NT YEARS: 2005-06, 2007-08 & 2008-09 M/S. WELKAN VINIMAY (PVT.) LIMITED 3 31.12.2010, WHEREIN HE MADE SIMILAR ADDITION ON ACC OUNT OF COMMISSION INCOME AT THE RATE OF 2% AMOUNTING TO RS.42,27,251/ - AND RS.34,79,651/- TO THE TOTAL INCOME OF THE ASSESSEE FOR A.Y. 2007-0 8 AND 2008-09 RESPECTIVELY. HE ALSO MADE ADDITIONS OF RS.21,13,62 ,537/- AND RS.17,39,82,556/- SIMILARLY ON PROTECTIVE BASIS IN THE ASSESSMENTS COMPLETED UNDER SECTION 143(3) FOR A.YS. 2007-08 AN D 2008-09 RESPECTIVELY FOR THE TOTAL AMOUNT OF ACCOMMODATION ENTRIES PROVIDED BY THE ASSESSEE-COMPANY TO THE MUMBAI BASED COMPANIES BELONGING TO KETAN PAREKH GROUP OBSERVING THAT UNEXPLAINED INCOME TO T HAT EXTENT WAS LIABLE TO BE ASSESSED ON SUBSTANTIVE BASIS IN THE HANDS OF THE SAID COMPANIES FOR THE CASH GIVEN TO THE ASSESSEE-COMPANY. 3. AGAINST THE ORDERS PASSED BY THE ASSESSING OFFIC ER UNDER SECTION 143(3)/147 FOR A.Y. 2005-06 AND UNDER SECTION 143(3 ) FOR A.YS. 2007-08 AND 2008-09, APPEALS WERE PREFERRED BY THE ASSESEE- COMPANY BEFORE THE LD. CIT(APPEALS) AND AFTER CONSIDERING THE SUBMISSI ONS MADE BY THE ASSESSEE AS WELL AS THE MATERIAL AVAILABLE ON RECOR D, THE LD. CIT(APPEALS) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER TO THE TOTAL INCOME OF THE ASSESSEE FOR A.Y. 2005-06 ON ACCOUNT OF THE ALL EGED ACCOMMODATION ENTRIES GIVEN TO THE MUMBAI BASED COMPANIES IN THE FORM OF COMMISSION INCOME AT THE RATE OF 2% AS WELL AS FURTHER ADDITIO N ON ACCOUNT OF PROTECTIVE BASIS FOR THE FOLLOWING REASONS GIVEN IN PARAGRAPH NO. 7 OF HIS IMPUGNED ORDER:- 7. I HAVE PERUSED THE RELEVANT ORDERS. I HAVE ALSO CONSIDERED THE SUBMISSIONS MADE ON BEHALF OF THE AP PELLANT. I FIND THAT THE ISSUES INVOLVED IN THIS APPEAL ARE CO VERED BY THE ORDERS OF THE HON'BLE JURISDICTIONAL ITAT WHEREIN S IMILAR ADDITIONS, UNDER IDENTICAL FACTS AND CIRCUMSTANCES, WERE DELETED. RESPECTFULLY FOLLOWING THE DECISIONS OF TH E JURISDICTIONAL IT AT, IT IS TO BE HELD THAT THE ADD ITION MADE BY THE AO ON ACCOUNT OF UNEXPLAINED INCOME AS WELL AS THAT ON COMMISSION INCOME IS NEITHER SUSTAINABLE IN LAW NOR ON FACTS. THE ADDITION OF RS.24,08,50,000/- AND RS.48,17,000/ - IS DIRECTED TO BE DELETED. GROUND NO. 2 AND 3 IS ALLOW ED. AND, AS THE APPEAL IS ALLOWED ON MERIT, THE LEGAL GROUND NO . 1 CONTESTING THE RE-OPENING OF THE ASSESSMENT IS NOT ADJUDICATED. GROUND NO. 4. IS RELATED TO THE INITIATION OF THE P ENALTY PROCEEDINGS U/S. 271(1)(C) WHICH IS PREMATURE FOR A DJUDICATION I.T.A. NOS. 1862, 1863 & 1864/KOL/2013 ASSESSME NT YEARS: 2005-06, 2007-08 & 2008-09 M/S. WELKAN VINIMAY (PVT.) LIMITED 4 AT THIS STAGE. GROUND NO 4 IS DISMISSED. GROUND NO 5 IS GENERAL IN NATURE. 4. FOR ALMOST SIMILAR REASONS AS GIVEN IN HIS IMPUG NED ORDER FOR A.Y. 2005-06, THE LD. CIT(APPEALS) ALSO DELETED THE SIMI LAR ADDITIONS MADE BY THE ASSESSING OFFICER TO THE TOTAL INCOME OF THE AS SESSEE FOR A.Y. 2007-08 AND 2008-09 ON ACCOUNT OF THE ALLEGED ACCOMMODATION ENTRIES GIVEN TO THE MUMBAI BASED COMPANIES IN THE FORM OF COMMISSIO N INCOME AND FURTHER ADDITION ON ACCOUNT OF PROTECTIVE BASIS. AG GRIEVED BY THE ORDERS OF THE LD. CIT(APPEALS) GIVING RELIEF TO THE ASSESS EE FOR ALL THE THREE YEARS UNDER CONSIDERATION, THE REVENUE HAS PREFERRED THES E APPEALS BEFORE THE TRIBUNAL. 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE TWO COMM ON ISSUES INVOLVED IN ALL THESE THREE APPEALS RELATE TO THE DELETION BY T HE LD. CIT(APPEALS) OF THE ADDITIONS MADE BY THE ASSESSING OFFICER ON ACCO UNT OF ALLEGED ACCOMMODATION ENTRIES GIVEN TO THE MUMBAI BASED COM PANIES ON PROTECTIVE BASIS AND THE DELETION BY THE LD. CIT(AP PEALS) OF THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF COMMISS ION INCOME ALLEGEDLY RECEIVED BY THE ASSESSEE FOR GIVING ACCOMMODATION E NTRIES. 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 F OR SOME PERIOD FOR GETTING THE INFORMATION ABOUT THE STATUS OR OUTCOME OF THE CASES WHERE THE SIMILAR AMOUNTS WERE ADDED ON SUBSTANTIVE BASIS . INSPITE OF SUFFICIENT TIME GIVEN TO BOTH THE PARTIES, THEY HAVE FAILED TO FURNISH THE SAID INFORMATION. IT IS WELL SETTLED THAT PROTECTIVE ASS ESSMENT IS PERMISSIBLE IN LAW AND IN CASE A DOUBT OR AMBIGUITY ABOUT REAL ENT ITY IN WHOSE HANDS A PARTICULAR INCOME IS TO BE ASSESSED, THE ASSESSING AUTHORITY IS ENTITLED TO HAVE RECOURSE TO MAKE A PROTECTIVE ASSESSMENT. AS H ELD BY THE HONBLE SUPREME COURT IN THE CASE OF LALJI HARIDAS VS.- IT O (43 ITR 387), THE OFFICER MAY, WHEN IN DOUBT, TO SAFEGUARD THE INTERE ST OF THE REVENUE CAN ASSESS IT IN MORE THAN ONE HAND BUT THIS PROCEDURE CAN BE PERMITTED ONLY I.T.A. NOS. 1862, 1863 & 1864/KOL/2013 ASSESSME NT YEARS: 2005-06, 2007-08 & 2008-09 M/S. WELKAN VINIMAY (PVT.) LIMITED 5 AT THE STAGE OF ASSESSMENT. PROTECTIVE ASSESSMENT B ECOMES REDUNDANT WHEN THE SUBSTANTIVE ASSESSMENT BECOMES FINAL AND I F 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 AGA INST THE PROTECTIVE ASSESSMENT SHOULD ORDINARILY AWAIT THE OUTCOME OF T HE SUBSTANTIVE ASSESSMENT SO THAT THE PROTECTIVE ASSESSMENT CAN BE INCONFORMITY WITH THE SUBSTANTIVE ASSESSMENT. IN THE CASE OF CIT VS. - SURENDRA GULAB CHAND MODI (140 ITR 517), THE APPEAL ARISING OUT OF THE P ROTECTIVE ASSESSMENT WAS DISPOSED OF BY THE APPELLATE AUTHORITY I.E. TRI BUNAL VACATING THE PROTECTIVE ASSESSMENT WITHOUT WAITING FOR THE FINAL OUTCOME OF THE PROCEEDINGS ARISING FROM THE SUBSTANTIVE ASSESSMENT , WHICH MATTER WAS PENDING IN THE HONBLE SUPREME COURT. THE HONBLE G UJARAT HIGH COURT HELD THAT THE TRIBUNAL WAS NOT JUSTIFIED IN PROCEED ING WITH THE MATTER AND IN DISPOSING OF IT INSTEAD OF BLOCKING IT TILL THE DISPOSAL OF THE MATTER PENDING IN THE HONBLE SUPREME COURT IN ORDER TO BR ING IT INCONFORMITY WITH THE VIEW OF THE HONBLE SUPREME COURT. THE HON BLE GUJARAT HIGH COURT ACCORDINGLY DIRECTED THE TRIBUNAL TO KEEP THE MATTER ALIVE AND PENDING AWAITING THE DECISION OF THE HONBLE SUPREM E COURT IN THE PROCEEDINGS ARISING FROM THE SUBSTANTIVE ASSESSMENT . 6. IN THE PRESENT CASE, THE LD. CIT(APPEALS) DID NO T AWAIT THE OUTCOME OF THE PROCEEDINGS ARISING FROM THE SUBSTANTIVE ASS ESSMENT AND SINCE THE SAID INFORMATION WAS NOT FORTHCOMING EVEN AFTER A C ONSIDERABLE PERIOD FROM THE CONCERNED ASSESSING OFFICER, HE PROCEEDED TO DISPOSE OF THE APPEALS ARISING FROM THE PROTECTIVE ASSESSMENTS BY HIS IMPUGNED ORDERS AND DELETED THE ADDITION MADE ON PROTECTIVE BASIS W ITHOUT AWAITING THE FINAL OUTCOME OF THE PROCEEDINGS ARISING FROM THE S UBSTANTIVE ASSESSMENT. KEEPING IN VIEW THE DECISION OF THE HONBLE 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 ADDI TIONS MADE BY THE ASSESSING OFFICER ON PROTECTIVE BASIS IN ALL THE TH REE YEARS UNDER I.T.A. NOS. 1862, 1863 & 1864/KOL/2013 ASSESSME NT YEARS: 2005-06, 2007-08 & 2008-09 M/S. WELKAN VINIMAY (PVT.) LIMITED 6 CONSIDERATION WITHOUT AWAITING FOR THE FINAL OUTCOM E OF THE PROCEEDINGS ARISING FROM THIS SUBSTANTIVE ASSESSMENT. WE, THERE FORE, SET ASIDE THE IMPUGNED ORDERS OF THE LD. CIT(APPEALS) ON THIS ISS UE AND REMIT THE MATTER BACK TO HIM FOR KEEPING IT ALIVE AND PENDING TILL THE OUTCOME OF THE PROCEEDINGS ARISING FROM THE SUBSTANTIVE ASSESSMENT . 7. AS REGARDS THE ISSUE RELATING TO THE ADDITIONS M ADE ON ACCOUNT OF COMMISSION INCOME ALLEGEDLY RECEIVED BY THE ASSESSE E FOR GIVING ACCOMMODATION ENTRIES, WE FIND THAT THIS ISSUE IS C ONSEQUENTIAL TO THE ISSUE RELATING TO THE ADDITION MADE ON PROTECTIVE B ASIS ON ACCOUNT OF ACCOMMODATION ENTRIES ALLEGEDLY GIVEN BY THE ASSESS EE-COMPANY TO THE MUMBAI BASED COMPANIES. SINCE THE SAID ISSUE IS REM ITTED BACK BY US TO THE LD. CIT(APPEALS), WE ALSO REMIT THE CONSEQUENTI AL ISSUE RELATING TO ADDITION ON ACCOUNT OF COMMISSION INCOME BACK TO TH E LD. CIT(APPEALS) FOR DECIDING THE SAME AFRESH. GROUNDS NO. 1 & 2 OF THE REVENUES APPEALS FOR ALL THE THREE YEARS UNDER CONSIDERATION ARE ACC ORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, ALL THE THREE APPEALS OF THE REVE NUE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON MARCH 28, 201 9. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER VICE -PRESIDENT (KZ) KOLKATA, THE 28 TH DAY OF MARCH, 2019 COPIES TO : (1) DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-VII, KOLKATA, AAYAKAR BHAWAN POORVA, 110, SHANTI PALLY, KOLKATA-700 107 (2) M/S. WELKAN VINIMAY (PVT.) LIMITED, 137, RABINDRA SARANI, KOLKATA-700 073 (3) COMMISSIONER OF INCOME TAX (APPEALS), CENTRAL-1 , KOLKATA, (4) COMMISSIONER OF INCOME TAX- , I.T.A. NOS. 1862, 1863 & 1864/KOL/2013 ASSESSME NT YEARS: 2005-06, 2007-08 & 2008-09 M/S. WELKAN VINIMAY (PVT.) LIMITED 7 (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.