DCIT, Central Circle - VII, Kolkata, Kolkata V. M/s. Shyam Stocks & Financiers Pvt. Ltd., Kolkata

ITA 402/KOL/2011

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8543 (ITAT-KOLKATA)
• Duration Of Justice: 8 year(s) 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 09-03-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A K NAYAK
• Assessee Lawyers: BRIJESH KUMAR SINGH RESPONDE
• Keywords: Accommodation entries; Rule 8D; Set aside
• Section: 143(3); 14A; 131

Judgement Text

I.T.A. NOS. 402 & 403/KOL/2011 ASSESSMENT YEARS: 2006-07 & 2007-08 M/S. S HYAM STOCKS & FINANCIERS 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. 402 & 403/KOL/2011 ASSESSMENT YEARS: 2006-2007 & 2007-2008 DEPUTY COMMISSIONER OF INCOME TAX,...... .........APPELLANT CENTRAL CIRCLE-VII, KOLKATA, AAYAKAR BHAWAN POORVA, 110, SHANTI PALLY, KOLKATA-700 107 -VS.- M/S. SHYAM STOCKS & FINANCIERS PVT. LIMITED,....... ......................RESPONDENT 39, KALI KRISHNA TAGORE STREET, KOLKATA-700 007 [PAN: AADCS 5992 F] APPEARANCES BY: SHRI A.K. NAYAK, CIT (D.R.), FOR THE APPELLANT SHRI BRIJESH KUMAR SINGH, ADVOCATE, FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : MARCH 28, 2019 DATE OF PRONOUNCING THE ORDER : APRIL 10, 2019 O R D E R PER SHRI P.M. JAGTAP, VICE-PRESIDENT (KOLKATA ZONE) :- THESE TWO APPEALS ARE PREFERRED BY THE REVENUE AGA INST TWO SEPARATE ORDERS PASSED BY THE LD. COMMISSIONER OF I NCOME TAX (APPEALS), CENTRAL-I, KOLKATA, BOTH DATED 24.12.2010 FOR A.YS. 2006-07 AND 2007-08 RESPECTIVELY AND SINCE THE ISSUES INVOLVED THEREIN ARE COMMON, THE SAME HAVE BEEN HEARD TOGETHER AND ARE BEING DISPOSED 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. 402 & 403/KOL/2011 ASSESSMENT YEARS: 2006-07 & 2007-08 M/S. S HYAM STOCKS & FINANCIERS 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 ARIHANT JAIN WAS RECORDED UNDER SECTION 131 BY THE DDIT(INVESTIGATION), KOLKATA ON 09.04.2007. IN THE SAID STATEMENT GIVEN ON OATH, SHRI ARIHANT JAIN ACCEPTED THAT HE HAD GOT CASH OF EQUIVALENT AM OUNT FROM THE MUMBAI BASED COMPANIES BELONGING TO SHRI KETAN PAREKH GROU P AND AFTER DEPOSITING THE SAID CASH INTO THE BANK ACCOUNT OF T HE ASSESSEE-COMPANY, CHEQUES WERE ISSUED TO THE SAID COMPANIES. HE ALSO FURNISHED A LIST OF CHEQUES SO ISSUED AGAINST CASH THAT HAD BEEN RECEIV ED BY HIM. ALTHOUGH SHRI ARIHANT JAIN SUBSEQUENTLY FILED AN AFFIDAVIT R ETRACTING HIS STATEMENT, THE ASSESSING OFFICER DID NOT ACCEPT THE SAME ON TH E BASIS OF THE ENQUIRIES CONDUCTED BY THE INVESTIGATION WING ON A TEST-CHECK BASIS, WHICH REVEALED THAT CASH WAS DEPOSITED IN VARIOUS BANK AC COUNTS IN DIFFERENT STAGES. ACCORDING TO THE ASSESSING OFFICER, THIS FA CTUAL POSITION SUBSTANTIATED THE STATEMENT OF SHRI ARIHANT JAIN, D IRECTOR OF THE ASSESSEE- COMPANY THAT CASH WAS INDEED RECEIVED BY THE ASSESS EE-COMPANY IN LIEU OF CHEQUES GIVEN TO VARIOUS COMPANIES BELONGING TO KETAN PAREKH GROUP. HE 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 ENTR IES SO GIVEN DURING THE PREVIOUS YEAR RELEVANT TO A.Y. 2006-07 AGGREGAT ED TO RS.7,20,38,900/- , HE ADDED THE COMMISSION INCOME @ 2% AMOUNTING TO RS.14,12,000/- TO THE TOTAL INCOME OF THE ASSESSEE IN THE ASSESSMENT COMPLETED FOR A.Y. 2006-07 UNDER SECTION 143(3) VIDE AN ORDER DATED 30 .12.2008. IN THE ASSESSMENT SO MADE, HE ALSO MADE AN ADDITION OF RS. 7,06,00,000/- IN THE HANDS OF THE ASSESSEE ON PROTECTIVE BASIS OBSERVING THAT THE UNEXPLAINED INCOME TO THAT EXTENT IN THE FORM OF CASH GIVEN BY THE MUMBAI BASED COMPANIES WAS ASSESSABLE ON SUBSTANTIVE BASIS IN TH E HANDS OF THE SAID COMPANIES. THE ASSESSING OFFICER ALSO COMPLETED THE ASSESSMENT FOR A.Y. 2007-08 AND IN THE ASSESSMENT SO MADE UNDER SECTION 143(3) VIDE ORDER DATED 18.12.2009, HE MADE A SIMILAR ADDITION ON ACC OUNT OF COMMISSION I.T.A. NOS. 402 & 403/KOL/2011 ASSESSMENT YEARS: 2006-07 & 2007-08 M/S. S HYAM STOCKS & FINANCIERS PVT. LIMITED 3 INCOME AT THE RATE OF 2% AMOUNTING TO RS.24,81,966/ - TO THE TOTAL INCOME OF THE ASSESSEE FOR 2007-08. HE ALSO MADE ADDITION OF RS.12,40,98,317/- SIMILARLY ON PROTECTIVE BASIS IN THE ASSESSMENT COM PLETED UNDER SECTION 143(3) FOR A.Y. 2007-08 VIDE ORDER DATED 18.12.2009 FOR THE TOTAL AMOUNT OF ACCOMMODATION ENTRIES PROVIDED BY THE ASSESSEE-C OMPANY TO THE MUMBAI BASED COMPANIES BELONGING TO KETAN PAREKH GR OUP OBSERVING THAT UNEXPLAINED INCOME TO THAT EXTENT WAS LIABLE T O BE ASSESSED ON SUBSTANTIVE BASIS IN THE HANDS OF THE SAID COMPANIE S FOR THE CASH GIVEN TO THE ASSESSEE-COMPANY. 3. AGAINST THE ORDERS PASSED BY THE ASSESSING OFFIC ER UNDER SECTION 143(3) FOR A.Y. 2006-07 AND 2007-08, APPEALS WERE P REFERRED BY THE ASSESEE-COMPANY BEFORE THE LD. CIT(APPEALS) AND AFT ER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE AS WELL AS THE MAT ERIAL AVAILABLE ON RECORD, THE LD. CIT(APPEALS) DELETED THE ADDITION M ADE BY THE ASSESSING OFFICER TO THE TOTAL INCOME OF THE ASSESSEE FOR A.Y . 2006-07 ON ACCOUNT OF THE ALLEGED ACCOMMODATION ENTRIES GIVEN TO THE MUMB AI BASED COMPANIES IN THE FORM OF COMMISSION INCOME AT THE RATE OF 2% AS WELL AS FURTHER ADDITION ON ACCOUNT OF PROTECTIVE BASIS FOR THE FOL LOWING REASONS GIVEN IN PARAGRAPH NO. 3.4 OF HIS IMPUGNED ORDER:- 3.4. CONSIDERING THE ABOVE FACTS, IT IS HELD THAT THE ADDITION MADE BY THE AO IS NOT SUPPORTED BY ANY CORROBORATIV E OR SUPPORTIVE EVIDENCE. IN SHRISHAIL NAGESHI PARE VS. - STATE OF MAHARASHTRA AIR 1985 SC 866, THE HONBLE SUPREME CO URT HAS HELD THAT, THE RETRACTED CONFESSION BY AN ACCUS ED MAY FORM THE BASIS OF CONVICTION OF THAT ACCUSED IF IT RECEIVES SOME GENERAL CORROBORATION FROM OTHER INDEPENDENT S OURCES. HOWEVER, IN THE CASE UNDER CONSIDERATION NO EVIDENC E HAS BEEN BROUGHT ON RECORD TO PROVE THAT THE TRANSACTIO N DECLARED IN THE BOOKS OF THE ASSESSEE IS NOT CORREC T. MOREOVER, EVEN IF THE RETRACTED STATEMENT IS MADE S OLE BASIS OF ADDITION, THEN ALSO, THERE WAS NO BASIS TO MAKE PROTECTIVE ADDITION IN THE HANDS OF THE ASSESSEE. HENCE, CONSI DERING ABOVE AND RESPECTFULLY FOLLOWING THE ORDER OF THE H ONBLE ITAT IN THE CASE OF M/S. ANKITA FINVEST PVT. LTD. ( ITA NO. 2009/KOL/2008, A.Y. 2005-06, DT. 30.04.2010), M/S. BANSIDHAR VYAPAAR PVT. LTD. (ITA NO. 2010/KOL OF 20 08, AY 2005-06, DT. 30.04.2010) AND M/S. BAKLIWAL FINVEST PVT. LTD. (ITA NO. 2011/KOL OF 2008, AY 2005-06,DDT. 30.04.20 10) ON IDENTICAL ADDITIONS MADE BY THE AO CONSIDERING IDEN TICAL I.T.A. NOS. 402 & 403/KOL/2011 ASSESSMENT YEARS: 2006-07 & 2007-08 M/S. S HYAM STOCKS & FINANCIERS PVT. LIMITED 4 FACTS, HE GROUND NO. 2 TO 4 TAKEN BY THE APPELLANT IS ALLOWED AND ADDITION MADE BY THE AO ON ACCOUNT OF UNEXPLAIN ED INCOME RS.7,06,00,000/- ON PROTECTIVE BASIS AND RS.14,12,000/- ON ACCOUNT OF COMMISSION IS DELETED . FOR ALMOST IDENTICAL REASONS AS GIVEN IN HIS IMPUGN ED ORDER FOR A.Y. 2006-07, THE LD. CIT(APPEALS) ALSO DELETED THE SIMI LAR ADDITION MADE BY THE ASSESSING OFFICER TO THE TOTAL INCOME OF THE AS SESSEE FOR A.Y. 2007-08 ON ACCOUNT OF THE ALLEGED ACCOMMODATION ENTRIES GIV EN TO THE MUMBAI BASED COMPANIES IN THE FORM OF COMMISSION INCOME AN D FURTHER ADDITION ON ACCOUNT OF PROTECTIVE BASIS. 4. AGGRIEVED BY THE ORDERS OF THE LD. CIT(APPEALS) GIVING RELIEF TO THE ASSESSEE FOR THE TWO YEARS UNDER CONSIDERATION, THE REVENUE HAS PREFERRED THESE 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 THESE TWO APPEALS 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 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 I.T.A. NOS. 402 & 403/KOL/2011 ASSESSMENT YEARS: 2006-07 & 2007-08 M/S. S HYAM STOCKS & FINANCIERS PVT. LIMITED 5 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 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. I.T.A. NOS. 402 & 403/KOL/2011 ASSESSMENT YEARS: 2006-07 & 2007-08 M/S. S HYAM STOCKS & FINANCIERS PVT. LIMITED 6 CIT(APPEALS) WAS NOT JUSTIFIED IN DELETING THE ADDI TIONS MADE BY THE ASSESSING OFFICER ON PROTECTIVE BASIS IN BOTH THE Y EARS UNDER 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 BOTH THE YEARS UNDER CONSIDERATION ARE ACCORDIN GLY TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 8. AS REGARDS GROUND NO. 3 RAISED IN THE REVENUES APPEAL FOR A.Y. 2007-08 RELATING TO THE ISSUE OF DISALLOWANCE UNDER SECTION 14A, IT IS OBSERVED THAT THE DISALLOWANCE UNDER SECTION 14A WA S WORKED OUT BY THE ASSESSING OFFICER BY APPLYING RULE 8D. BY RELYING O N THE ORDERS OF THE TRIBUNAL, LD. CIT(APPEALS) HELD THAT RULE 8D WAS NO T APPLICABLE TO A.Y. 2007-08 AND RESTRICTED THE DISALLOWANCE TO 1% OF TH E DIVIDEND INCOME. SINCE THIS VIEW IS TAKEN BY THE LD. CIT(APPEALS) BY FOLLOWING THE ORDERS OF THE TRIBUNAL, WE DO NOT FIND ANY JUSTIFIABLE REASON TO INTERFERE WITH THE SAME. GROUND NO. 3 OF REVENUES APPEAL FOR A.Y. 200 7-08 IS ACCORDINGLY DISMISSED. I.T.A. NOS. 402 & 403/KOL/2011 ASSESSMENT YEARS: 2006-07 & 2007-08 M/S. S HYAM STOCKS & FINANCIERS PVT. LIMITED 7 9. IN THE RESULT, THE APPEAL OF THE REVENUE FOR A.Y . 2006-07 IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES WHILE T HE APPEAL OF THE REVENUE FOR A.Y. 2007-08 IS TREATED AS PARTLY ALLOW ED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON APRIL 10, 201 9. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER VICE -PRESIDENT (KZ) KOLKATA, THE 10 TH DAY OF APRIL, 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. SHYAM STOCKS & FINANCIERS PVT. LIMITED, 39, KALI KRISHNA TAGORE STREET, KOLKATA-700 007 (3) COMMISSIONER OF INCOME TAX (APPEALS), CENTRAL- 1, KOLKATA, (4) COMMISSIONER OF INCOME TAX- , (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.