D.C.I.T Cir - VII,kolkata, Kolkata V. M/s Kanodia Vyapaar Pvt Ltd, Kolkata

ITA 771/KOL/2013

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8551 (ITAT-KOLKATA)
• Duration Of Justice: 6 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 10-04-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A K NAYAK
• Keywords: Accommodation entries
• Section: 143(3); 131

Judgement Text

I.T.A. NO. 771/KOL/2013 ASSESSMENT YEAR: 2008-2009 M/S. KANODIA VYAPAAR 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. 771/KOL/2013 ASSESSMENT YEAR: 2008-2009 DEPUTY COMMISSIONER OF INCOME TAX,...... .........APPELLANT CENTRAL CIRCLE-VII, KOLKATA, AAYAKAR BHAWAN POORVA, 110, SHANTI PALLY, KOLKATA-700 107 -VS.- M/S. KANODIA VYAPAAR PVT. LIMITED,................. ............................RESPONDENT 51, NALINI SETH ROAD, KOLKATA-700 007 [PAN: AABCK 0756 F] APPEARANCES BY: SHRI A.K. NAYAK, CIT (D.R.), FOR THE APPELLANT SHRI SUBHAS AGARWAL, ADVOCATE, FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : MARCH 26, 2019 DATE OF PRONOUNCING THE ORDER : APRIL 10, 2019 O R D E R PER SHRI P.M. JAGTAP, VICE-PRESIDENT (KOLKATA ZONE) :- THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS), CENTR AL-I, KOLKATA DATED 31.01.2013 FOR A.Y. 2008-09. 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 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 SURESH SETHI WAS RECORDED UNDER SECTION 131 BY THE DDIT(INVESTIGATION), I.T.A. NO. 771/KOL/2013 ASSESSMENT YEAR: 2008-2009 M/S. KANODIA VYAPAAR PVT. LIMITED 2 KOLKATA ON 09.04.2007. IN THE SAID STATEMENT GIVEN ON OATH, SHRI SURESH SETHI ACCEPTED THAT HE HAD GOT CASH OF EQUIVALENT A MOUNT FROM THE MUMBAI BASED COMPANIES BELONGING TO SHRI KETAN PARE KH GROUP 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 SURESH SETHI 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 SURESH SETHI, 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. 2008-09 AGGREGAT ED TO RS.7,93,36,665/- , HE ADDED THE COMMISSION INCOME @ 2% AMOUNTING TO RS.15,86,733/- TO THE TOTAL INCOME OF THE ASSESSEE IN THE ASSESSMENT COMPLETED FOR A.Y. 2008-09 UNDER SECTION 143(3) VIDE AN ORDER DATED 31 .12.2010. IN THE ASSESSMENT SO MADE, HE ALSO MADE AN ADDITION OF RS. 7,93,36,665/- 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. 3. AGAINST THE ORDER PASSED BY THE ASSESSING OFFICE R UNDER SECTION 143(3) FOR A.Y. 2008-09, APPEAL WAS PREFERRED BY TH E ASSESEE-COMPANY BEFORE THE LD. CIT(APPEALS) AND AFTER CONSIDERING T HE SUBMISSIONS MADE BY THE ASSESSEE AS WELL AS THE MATERIAL AVAILABLE O N RECORD, THE LD. CIT(APPEALS) DELETED THE ADDITION MADE BY THE ASSES SING OFFICER TO THE I.T.A. NO. 771/KOL/2013 ASSESSMENT YEAR: 2008-2009 M/S. KANODIA VYAPAAR PVT. LIMITED 3 TOTAL INCOME OF THE ASSESSEE FOR A.Y. 2008-09 ON AC COUNT OF THE ALLEGED ACCOMMODATION ENTRIES GIVEN TO THE MUMBAI BASED COM PANIES IN THE FORM OF COMMISSION INCOME AT THE RATE OF 2% AS WELL AS F URTHER ADDITION ON ACCOUNT OF PROTECTIVE BASIS FOR THE FOLLOWING REASO NS GIVEN IN PARAGRAPH NO. 8 OF HIS IMPUGNED ORDER:- 8. I HAVE PERUSED THE RELEVANT ORDERS. I HAVE ALSO CONSIDERED THE SUBMISSIONS MADE ON BEHALF OF THE APPELLANT. I FIND THAT THE ISSUES INVOLVED IN THIS APPEAL ARE COVERED BY T HE ORDERS OF MY LEARNED PREDECESSOR IN APPELLANTS OWN CASE A S WELL AS BY THOSE OF THE HONBLE JURISDICTIONAL ITAT IN SIMI LAR CASES. RESPECTFULLY FOLLOWING THE DECISIONS, IT IS TO BE H ELD 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 NOR ON FACTS. THE ADDITION OF RS.7,93,36,665/- AND RS.15,86,733/- IS DIRECTED TO BE DELETED. GROUNDS NO. 2, 3 & 4 ARE ALLOWED. IN GROUND NO. 1, THE APPELLANT HAS CHALLENGED THE LEGAL VALIDITY OF THE ASSESSMENT ORDER. AS THE APPEAL HAS ALREADY BEEN ALLOWED ON ME RIT, THESE LEGAL GROUNDS ARE NOT ADJUDICATED. GROUND NO. 5 IS GENERAL IN NATURE. 4. AGGRIEVED BY THE ORDER OF THE LD. CIT(APPEALS) G IVING RELIEF TO THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION, THE REVE NUE HAS PREFERRED THIS APPEAL 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 ISSU ES INVOLVED IN THIS APPEAL RELATE TO THE DELETION BY THE LD. CIT(APPEAL S) OF THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ALLEGED ACCO MMODATION ENTRIES GIVEN TO THE MUMBAI BASED COMPANIES ON PROTECTIVE B ASIS AND THE DELETION BY THE LD. CIT(APPEALS) OF THE ADDITION MA DE BY THE ASSESSING OFFICER ON ACCOUNT OF COMMISSION INCOME ALLEGEDLY R ECEIVED BY THE ASSESSEE FOR GIVING ACCOMMODATION ENTRIES. IT IS OB SERVED THAT THE SIMILAR ISSUES WERE INVOLVED IN SOME OTHER CASES AND ALL TH ESE CASES WERE ADJOURNED IN THE PAST AND ALSO BLOCKED FOR SOME PER IOD FOR GETTING THE INFORMATION ABOUT THE STATUS OR OUTCOME OF THE CASE S WHERE THE SIMILAR AMOUNTS WERE ADDED ON SUBSTANTIVE BASIS. INSPITE OF SUFFICIENT TIME GIVEN TO BOTH THE PARTIES, THEY HAVE FAILED TO FURNISH TH E SAID INFORMATION. IT IS WELL SETTLED THAT PROTECTIVE ASSESSMENT IS PERMISSI BLE IN LAW AND IN CASE A I.T.A. NO. 771/KOL/2013 ASSESSMENT YEAR: 2008-2009 M/S. KANODIA VYAPAAR PVT. LIMITED 4 DOUBT OR AMBIGUITY ABOUT REAL ENTITY IN WHOSE HANDS A PARTICULAR INCOME IS TO BE ASSESSED, THE ASSESSING AUTHORITY IS ENTIT LED TO HAVE RECOURSE TO MAKE A PROTECTIVE ASSESSMENT. AS HELD BY THE HONBL E SUPREME COURT IN THE CASE OF LALJI HARIDAS VS.- ITO (43 ITR 387), T HE 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 A T THE STAGE OF ASSESSMENT. PROTECTIVE ASSESSMENT BECOMES REDUNDANT WHEN THE SUBSTANTIVE ASSESSMENT BECOMES FINAL AND IF THE SUB STANTIVE ASSESSMENT FAILS, IT IS PROTECTIVE ASSESSMENT WHICH IS TO BE T REATED AS SUBSTANTIVE. KEEPING IN VIEW THIS COROLLARY BETWEEN THE SUBSTANT IVE ASSESSMENT AND PROTECTIVE ASSESSMENT, AN APPEAL AGAINST THE PROTEC TIVE ASSESSMENT SHOULD ORDINARILY AWAIT THE OUTCOME OF THE SUBSTANT IVE 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 PROTECTIVE ASSE SSMENT WAS DISPOSED OF BY THE APPELLATE AUTHORITY I.E. TRIBUNAL VACATING T HE PROTECTIVE ASSESSMENT WITHOUT WAITING FOR THE FINAL OUTCOME OF THE PROCEEDINGS ARISING FROM THE SUBSTANTIVE ASSESSMENT, WHICH MATT ER WAS PENDING IN THE HONBLE SUPREME COURT. THE HONBLE GUJARAT HIGH COU RT HELD THAT THE TRIBUNAL WAS NOT JUSTIFIED IN PROCEEDING WITH THE M ATTER AND IN DISPOSING OF IT INSTEAD OF BLOCKING IT TILL THE DISPOSAL OF T HE MATTER PENDING IN THE HONBLE SUPREME COURT IN ORDER TO BRING IT INCONFOR MITY WITH THE VIEW OF THE HONBLE SUPREME COURT. THE HONBLE GUJARAT HIGH COURT ACCORDINGLY DIRECTED THE TRIBUNAL TO KEEP THE MATTER ALIVE AND PENDING AWAITING THE DECISION OF THE HONBLE SUPREME COURT IN THE PROCEE DINGS 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 APPEAL ARISING FROM THE PROTECTIVE ASSESSMENTS BY H IS IMPUGNED ORDER I.T.A. NO. 771/KOL/2013 ASSESSMENT YEAR: 2008-2009 M/S. KANODIA VYAPAAR PVT. LIMITED 5 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 TION MADE BY THE ASSESSING OFFICER ON PROTECTIVE BASIS IN THE YEAR U NDER CONSIDERATION WITHOUT AWAITING FOR THE FINAL OUTCOME OF THE PROCE EDINGS ARISING FROM THIS SUBSTANTIVE ASSESSMENT. WE, THEREFORE, SET ASI DE 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 TH E PROCEEDINGS ARISING FROM THE SUBSTANTIVE ASSESSMENT. 7. AS REGARDS THE ISSUE RELATING TO THE ADDITION MA DE 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 THE YEAR UNDER CONSIDERATION ARE ACCORDINGLY TR EATED AS ALLOWED FOR STATISTICAL PURPOSES. 8. THE OTHER ISSUES RAISED THE REVENUE IN ITS APPEA L ARE GENERAL IN NATURE AND DO NOT REQUIRE ANY ADJUDICATION. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS TREA TED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON APRIL 10, 20 19. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER VICE -PRESIDENT (KZ) KOLKATA, THE 10 TH DAY OF APRIL, 2019 I.T.A. NO. 771/KOL/2013 ASSESSMENT YEAR: 2008-2009 M/S. KANODIA VYAPAAR PVT. LIMITED 6 COPIES TO : (1) DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-VII, KOLKATA, AAYAKAR BHAWAN POORVA, 110, SHANTI PALLY, KOLKATA-700 107 (2) M/S. KANODIA VYAPAAR PVT. LIMITED, 51, NALINI SETH ROAD, 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.