Income Tax Appellate Tribunal - Kolkata
Dcit, Cc-X, Kolkata, Kolkata vs M/S Manasi Exim (P) Ltd., Kolkata on 17 July, 2019
I.T.A. No. 787/KOL/2014
Assessment Year: 2006-2007
M/s. Manasi Exim (P) Limited
IN THE INCOME TAX APPELLATE TRIBUNAL,
KOLKATA 'B' BENCH, KOLKATA
Before Shri P.M. Jagtap, Vice-President (KZ)
and Shri A.T. Varkey, Judicial Member
I.T .A. Nos. 787/KOL /2014
Assessment Year: 2006-2007
Deputy Commissioner of Income Tax,............................................... .Appellant
Central Ci rcle-X, Kolkata,
Aayakar Bhawan Po orva,
110, Shanti Pally, Ko lkata-700 107
-Vs.-
M/s. Manasi Exim (P) Limi ted,.................. .................................Respondent
2B, Grant Lane, Ko lk ata-700 012
[PAN: AAECM 3160 C]
Appearances by:
Shri Radhey Shyam, C IT (D.R.), fo r th e Appellant
N o n e, for the Respondent
Date of concluding th e hearing : Ju ly 11, 2019
Date of pronouncing the order : Ju ly 17, 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), Central-I, Kolkata dated 14.01.2014 for A.Y. 2006-07.
2. The assessee in the present case is a Company. The investigation carried out by the Department of Income Tax (Investigation), Kolkata 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 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 Ajay Agarwal was recorded under section 131 by the DDIT(Investigation), 1 I.T.A. No. 787/KOL/2014 Assessment Year: 2006-2007 M/s. Manasi Exim (P) Limited Kolkata on 15.12.2006. In the said statement given on oath, Shri Ajay Agarwal accepted that he had got cash of equivalent amount from the Mumbai based Companies belonging to Shri Ketan Parekh Group and after depositing the said cash into the Bank account of the assessee-company, cheques were issued to the said Companies. He also furnished a list of cheques so issued against cash that had been received by him. Although Shri Ajay Agarwal subsequently filed an affidavit retracting his statement, the 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 the Assessing Officer, this factual position substantiated the statement of Shri Ajay Agarwal, 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. 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 entries so given during the previous year relevant to A.Y. 2006-07 aggregated to Rs.33,66,00,000/-, he added the commission income @ 2% amounting to Rs.67,32,000/- to the total income of the assessee in the assessment completed for A.Y. 2006-07 under section 143(3) vide an order date d 31.12.2008. In the assessment so made, he also made an addition of Rs.33,66,00,000/- 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 the hands of the said companies.
3. Against the order passed by the Assessing Officer under section 143(3) for A.Y. 2006-07, appeal was preferred by the assesee-company before the ld. CIT(Appeals) and after considering the submissions made by the assessee as well as the material available on record, the ld. CIT(Appeals) deleted the addition made by the Assessing Officer to the 2 I.T.A. No. 787/KOL/2014 Assessment Year: 2006-2007 M/s. Manasi Exim (P) Limited total income of the assessee for A.Y. 2006-07 on account of the alleged accommodation entries given to the Mumbai 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 following reasons given in paragraph no. 6 of his impugned order:-
"6. I h ave perused the relevant orders and considered the material placed o n record. I find from the appeal folder that in course of the appell ate proceedings, my learned predecesso r tried t o ascertain abo ut the cases where subst antive additions were made corresponding to the protect ive addit ion in the present case; and also , about the fate of the appeals in those cases. The Ld C IT(A) called for the report vide his letter dated 23-07-2009 wh ich was followed by reminders dated 17-0 8-2010, 13-07-2011, 30-10-2013 and 19- 11-2013. However, t hough a substantial period of 4 & 1/2 years has el apsed, no thing h as been heard in this regard from the AO. In this factual background; given t he facts of the case and the findings of t he AO in his assessment order; and also , the decisio ns of the Hon'ble Benches of the jurisdictional ITAT in similar cases invo lving identical facts and circumst ances, the present appeal is now being decided on the basi s of th e material avail able on reco rd. I find that th e AO h as made the addit ions o n the basis of the admission made by th e directo r before. the DDIT (Inv) which was l ater retracted. It is a settled legal propo sition th at a mere admission which is l ater ret racted and which is not corroborated o r support ed by any independent material cannot be made th e basis for addition. Once the admissio n made by the directo r was retracted, the onus was on the AO to bring po sitive mat erial on record which could corroborate o r support the admission. But , in the present case, no such material has been brought on record by the AO. On the contrary, the AO h as simpl y reject ed the ret raction without assigning any reason. T he AO h as not even discussed in his assessment o rder as to why the ret raction made by the directo r th rough a sworn affidavit was not accept able to him. Mo reover, the AO has brought on reco rd no independent material which could possibly corroborate o r support the admissio n made earlier by t he directo r of the assessee company. In this fact ual background, I am of the considered view th at the AO h as erred in law as well as on facts in resting his assessment on the admissio n of the directo r which was later ret racted and which was not corrobo rated o r supported by any independent material on record. I also find fro m the assessment order th at the addition on acco unt of unexplained cash was made by the AO on protect ive basis. The AO h as h imself given the finding in h is assessment order th at the assessee co mpany h ad issued cheques by t aking equal amount of cash from various companies; and that , such cash was assessable as unexplained 3 I.T.A. No. 787/KOL/2014 Assessment Year: 2006-2007 M/s. Manasi Exim (P) Limited income in the h ands of those companies. The AO h as then added the same cash on protective basis as unexplained income of th e assessee company witho ut assigning any concrete reasons. I find no' basis o r justification for the AO to consider on protective basis such cash as unexplained inco me of the assessee co mpany which he himself h eld was assessable as unexplained inco me in the h ands of the various companies who had allegedl y purchased accommo dation ent ries. The addit ion o n protective basis on account o f unexplai ned cash by th e AO cont radict s his own findings t hat such cash was assessable as unexpl ained income in the h ands of the various companies who had allegedly purchased accommodat ion entries. Abo ve all, identical additio ns made by the AO in simil ar cases were deleted by my learned predecesso r as well as by the Hon.ble Benches of the jurisdictio nal ITAT. In other words, similar addit ions based on the admission of th e directo r of the company which was lat er retracted w as deleted by the jurisdictional ITAT in the assessment of such company. In these cases, th e directo r of t he co mpany made admission regarding pro viding accommo dation ent ry i n lieu of cash which was later ret ract ed. Though th e AO made simil ar addit ions on account of unexplained cash and commission income in the case of the company, the same was deleted by the Ld C IT(A) as well as by the jurisdictio nal ITAT . The issues in th e' present appeal are thus covered by the orde rs of the Hon'ble Benches of t he jurisdictio nal ITAT wherein simil ar addit ions, made under ident ical fact s and circumst ances, were deleted. Respectfull y following the decisio ns of the jurisdictional ITAT , it is to, be held that the additions made by the AO on account of unexplained cash and commission inco me is neither sust ainabl e in law nor on fact s. The addit ions of Rs.33 ,66,00,000/- and Rs.67,32,000/- is directed to be deleted. Ground No. 1 & 2 are allowed".
4. Aggrieved by the order of the ld. CIT(Appeals) giving relief to the assessee for the year under consideration, the Revenue has preferred this appeal before the Tribunal.
5. We have heard the arguments of ld. D.R. and also perused the relevant material available on record. The issues raised in Grounds No. 1 & 2 of this appeal relate to the deletion by the ld. CIT(Appeals) of the addition made by the Assessing Officer on account of alleged accommodation entries given to the Mumbai based Companies on protective basis and the deletion by the ld. CIT(Appeals) of the addition made by the Assessing Officer on account of commission income allegedly 4 I.T.A. No. 787/KOL/2014 Assessment Year: 2006-2007 M/s. Manasi Exim (P) Limited received by the assessee for giving accommodation 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. Inspite 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 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 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 assessment was disposed of 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 of 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 accordingly directed the Tribunal to keep the matter alive and 5 I.T.A. No. 787/KOL/2014 Assessment Year: 2006-2007 M/s. Manasi Exim (P) Limited pending awaiting the decision of the Hon'ble Supreme Court in the proceedings arising from the substantive assessment.
6. In the present case, the ld. CIT(Appeals) did not await the outcome of the proceedings arising from the substantive assessment and since the said information was not forthcoming even after a considerable period from the concerned assessing officer, he proceeded to dispose of the appeal arising from the protective assessment by his impugned order and deleted the addition made on protective basis without awaiting the final outcome of the proceedings arising from the substantive assessment. Keeping in view the decision of the Hon'ble 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 addition made by the Assessing Officer on protective basis in the year under consideration without awaiting for the final outcome of the proceedings arising from this substantive assessment. We, therefore, set aside 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 the proceedings arising from the substantive assessment.
7. As regards the issue relating to the addition made on account of commission income allegedly received by the assessee for giving accommodation entries, we find that this issue is consequential to the issue relating to the addition made on protective basis on account of accommodation entries allegedly given by the assessee-company to the Mumbai based companies. Since the said issue is remitted back by us to the ld. CIT(Appeals), we also remit the consequential issue relating to addition on account of commission income back to the ld. CIT(Appeals) for deciding the same afresh. Grounds No. 1 & 2 of the Revenue's appeals for the year under consideration are accordingly treated as allowed for statistical purposes.
6I.T.A. No. 787/KOL/2014 Assessment Year: 2006-2007 M/s. Manasi Exim (P) Limited
8. As regards the remaining issue raised in Ground No. 3 of the Revenue's appeal for A.Y. 2006-07 relating to deletion by the ld. CIT(Appeals) of the addition of Rs.5,08,55,000/- made by the Assessing Officer on account of cash deposits found to be made in the Bank account of the assessee, it is observed that the ld. CIT(Appeals) has deleted the said addition for the following reasons given in paragraph no. 8 of his impugned order:-
"8. I have considered the assessment order and the remand report of the A.O. It was contended before me that the cash deposits in the bank account was verifiable from the cash book of the assessee company. It was further contended that the cash balances available in the cash book were due to cash withdrawals made earlier from the bank account (which was verifiable from the bank statement) and. the sale proceeds of shares (which was duly supported by sales invoices). The AO has admitted in his remand report that the cash deposits in the bank account were verifiable from the cash book which was produced before him in course of the remand proceedings. The AO has also admitted that the sale proceeds of shares reflected in the cash book are duly supported by sales invoices which were also produced before him. The AO has found no defect in the cash book of the assessee company. The AO has not pointed out any receipts recorded in the cash book whose source was not explained. The remand report of the AO contains no adverse finding or remark about the cash book. In this factual background, the only conclusion that can possibly be drawn is that the cash deposits in the bank account are explained with reference to the cash book of the assessee company. The AO has noted in his remand report that apart from the bank statement, cash book and the sales invoices, the assessee could produce no other evidence for verification. But then, it has not been clarified by the AO as to what more evidence he required the assessee to produce for verification. I agree with the Ld AR that there is no adverse finding in the remand report of the AO. The AO has categorically admitted that the bank statement, cash book and sales invoices were produced before him and that the cash deposits in the bank account were verifiable from the cash book. I am therefore of the considered view that such cash deposits in the bank account which were duly verifiable from the 7 I.T.A. No. 787/KOL/2014 Assessment Year: 2006-2007 M/s. Manasi Exim (P) Limited cash book of the assessee company could not be treated as its undisclosed income. The addition of Rs.5,08,55,000/- is deleted. Ground no 3 is allowed".
9. It is observed that the cash deposits found to be made in the Bank account of the assessee aggregating to Rs.5,08,55,000/- were treated by the Assessing Officer as unexplained and an addition to that extent was made by him to the total income of the assessee. During the course of appellate proceedings before the ld. CIT(Appeals), it was claimed by the assessee that the said deposits in Bank account were made from the cash balances available in the cash book and this factual position was verifiable from the cash book regularly maintained by the assessee. In order to verify this claim of the assessee, the matter was remanded by the ld. CIT(Appeals) to the Assessing Officer. During the course of remand proceedings before the Assessing Officer, the assessee-company produced its Bank account, cash book as well as the concerned sales invoices and from verification of the same, the Assessing Officer admitted in his remand report submitted to the ld. CIT(Appeals) that the cash deposits in the Bank account were verifiable from the cash book produced by the assessee. He also admitted that the availability of cash for deposits made in the Bank account as reflected in the cash book was duly supported by the relevant sales involves as well as evidence showing allotment of shares. As emphasized by the ld. CIT(Appeals) in his impugned order, there was no adverse findings whatsoever given by the Assessing Officer in his remand report regarding the availability of cash with the assessee for the deposits to be made in Bank account. At the time of hearing before us, the ld. D.R. has also not brought anything on record to rebut or controvert this position. We, therefore, find no justifiable reason to interfere with the impugned order of the ld. CIT(Appeals) deleting the addition of Rs.5,08,55,000/- made by the Assessing Officer on account of the alleged unexplained cash deposits found to be made in the Bank account of the assessee and upholding the same, we dismiss Ground No. 3 of the Revenue's appeal.
8I.T.A. No. 787/KOL/2014 Assessment Year: 2006-2007 M/s. Manasi Exim (P) Limited
10. In the result, the appeal of the Revenue is treated as partly allowed for statistical purposes.
Order pronounced in the open Court on July 17, 2019.
Sd/- Sd/-
(A.T. Varkey) (P.M. Jagtap)
Judicial Member Vice-President (KZ)
Kolkata, the 17 t h day of July, 2019
Copies to : (1) Deputy Commissioner of Income Tax,
Central Ci rcle-X, Kolkata,
Aayakar Bhawan Po orva,
110, Shanti Pally, Ko lkata-700 107
(2) M/s. Manasi Exim (P) Limi ted,
2B, Grant Lane, Ko lk ata-700 012
(3) Commissioner of Inco me T ax (Appeals), Central -1, Kolkat a,
(4) Commissio ner of Income Tax- ,
(5) The Depart ment al Represent ative
(6) Guard File
By order
Assistant Registrar,
Income Tax Appellate Tribunal,
Kolkata Benches, Kolkata
Laha/Sr. P.S.
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