2020 (7) TMI 751 - AT - Income Tax

Rectification of mistake - Addition u/s 68 - cases relied upon were ignored to be considered - company was dealing in providing the accommodation entries - addition was raised on account of third party statement - assessee alternate plea was that the assessee was earning the commission by providing accommodation entries, the only amount of commission could be added to the assessee s taxable income and not entire amount of transaction - HELD THAT - As stated that the applicant used to issue accommodation entries on commission basis @ 0.02% to 0.10%. On the basis of the said information, the noticed u/s 153C of the Act was issued. The assessment u/s 153C was completed treating the 4% as income. Subsequently, the PCIT-4 passed the order u/s 263 of the Act and thereafter the assessment u/s 144/142(1) r.w.s. 153C of the Act was competed by assessing the 100% addition. CIT(A) upheld the disallowance. The applicant/appellant had produced the order of co-ordinate bench in the case of M/s. Chaitali Sales Agency Pvt. Ltd and Gold Star Finvest Pvt. Ltd. The said cases were related to same search in which the commission was assessed @ 0.15% of total deposits but the alternate contention was not dealing with the Hon ble ITAT, therefore, the present Miscellaneous Application has been filed. After perusing the order dated 25.03.2019, we noticed that the decisions in the case of Chaitali Sales Agency Pvt. Ltd. and Gold Star FinvestPvt. Ltd. were not dealt with. Subsequently these decisions were confirmed by the Hon ble Bombay High Court. Applicability of these cases may effect the merits of the case also. So by not dealing these cases, there is mistake apparent on record, therefore, we recall the order dated 25.03.2019. Registry is directed to refix the case in due course of time. These Miscellaneous Applications are hereby also allowed accordingly.

Summary

Issues:
1. Disposal of Miscellaneous Applications related to ITA. Nos. 7105/M/2017 to 7108/M/2017 for A.Ys. 2006-07 to 2009-10.
2. Addition of income under section 68 of the Income Tax Act, 1961 based on accommodation entries.
3. Appeal regarding addition of ?2,34,52,668/- under section 68 for A.Y. 2006-07.
4. Consideration of decisions in cases of Chaitali Sales Agency Pvt. Ltd. and Gold Star Finvest Pvt. Ltd.
5. Procedural issue of delayed pronouncement of orders due to Covid-19 lockdown.

Issue 1: Disposal of Miscellaneous Applications
The Miscellaneous Applications related to ITA. Nos. 7105/M/2017 to 7108/M/2017 for A.Ys. 2006-07 to 2009-10 were disposed of by the Hon'ble ITAT Mumbai 'F' Bench. The applications were filed in connection with the order passed for A.Y. 2006-07, and the decisions in the cases of Chaitali Sales Agency Pvt. Ltd. and Gold Star Finvest Pvt. Ltd. were not initially considered. The order dated 25.03.2019 was recalled due to the mistake apparent on record, and the case was directed to be refixed by the Registry.

Issue 2: Addition of Income under Section 68
The appeal pertained to the addition of ?2,34,52,668/- under section 68 of the Income Tax Act, 1961, based on accommodation entries. The appellant argued that only the commission earned should be added to taxable income, not the entire transaction amount. The assessment was completed treating 4% as income, which was later revised to 100% addition. The CIT(A) upheld the disallowance, leading to the filing of the Miscellaneous Application.

Issue 3: Appeal for A.Y. 2006-07
The appeal for A.Y. 2006-07 was related to the addition of income under section 68. The appellant contended that the commission earned should be the taxable amount, not the full transaction value. The case involved the issuance of accommodation entries and the assessment under section 153C of the Act.

Issue 4: Consideration of Previous Decisions
The decisions in the cases of Chaitali Sales Agency Pvt. Ltd. and Gold Star Finvest Pvt. Ltd. were not initially addressed in the order dated 25.03.2019. These cases were confirmed by the Hon'ble Bombay High Court, and their applicability could impact the merits of the present case. Therefore, the order was recalled to consider these decisions, as they were relevant to the case.

Issue 5: Procedural Delay due to Covid-19 Lockdown
The delay in pronouncing the order was attributed to the Covid-19 lockdown situation, which severely impacted judicial functioning. The lockdown restrictions and subsequent extensions led to disruptions in the functioning of the ITAT Mumbai. The exceptional circumstances caused by the pandemic and the subsequent orders extending limitations justified the delay in pronouncing the order. The Miscellaneous Applications filed by the assessee were allowed due to these exceptional circumstances.

In conclusion, the judgment addressed various issues related to the disposal of Miscellaneous Applications, the addition of income under section 68, consideration of previous decisions, and the procedural delay caused by the Covid-19 lockdown. The order was recalled to consider relevant decisions, and the delay in pronouncing the order was justified due to the unprecedented circumstances caused by the pandemic.