2023 (4) TMI 1265 - AT - Income Tax

Addition u/s 69 - unexplained investments made in the JP Minda Group of companies - AO made an addition on protective basis in the hands of the assessee company and the addition has been made on substantive basis in JP Minda Group Companies - HELD THAT - Since, the substantive additions have been deleted on merits and no observation has been given that the substantive additions were deleted owing to the fact that the addition made on protective basis in the hands of the assessee company and since the assessee company has not been held to be the right assessee wherein, the substantive additions were supposed to be made by any of the authorities viz. CIT(A), co-ordinate bench ITAT, Hon ble High Court, we hereby affirm the order of the CIT(A) Since, the appeal of the Revenue is dismissed on the core issue of taxability of the amount on the protective basis, any adjudication of the technical issues raised by the assessee under Rule 27 of ITAT Rules, 1963 becomes academic in nature.

Summary

Issues involved:
The issues involved in the judgment are:
1. Whether the deletion of the addition made under section 69 of the I.T. Act, 1961 on account of unexplained investment in JP Minda Group Companies by the assessee company was justified.
2. Whether the assessee satisfactorily explained the source of investments made by the company and whether the company was a paper/shell company not engaged in real business.

Issue 1: Addition under section 69 of the I.T. Act, 1961
The Assessing Officer (AO) made an addition on a protective basis in the hands of the assessee company, which was also made on a substantive basis in JP Minda Group Companies. The ld CIT(A) deleted the protective addition, leading to the revenue filing an appeal. The revenue contended that once the substantive additions were deleted, the addition on a protective basis should stand. However, the ld AR argued that the deletion was based on the adjudication in a similar case involving Jay FE Cylinders Ltd, where the substantive addition was also deleted and confirmed by the ITAT and the High Court. The Tribunal affirmed the ld CIT(A)'s order as the substantive additions were deleted on merits and no authority held the assessee company liable for the substantive additions.

Issue 2: Explanation of source of investments and nature of the company
The revenue argued that the ld CIT(A) erred in deleting the addition without the assessee satisfactorily explaining the source of investments and despite findings that the company was a paper/shell company not engaged in real business. The revenue's contention was that the ld CIT(A) did not consider the facts and reasoning in the AO's assessment order and merely followed the decision in another group company. The revenue emphasized that the protective assessment should stand if the substantive additions were deleted. However, the Tribunal upheld the ld CIT(A)'s decision, stating that since the substantive additions were deleted on merits and no authority held the assessee company liable, the deletion of the protective addition was justified.

Conclusion:
The Tribunal dismissed the revenue's appeals as the substantive additions were deleted on merits, and no authority held the assessee company liable for the additions. The Tribunal affirmed the ld CIT(A)'s decision to delete the protective addition, considering the adjudication in a similar case and the lack of liability on the part of the assessee company. The technical issues raised by the assessee under Rule 27 of ITAT Rules were not addressed as they became academic in light of the core issue being resolved.