2023 (7) TMI 499 - AT - Income Tax

Addition u/s 68 - addition on protective basis in hands of assessee - substantive addition made in the hands of person advancing credit to assessee - HELD THAT - It is settled principle of law the Income Tax Act nowhere provides that parallel assessments can be made in respect of the same income on two different persons. The assessee right from the beginning of the reassessment proceedings submitted that the source of the funds from the creditors and their source (i.e. source on source) is also proved by the assessee. AO made a protective addition as unexplained money in the hand of the assessee. As in the case of M/s. Capaxo Logistics Pvt. Ltd. 2022 (4) TMI 736 - ITAT AHMEDABAD and M/s. Ambe Tradecorp Pvt. Ltd. 2022 (2) TMI 1297 - ITAT AHMEDABAD are on identical additions deleted the same observing identity, creditworthiness and genuineness of the transactions are clearly established by the assessee. AO has not pointed out any deficiency in these documentary evidences submitted by the assessee and also not brought on record any contrary evidences in the reassessment proceedings. The assessment made in the case of Smt. Hansaben Manilal Patel wherein the sale of land has been duly taxed on substantive basis. Though the said order remained unchallenged by her (Smt. Hansaben Manilal Patel allegedly a missing person) by way of appeal or revision. Whereas in the case of Shri Rameshji Thakor that the alleged substantive additions made in his hands were also deleted by Ld. CIT(A) as the source was been clearly proved by the assessee. Thus we do not find any infirmity in the order passed by the Ld. CIT(A) who has deleted the protective addition made in the hands of the assessee herein. Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of protective addition of Rs. 28.68 crores made by the AO under Section 68 of the Income Tax Act.
2. Verification of the source of funds and the requirement to prove the "source of the source."

Summary:

Issue 1: Deletion of Protective Addition of Rs. 28.68 Crores

The Revenue filed an appeal against the order of the Commissioner of Income Tax (Appeals), Gandhinagar, which deleted the protective addition of Rs. 28.68 crores made by the Assessing Officer (AO) under Section 68 of the Income Tax Act. The assessee, a Private Limited Company, had its name struck off from the Registrar of Companies as of 21-07-2011. Despite not filing a Return of Income under Section 139(1), the company received Rs. 26.68 crores in its bank account from two individuals. The AO issued a notice under Section 148 and concluded that the credit entries were accommodation entries, making the amount income of the assessee for the Assessment Year 2010-11. However, substantive additions were already made in the names of the individuals who credited the amounts, and thus, the AO made the addition in the hands of the assessee on a protective basis.

Issue 2: Verification of Source of Funds

The CIT(A) deleted the protective addition, noting that the source of funds from the individuals was verified by their respective AOs. The CIT(A) referenced previous appellate orders where similar additions were deleted, establishing the identity, creditworthiness, and genuineness of transactions. The Tribunal also noted that the Income Tax Act does not allow parallel assessments for the same income on two different persons. The assessee had provided sufficient evidence to prove the source of funds, and the AO did not present any contrary evidence. The Tribunal upheld the CIT(A)'s decision, emphasizing that the provisions of Section 68, as they stood before the amendment in 2013, did not require verification of the "source of the source."

Conclusion:

The Tribunal dismissed the Revenue's appeal, affirming that the CIT(A) correctly deleted the protective addition of Rs. 28.68 crores, as the identity, creditworthiness, and genuineness of the transactions were established, and the provisions of Section 68 were appropriately applied. The order was pronounced in the open court on 05-07-2023.