2019 (4) TMI 606 - AT - Income Tax

Addition made on protective basis - proceedings arising from the substantive assessment - unexplained income of the assessee company - accommodation entries receipt - CIT-A deleted the addition - HELD THAT - Relying in M/S. TOPGRAIN MANAGEMENT PVT. LIMITED 2019 (2) TMI 708 - ITAT KOLKATA we 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. Thus, grounds raised by the Revenue are allowed for statistical purposes. also see CIT vs.- Surendra Gulab Chand Modi 1981 (3) TMI 21 - GUJARAT HIGH COURT

Issues Involved:
1. Deletion of additions made on account of alleged accommodation entries given to Mumbai-based companies on a protective basis.
2. Deletion of additions made on account of commission income allegedly received by the assessee for giving accommodation entries.
3. Deletion of additions made on account of unexplained cash deposits found in the bank accounts of the assessee.

Issue-wise Detailed Analysis:

1. Deletion of Additions on Protective Basis:
The Revenue's appeal challenges the deletion of additions made by the Assessing Officer (AO) on a protective basis for the assessment years (AYs) 2005-06, 2006-07, and 2007-08. The AO had added substantial amounts on protective grounds, asserting that the unexplained income was assessable on a substantive basis in the hands of various Mumbai-based companies. The CIT(A) deleted these protective additions, citing the lack of positive material corroborating the initial admission by the director of the assessee-company, which was later retracted. The Tribunal noted that protective assessments should await the outcome of substantive assessments, as per the legal precedent set by the Hon'ble Supreme Court in Lalji Haridas vs. ITO and the Hon'ble Gujarat High Court in CIT vs. Surendra Gulab Chand Modi. Consequently, the Tribunal set aside the CIT(A)'s order and remitted the matter back to the CIT(A) to keep it pending until the outcome of the substantive assessments.

2. Deletion of Additions on Account of Commission Income:
The AO had made additions for commission income allegedly received by the assessee for providing accommodation entries. These additions were consequential to the protective additions discussed above. The CIT(A) deleted these additions, stating that the AO failed to bring any independent material to corroborate the initial admission by the director, which was later retracted. The Tribunal, recognizing the consequential nature of this issue, remitted it back to the CIT(A) for a fresh decision, aligning it with the outcome of the substantive assessment proceedings.

3. Deletion of Additions on Account of Unexplained Cash Deposits:
For AYs 2005-06 and 2006-07, the AO had made additions for unexplained cash deposits found in the bank accounts of the assessee. The CIT(A) deleted these additions, noting that the cash deposits were verifiable from the cash book, which was supported by bank statements and sales invoices. The AO admitted in remand reports that these documents were produced and found no defects in the cash book. The Tribunal upheld the CIT(A)'s decision, agreeing that the cash deposits were adequately explained and could not be treated as undisclosed income.

Conclusion:
The Tribunal allowed the Revenue's appeal for statistical purposes, setting aside the CIT(A)'s order on protective additions and commission income, and remitting these issues back to the CIT(A) for keeping them pending until the outcome of substantive assessments. The Tribunal upheld the CIT(A)'s decision regarding the deletion of additions for unexplained cash deposits. The order was pronounced in the open court on 26.03.2019.

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