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TMI Blog2020 (8) TMI 913X X X X Extracts X X X X X X X X Extracts X X X X ..... income of Shree Global Tradefin Ltd. on substantive basis on the ground that source of money was not proved. Pertinent to note that in the appellate proceeding, the Tribunal deleted the addition in the case of Shree Global Tradefin Ltd.[ 2018 (10) TMI 1974 - ITAT MUMBAI] and there is no finding by the Coordinate Bench that the said amount of Rs. 43.50 Cr belongs to the present assessee. We note from the perusal of the order of coordinate bench that the addition in the case of M/S Shree Global Tradefin Ltd. has been deleted on merit. Thus, the coordinate bench has not given any finding that the money belongs to the assessee. The protective addition is always made whenever there is a doubt about the correct entity or correct assessment year. Thus , where there is a doubt as to whom the income belongs to, the addition is made in the hands of two persons, i.e. on substantive basis in the hands of one person and on protective basis in the hands of the other person. The protective addition would become substantive, only and only if substantive addition is deleted by the appellate authority on the ground that the income belonged to the person in whose hands protective addition has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 02.2011 declaring income of Rs. 14,15,00,000/- and the assessment was framed u/s 143(3) r.w.s 153A of the Act on 26.12.2011 determining the total income at Rs. 14,15,00,000/-. Thereafter, the case of the assessee was re-opened u/s 147 r.w.s 148 of the Act after the AO received information from investigation wing of the department thattheassessee has invested Rs. 43,50,00,000/- with M/s Shree Global Tradefin Ltd., as share application money. The said reopening was consequent to a survey conducted on Llyods Group of companies on 19.12.2012 and various information/details coming to the notice of the survey team. A notice u/s 148 of the Act dated 21.03.2014 was served on the assessee on 28.03.2014. The assessee filed a letter dated 02.04.2014 requesting the AO to treat the return filed u/s 153A on 26.02.2011 as return in compliance to notice u/s 148 of the Act. During the course of the assessment proceeding, the AO observed that during the year under consideration, the assessee has given Rs. 43,50,00,000/- by way of advanceto M/s Shree Global Tradefin Ltd. which was subsequently converted into share capital. The source of such advance was examined during the course of survey and it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is extracted below: 5.6.3 It is also pertinent to mention here the flow of funds as explained in the survey report which is as follows: Money from different proprietorship concerns were transferred to some of the 53 investor companies. These 53 investor companies further invested as share application money into the 14 companies of the Jogiagroup including the assessee who further invested into the Shree Global Trade fin Ltd as share application money. On verification of the bank details of the assessee it is seen that the assessee has transferred or withdrawn from its bank account immediately after deposits were made into its account. Immediate withdrawal of money after deposits almost each and every time, speaks of the sinister motives of the assessee whether it is for not coming into the eyes of the regulatory authorities or to not show funds with unexplainable sources in its bank accounts, etc. However no details have been mentioned in the survey report regarding the source of funds in those proprietorship concerns or of some of the assessee 's investor companies. Also in absence of any details filed by the assessee regarding the source of funds of these concerns or how ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee Global Tradefin Ltd. simultaneously, in whose hand the same amount was added by the Assessing Officer on the ground that the ultimate destination of money has not been established as genuine. The CIT (A) gave a finding that the conclusion of the Assessing Officer to the effect that the source of money has not been established is correct. According to the CIT (A), the amount received from 53 companies were not genuine. However, the CIT (A) was of the view that the said amount is to be taxed in the hands of the entity who is the ultimate destination of the money. Consequently, the amount is to be taxed in the hands of Shree Global Tradefin Ltd. The CIT (A) was of the view that the present assessee being the conduit, has transferred the money from various entities to Shree Global Tradefin Ltd. and, hence, the addition cannot be made in the hands of the present assessee. The finding of the CIT (A) in para 8.29 on page 191 is reproduced hereinbelow: 8.29 The AR has also contended that similar addition u/s. 68 is made in the cases of Shree Global Tradefin Ltd ('SGTL) whose appeals are pending before me. While the amounts received through these entities are not genuine and c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even by going on the basis of the reasonings of the Assessing Officer, the order of CIT (A) is bound to be upheld. It is further submitted that protective addition is always made whenever there is a doubt about the correct entity or correct assessment year. In a case where there is a doubt as to whom the income belongs to, then addition is made in the hands of two persons, i.e. on substantive basis in the hands of one person and on protective basis in the hands of the other person. The protective addition would become substantive, only and only if substantive addition is deleted by the appellate authority on the ground that the income belonged to the person in whose hands protective addition has been made. However, the protective addition would not survive if (i) the substantive addition has been confirmed and (ii) substantive addition has been deleted on merits. The ld AR submitted that in the present case, the appeal in the case of Shree Global Tradefin Ltd. has been decided by the Hon ble Tribunal in ITA Nos. 7310 to 7313/Mum/2017 dated 15.10.2018 a copy whereof is also placed on recordand there is no finding in that case that the income is that of the present assessee. In fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hiness and genuineness of the share application money received. He also accepted that no documents or agreements or any paper work was made with any of the entities for the investments made in the 14 companies. He stated that only cheques were received which were deposited in the bank accounts of the 14 companies. After the survey in Shree Global Trade Fin. Ltd. in 2012, Department conducted search in Shri Pravinkumar Jain, a hawala operator. It was found during this search that several of the 54 entities were controlled and managed by hawala operator Pravin Kumar Jain. Findings in the case of Pravin Kumar Jain are extracted by the CIT(A) on pages 95 to 114 of his order. Admission of Shri Pravin Kumar Jain and corroboration of findings of this search with other searches regarding the beneficiaries is been mentioned on pages 114 to 118 by the CIT(A) in his order. After considering all the materials, the CIT(A) disposed off the grounds relating to addition of Rs.43.50 cr. from page 123 of the order. Pages 124 to 161 contain the details of 14 companies and 54 entities. The observations made by the CIT(A) in paragraphs 8.6 to 8.15 of his order are not reproduced and the same may be tre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um of Rs. 43.50 Crores in M/S Shree Global Tradefin Ltd. The assessee received the equivalent sum from 25 companies as share application money and passed on the same to M/S Shree Global Tradefin Ltd. immediately as advance which was later on converted into share capital. The AO as well as CIT(A) recorded a findings that 25 companies who invested in the assessee company are included in the list of said 53 investor companies which have advanced money to 14 companies including the assessee and same amount has been transferred by all 14 companies including the assessee to one company namely M/S Shree Global Tradefin Ltd. Thus, the amounts have been transferred by 14 companies including assessee to M/S Shree Global Tradefin Ltd., and the flow of funds are clearly evident and discernible. As such, there is no doubt as to the source of money.The AO added 43,50,00,000/- u/s 68 of the Act on protective basis in the hands of the assessee and simultaneously similar addition of Rs. 43,50,00,000/- was made to the income of Shree Global Tradefin Ltd. on substantive basis on the ground that source of money was not proved. The AO also added to the income of the assessee, commission @ 3% on the tot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. DR that where substantive addition is deleted the protective has to restored to the AO as in the case of M/S Shree Global TradefinLtd , assessment has not attained finality. We are therefore inclined to dismiss the appeal of the revenue by upholding the order of CIT(A). 10. The assessee has also filed cross objection challenging the re-opening and assessment order on various grounds. Since we have dismissed the appeal of the revenue on merits, we are, therefore, not adjudicating the grounds raised by the assessee in the cross objections. Accordingly the cross objections are dismissed. 11. However, before we part with the matter, we would like to deal with one procedural issue as well. While hearing of this appeal was concluded on 4th March 2020, the order is being pronounced today on 6th day of August, 2020, much after the expiry of 90 days from the date of conclusion of hearing. We are also alive to the fact that rule 34(5) of the Income Tax Appellate Tribunal Rules 1963, which deals with pronouncement of orders, provides for the same within a period of 90 days of the conclusion of the hearing. 12. It is quite clear that ordinarily the order on an appeal should be pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Their Lordships had, inter alia, directed that We, therefore, direct the President of the Appellate Tribunal to frame and lay down the guidelines in the similar lines as are laid down by the Apex Court in the case of Anil Rai (supra) and to issue appropriate administrative directions to all the benches of the Tribunal in that behalf.We hope and trust that suitable guidelines shall be framed and issued by the President of the Appellate Tribunal within shortest reasonable time and followed strictly by all the Benches of the Tribunal. In the meanwhile (emphasis, by underlining, supplied by us now), all the revisional and appellate authorities under the Income-tax Act are directed to decide matters heard by them within a period of three months from the date case is closed for judgment . In the ruled so framed, as a result of these directions, the expression ordinarily has been inserted in the requirement to pronounce the order within a period of 90 days. The question then arises whether the passing of this order, beyond ninety days, was necessitated by any extraordinary circumstances. 9. Let us in this light revert to the prevailing situation in the country. On 24th March, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either anticipated nor controlled When such is the position, and it is officially so notified by the Government of India and the Covid-19 epidemic has been notified as a disaster under the National Disaster Management Act, 2005, and also in the light of the discussions above, the period during which lockdown was in force can be anything but an ordinary period. 10. In the light of the above discussions, we are of the considered view that rather than taking a pedantic view of the rule requiring pronouncement of orders within 90 days, disregarding the important fact that the entire country was in lockdown, we should compute the period of 90 days by excluding at least the period during which the lockdown was in force. We must factor ground realities in mind while interpreting the time limit for the pronouncement of the order. Law is not brooding omnipotence in the sky. It is a pragmatic tool of the social order. The tenets of law being enacted on the basis of pragmatism, and that is how the law is required to interpreted. The interpretation so assigned by us is not only in consonance with the letter and spirit of rule 34(5) but is also a pragmatic approach at a time when a disast ..... X X X X Extracts X X X X X X X X Extracts X X X X
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