Parallel Assessments shall be made in respect of same Income on Different Person: ITAT deletes Addition made on protective basis [Read Order]

The Ahmedabad Income Tax Appellate Tribunal (ITAT) ruled that parallel assessment should be made in respect of the same Income on different persons. Therefore, the bench deleted the addition made on the protective basis Rachna Finlease Pvt. Ltd. is a Private Limited Company and the name of the assessee company has got struck off from the Registrar of Companies with effect from 21-07-2011 as per Section 560(5) of the Companies Act, 2013. Thereafter, however the company has received Rs. 26,68,50,000/- in its bank account from Rameshji Gobarji Thakor and Hansaben Manilal Patel. The department after a verification found that the assessee company had two directors but they were dummy directors and name-givers only. Therefore, the credited amount of Rupees 26 crore in account of the assessee considered remains unverified. Accordingly, notice was issued to assessee and the assessee objected that the company was already struck off by the Registrar of Companies with effect from 21-07-2011. Without considering the objection AO argued that credit entries of Rs. 28.68 crores in the bank account of the assessee are accommodation entries hence it is the income of assessee. Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax (Appeal) {CIT(A)} who deleted the protective addition made in the hands of the assessee. Against the order revenue filed an appeal before the tribunal. Before the tribunal Nupur Shah, counsel for the assessee submitted that there was no provision in the Act to make addition once the person giving money was taxed substantively and the source of source was verified by the respective Assessing Officer. Moreover, the income was already assessed in the name of the two different people who are the person giving the amount to assessee. A.P. Singh, Departmental representatives strongly supported the order passed by the Assessing Officer and submitted that the CIT(A) erred in deleting the addition of Rs. 28.68crores made in the hands of the assessee on protective basis. It was observed by the tribunal that Income Tax Act provided that parallel assessments can be made in respect of the same income on two different persons. But no addition could be made on a protective basis if the income was already taxed on a substantial basis. The tribunal after reviewing the facts and submissions of the both parties, the two-member bench of Waseem Ahmed (Accountant Member) and T.R. Senthil Kumar, (Judicial Member) observed that assessee provide all documents and source of the funds before the assessing officer. Further, it was also noted that the assessment made in the case of Hansaben Manilal Patel wherein the sale of land has been duly taxed on substantive basis which was not challenged before any authority. The Ahmedabad Income Tax Appellate Tribunal (ITAT) ruled that parallel assessment should be made in respect of the same Income on different persons. Therefore, the bench deleted the addition made on the protective basis Rachna Finlease Pvt. Ltd. is a Private Limited Company and the name of the assessee company has got struck off from the Registrar of Companies with effect from 21-07-2011 as per Section 560(5) of the Companies Act, 2013. Thereafter, however the company has received Rs. 26,68,50,000/- in its bank account from Rameshji Gobarji Thakor and Hansaben Manilal Patel. The department after a verification found that the assessee company had two directors but they were dummy directors and name-givers only. Therefore, the credited amount of Rupees 26 crore in account of the assessee considered remains unverified. Accordingly, notice was issued to assessee and the assessee objected that the company was already struck off by the Registrar of Companies with effect from 21-07-2011. Without considering the objection AO argued that credit entries of Rs. 28.68 crores in the bank account of the assessee are accommodation entries hence it is the income of assessee. Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax (Appeal) {CIT(A)} who deleted the protective addition made in the hands of the assessee. Against the order revenue filed an appeal before the tribunal. Before the tribunal Nupur Shah, counsel for the assessee submitted that there was no provision in the Act to make addition once the person giving money was taxed substantively and the source of source was verified by the respective Assessing Officer. Moreover, the income was already assessed in the name of the two different people who are the person giving the amount to assessee. A.P. Singh, Departmental representatives strongly supported the order passed by the Assessing Officer and submitted that the CIT(A) erred in deleting the addition of Rs. 28.68crores made in the hands of the assessee on protective basis. It was observed by the tribunal that Income Tax Act provided that parallel assessments can be made in respect of the same income on two different persons. But no addition could be made on a protective basis if the income was already taxed on a substantial basis. The tribunal after reviewing the facts and submissions of the both parties, the two-member bench of Waseem Ahmed (Accountant Member) and T.R. Senthil Kumar, (Judicial Member) observed that assessee provide all documents and source of the funds before the assessing officer. Further, it was also noted that the assessment made in the case of Hansaben Manilal Patel wherein the sale of land has been duly taxed on substantive basis which was not challenged before any authority. Therefore, the bench dismissed the appeal filed by the revenue. Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates

Parallel Assessments shall be made in respect of same Income on Different Person: ITAT deletes Addition made on protective basis [Read Order]

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