The Kolkata bench of the Income Tax Appellate Tribunal ( ITAT ) has held that Protective addition made to save interest of revenue is not permissible and the assessment can’t be reopened based on contingent reason.
G.K. Ispat Pvt. Ltd., the assessee filed return of income on 13.09.2011 which was selected for scrutiny. The assessment was framed u/s 143(3) of the Act vide order dated 28.01.2014 assessing the total income at Rs. 97,19,400/-.
During the course of original assessment proceedings, the AO examined the issue of an interest-bearing loan taken from M/s Gaurav Rose Real Estate Pvt. Ltd.of Rs. 14.11 crores by calling for various details and evidence which were duly furnished by the assessee. The said transaction of Rs. 14.11 crores was explained by the assessee before the AO and assessment was also framed accordingly by accepting the transactions as genuine.
Subsequently the AO received information from Investigation Wing that the assessee had transaction with M/s Gaurav Rose Real Estate Pvt. Ltd. of Rs. 70 Lakhs during the F.Y. 2010-11 which is paper company managed and controlled by Shri Manohar Lal Nangalia and accordingly the case was reopened by issuing notice u/s 148 of the Act dated 31.03.2018 which was complied with by filing return of income on 24.04.2018.
The AO during the original assessment proceedings called for various details and evidences which were duly filed by the assessee comprising loan confirmation, bank statement of the assessee as well as of M/s Gaurav Rose Real Estate Pvt. Ltd. proving the source of funds received by the assessee.
The AO concluded that the assesse and M/s Gaurav Rose Real Estate Pvt. Ltd are operating in collusion with the result that assesse is the ultimate beneficiary of Rs. 14.11 crores and M/s Gaurav Rose Real Estate pvt. Ltd. has played the role of accommodation entry provider and therefore accordingly the amount was added u/s 68 of the Act to the income of the assessee thereby assessing the income at Rs. 15,08,19,400/- vide order dated 30.12.2018.
The assessment of M/s Gaurav Rose Real Estate Pvt. Ltd. was also reopened u/s 147 of the Act and addition was on protective basis. The CIT(A) allowed the appeal of the assessee on the legal issue of reopening u/s 147 by quashed the same.
A Coram comprising Shri Sanjay Garg, Judicial Member & Shri Rajesh Kumar, Accountant Member observed that the protective addition is made in order to safeguard the interest of revenue where the revenue itself is not sure to whom the said income belongs to. The CIT(A) has held that no protective addition can be made in the hands of the assessee in the assessment proceedings by following the decision in the case of DHLF Venture Capital Fund vs. ITO (supra). While dismissing the appeal of revenue, the Tribunal held upheld the order of CIT(A).
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