ITAT Bars Double Taxation: Protective Addition Deleted as Income Already Assessed Elsewhere [Read Order]

The Income Tax Appellate Tribunal (ITAT) Delhi Bench has ruled that a protective addition cannot be sustained when the same income has already been assessed in the hands of another entity, thereby preventing double taxation.

The case arose from a search and seizure operation conducted under section 132 at the premises of Priya Gold Group of Companies and its affiliates. During the course of assessment, it was found that Surya Vanijya Pvt. Ltd (Respondent). had provided accommodation entries in the form of share capital and share premium totalling Rs. 15,23,00,000 to Surya Agrotech Infrastructure Ltd.

As a result, the Assessing Officer made a protective addition of this amount in the hands of Surya Vanijya Pvt. Ltd., while the substantive addition was made in the hands of the ultimate beneficiary, Surya Agrotech Infrastructure Ltd. Additionally, an amount of Rs. 38,07,500 was added to the income of Surya Vanijya Pvt. Ltd. on account of unexplained commission expenditure.

Surya Vanijya Pvt. Ltd. appealed against the assessment order, and the Commissioner of Income Tax (Appeals), CIT(A) deleted the protective addition of Rs. 15,23,00,000, holding that the substantive addition in the hands of Surya Agrotech Infrastructure Ltd. was justified, as it was the ultimate beneficiary of the funds. However, the CIT(A) confirmed the addition of Rs. 38,07,500 towards commission expenditure.

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The Department challenged the deletion of the protective addition before the ITAT, while Surya Vanijya Pvt. Ltd. contested the confirmation of the commission expenditure addition. During the hearing, the Department’s representative argued that the CIT(A) erred in deleting the protective addition and supported the confirmation of the commission income addition.

In its order, the Tribunal noted that the substantial addition made in the hands of Surya Agrotech Infrastructure Ltd. had already been challenged before the Tribunal in related appeals. The Tribunal observed that the income in question had already been taxed in the hands of Surya Food & Agro Ltd., the flagship company of the group, which had disclosed the income before the Settlement Commission. The Settlement Commission’s order had become final, with both parties accepting it.

After considering the facts, the Tribunal, comprising M. Balaganesh (Accountant Member) and Yogesh Kumar U.S. (Judicial Member), found no error in the CIT(A)’s deletion of the protective addition. The Tribunal dismissed the Department’s appeal, confirming that the same income cannot be taxed twice in different hands.

The appeal of Surya Vanijya Pvt. Ltd. against the addition of commission expenditure was also dismissed, as the Tribunal found no reason to interfere with the CIT(A)’s findings.

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