2025 (1) TMI 1521 - AT - Income Tax

Protective additions under Section 68 deleted after real beneficiaries identified and substantive additions made against them

The ITAT Delhi upheld the CIT(A)'s decision to delete additions made under Section 68 for unexplained cash credits relating to share capital, premium, and ... Unexplained cash credits - Addition u/s 68 - unexplained nature and source of credit entries in respect of share capital/premium/unsecured loans and other credits in bank - CIT(A) deleted addition - HELD THAT:- As could be seen from the observations of the CIT(A), since, the real beneficiaries, who have availed the accommodation entries were identified, the substantive additions have been made at their hands. That being the case, protective additions made at the hands of the assessee cannot survive. While considering identical issue on similar facts, the companies, allegedly managed and controlled by Jain Brothers in the cases of M/s. Shivji Garments Pvt. Ltd.[2024 (2) TMI 454 - ITAT DELHI] and ACIT Vs. M/s. Zed Enterprises (P) Ltd [2024 (1) TMI 1442 - ITAT DELHI] has upheld the decision of the Ld. CIT (A) in deleting the addition. In the present cases, the facts are being identical, we do not find any infirmity in the decision of Ld. CIT(A), in deleting the additions. Accordingly, revenue grounds are dismissed. The issues presented and considered in the judgment are as follows:1. Whether the protective addition of unexplained cash credits made by the Assessing Officer should be deleted due to the failure of the assessee to satisfy the conditions under section 68 of the Income Tax Act.2. Whether the substantive addition of commission income should be deleted as the assessee is considered a conduit concern.3. Whether the proceedings initiated under Section 153C and the assessment framed under Section 153C are without jurisdiction.4. Whether the additions made under Section 153C are valid in the absence of incriminating material belonging to the assessee.5. Whether the assessment order was passed erroneously due to the alleged non-filing of a reply to the show cause notice and the failure to produce the director of the assessee company.6. Whether the explanations and evidence provided by the assessee to prove the identity and creditworthiness of the lenders and the genuineness of the transactions were correctly rejected.7. Whether the assessee is involved in providing and taking accommodation entries in the form of share application money or unsecured loans.Issue-wise detailed analysis:The Tribunal considered the common grounds of appeal and facts arising in the appeals by the Revenue and Cross Objections of the assessee together. The Assessing Officer had made protective additions at the hands of the assessee based on unexplained cash credits and commission income. The CIT (A) found that the beneficiaries had been identified, and substantive additions had been made at their hands, leading to the deletion of the protective additions at the hands of the assessee.The CIT (A) noted that the appellant company was not a beneficiary company but a conduit company operated by others to provide accommodation entries. The substantive additions had already been made at the hands of the main entry providers, and therefore, no further additions were warranted at the hands of the assessee. The Tribunal upheld the decision of the CIT (A) in deleting the additions based on similar cases involving companies managed by the same individuals.Significant holdings:The core principle established in this judgment is that when the real beneficiaries of accommodation entries have been identified and substantive additions have been made at their hands, protective additions made at the hands of conduit companies cannot stand. The Tribunal dismissed the Revenue's appeals and the assessee's cross objections based on the findings in the Assessment Year 2012-13, which were deemed applicable to subsequent years.In conclusion, the Tribunal held that the protective additions made by the Assessing Officer were not sustainable, and the substantive additions had already been made at the hands of the main entry providers. The Tribunal affirmed the decision of the CIT (A) in deleting the additions and dismissed all appeals and cross objections.