TaxTMI 
TaxTMI 
TaxTMI 
2026 (2) TMI 262
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....0,00,000/ - on account of unaccounted investment by observing that the investment reflected in the balance sheet is out of corresponding liabilities as the assessee company is not carrying any business actually and the said entry is unexplained 3. On the facts and circumstances of the case and in law, the Ld CIT(A) erred in deleting the protective addition of Rs 5,90,00,000/ - on account of unaccounted investment and of Rs 14,75,000/- on account of unaccounted commission u/s 69C without considering the fact that the addition made on substantive basis has not reached its finality 2. Briefly stated, facts of the case are the assessee filed its return of income for Assessment Year 2012-13 on 26.09.2012 declaring a total income of Rs.3,05,380/-, which was processed under section 143(1) of the Income-tax Act, 1961 ("the Act"). 2.1 Subsequently, a search and seizure operation under section 132 of the Act was conducted on 11.08.2014 in the case of the First Winner Group, which included the assessee. During the course of search, statements of Shri Rinku Indrakumar Patodia, the key person of the First Winner Group, were recorded on oath under section 132(4) on 11.08.2014 and ....
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.... "5.1.4 During the relevant year, the assessee has been used as a conduit for layering / routing the introduction of unaccounted funds in M/s First Winner Textiles P Ltd (Rs 2,90,00,000/-), M/s Bhagwat Textiles P Ltd (Rs 75,00,000/-) M/s Starwood Exports Pvt Ltd (Rs 75,00,000/-), M/s Rikosh Fashions P Ltd (Rs 75,00,000/-) and M/s Solitaire Texfab & Trader Textiles P Ltd (Rs 75,00,000/-) totally aggregating to Rs 5,90,00,000/- from concerns of Pravin Kumar Jain. The AO has made the substantive additions u/s 68 in the hands of M/s First Winner Textiles P Ltd., M/s Bhagwat Textiles P Ltd., M/s Starwood Exports P Ltd., M/s Rikosh Fashions P Ltd and M/s Solitaire Texfab & Traders Textiles P Ltd on account of unexplained share application money and has made protective addition in the hands of the our assessee. Moreover, the AO has also made substantive addition u/s 69C in the hands of M/s First Winner Textiles P Ltd, M/s Bhagwat Textiles P Ltd., M/s Starwood Exports P Ltd., M/s Rikosh Fashions P Ltd and M/s Solitaire Texfab & Traders Textiles P Ltd being the unaccounted estimated commission @ 2.5% for obtaining the said accommodation entries and on protective basis in the hands of ou....
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....ide my order in appeal No CIT(A)-51/IT-343/16-17 dated 03.11.2017. The operative part of the said order is from Para 6.3.1 to 6.3.26 at pages 13 to 24. In the said appellate order, the substantive additions u/s 68 made of Rs 7,00,00,000/- have been confirmed which includes the addition related to our assessee of Rs 75,00,000/-. 5.3.2 Similarly, the substantive addition of Rs. 75,00,000/- in M/s Rikosh Fashions Ltd., the same has been adjudicated vide my order in appeal No CIT(A)-51/IT-345/16-17 dated 20.11.2018. The operative part of the said order is from Para 6.3.1 to 6.3.26 at pages 13 to 25. In the said appellate order, the substantive additions u/s 68 made of Rs 6,40,00,000/- have been confirmed which includes the addition related to our assessee of Rs 75,00,000/-. 5.3.3 Also, the substantive addition of Rs. 75,00,000/- in M/s Solitaire Texfab Traders & Textiles P Ltd., the same has been adjudicated vide my order in appeal No CIT(A)-51/IT-344/16-17 dated 20.11.2018. The operative part of the said order is from Para 6.3.1 to 6.3.26 at pages 13 to 25. In the said appellate order, the substantive additions u/s 68 made of Rs 6,40,00,000/- have been confirmed whic....
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....ppropriate action if required in the hands of M/s Bhagwat Textiles P Ltd. 5.3.6 It is observed that the AO has made the said additions of Rs. 5,90,00,000/- in the hands of our assessee on protective basis by holding that the said investments in M/s First Winner Textiles P Ltd. (Rs. 2,90,00,000/-), M/s Bhagwat Textiles P Ltd. (Rs. 75,00,000/-), M/s Starwood Exports P Ltd. (Rs. 75,00,000/-), M/s Rikosh Fashions P Ltd (Rs 75,00,000/-) and M/s Solitaire Texfab Traders & Textiles P Ltd. (Rs 75,00,000/-) are unexplained. It is noted that the provisions of section 69 can be invoked if (i) the said investment is not recorded in the regular books and (ii) the assessee offers no explanation about the source or the explanation offered is not satisfactory. It is relevant to note that both these conditions are to be cumulatively satisfied. The Hon'ble Orissa High Court in the case of Aurobindo Sanitary Stores (276 ITR 549) has held that the primary condition to be satisfied before invoking the provisions of section 69 is that there should be a finding of the AO that the investments are not recorded in the regular books. In the instant case, there is no dispute that the said amount ....
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....tive, none appeared on behalf of the assessee and no adjournment was sought. We, therefore, proceed to decide the appeal after hearing the learned Departmental Representative and perusing the material on record. 5. The core issue that arises for our consideration is whether the protective additions under section 68 and section 69C of the Act, made in the hands of the assessee as an accommodation entry provider, can be sustained in law. 5.1 The learned Departmental Representative relied upon the judgment of the Hon'ble Chhattisgarh High Court in Sumit Global Pvt. Ltd. v. ITO (TAXC No. 120 of 2024), wherein it was held that an accommodation entry provider cannot escape assessment merely on the ground that substantive additions have been made in the hands of the beneficiaries. The contention of the accommodation entry providers has been rejected by the Hon'ble High Court observing as under: 7. We have heard learned counsel for the parties and perused the documents. 8. In order to find out whether the question of law arises for consideration, we went through the orders passed by the ITAT and CIT. The original assessment order was dated 27/12/2016 wherein the inc....
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....t Director or Deputy Director or Assistant Director]: [Provided further that the power in respect of an inquiry, in a case where no proceeding is pending, shall not be exercised by any income tax authority below the rank of [Principal Director or Director] or [Principal Commissioner or Commissioner]_[, other than the Joint Director or Deputy Director or Assistant Director,] without the prior approval of the Principal Director or Director or, as the case may be, the [Principal Commissioner or Commissioner]: [Provided also that for the purposes of an agreement referred to in Section 90 or Section 90-A, an income tax authority notified under sub-section (2) of Section 131 may exercise all the powers conferred under this section, notwithstanding that no proceedings are pending before it or any other income tax authority.] 68. Cash Credits.- Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income tax as the income of t....
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....n that the onus of proving the source of a sum of money found to have been received by an assessee, is on the assessee. Once the assessee has submitted the documents relating to identity, genuineness of the transaction, and creditworthiness, then the AO must conduct an inquiry, and call for more details before invoking Section 68. If the assessee is not able to provide a satisfactory explanation of the nature and source, of the investments made, it is open to the Revenue to hold that it is the income of the assessee, and there would be no further burden on the Revenue to show that the income is from any particular source. xxx xxx xxx xxx xxx xxx xxx xxx xxx 9.5. The Delhi High Court in CIT v. Oasis Hospitalities (P) Ltd. [CIT v. Oasis Hospitalities (P) Ltd., 2011 SCC OnLine Del 506: (2011) 333 ITR 119], held that: (SCC OnLine Del para 43) "43.... the initial onus is upon the assessee to establish three things necessary to obviate the mischief of Section 68 of the Act. These are: (i) identity of the investors; (ii) their creditworthiness/investments; and (iii) genuineness of the transaction. Only when these three ingredients are established prima ....