AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2026 (4) TMI 810
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.... of unexplained credits/deposits in the bank account on the sole ground that no substantive addition has been made in the hands of M/s HMA Agro Industries Ltd., without appreciating the facts that the assessment order passed by the AO in the case of M/s HMA Agro Industries Ltd. for A.Y. 2018-19 has been set aside by the Principal Commissioner of Income Tax (Central), Kanpur vide order passed u/s 263 of the Act dated 27.03.2025, by holding the assessment order to be erroneous and prejudicial to the interest of revenue and directing the AO to pass fresh order after conducting proper inquiries and investigation. 2. Whether on facts and circumstances of the case and in law, the Ld. CIT(A)- IV, Kanpur has erred in deleting the protective addition of Rs. 62,11,24,560/- made u/s 68 of the Act in the hands of assessee on account of unexplained credits/deposits in the bank account on the sole ground that no substantive addition has been made in the hands of M/s HMA Agro Industries Ltd... ignoring the fact that the assessment order passed in the case of M/s HMA Agro Industries Ltd. for A.Y. 2018-19 has been found to be erroneous and prejudicial to the interest of revenue and has bee....
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....sidering the various material available with Assessing Officer, Assessing Officer observed that assessee is supplying livestock to HMA Agro and after considering the materials found during the search, in the post search proceedings, he came to the conclusion that assessee is merely providing accommodation entries in the form of bogus purchase, it is appropriate to estimate the profit at the rate of 1% of the total deposits in the bank from which assessee withdrawn Rs. 1,75,03,63,927/-, accordingly, added to the income of the assessee. With the above observation, proceeded to make the cash withdrawn by the assessee of Rs. 1.75 crores as substantial addition in the hands of HMA Agro Industries Ltd. and protective addition in the hands of the assessee. 7. Aggrieved with the above order assessee preferred an appeal before Ld. CIT(A) Kanpur-4 and filed a detailed submissions before him. After considering the detailed submissions and material available on record Ld. CIT(A) deleted the protective additions made by the Assessing Officer by observing as under:- 6.8 On a detailed examination of the appellants written and oral submissions made during the course of the appellate pr....
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....ses done by the appellant as bogus would not be right. The AO has not disputed the stock records or the yield of the appellant company, in his assessment order nor during the course of search proceedings any incriminating maternal in this regard was brought on record. All the payments to the supplier Mohd Irfan has been made through proper banking channel which is not under dispute either. On similar facts in reassessment proceedings for the preceding assessment year 2018-19 wherein the sole issue of reopening was alleged bogus purchase from Shri Mohammad Irfan the same was accepted by the AO after detailed examination of the concerned person Shri Mohammad Irfan, his statements were recorded & documents produced by him were examined. Now to state on similar facts that during the current year of assessment some of the purchases done from Shri Mohammad Irfan are bogus purchases would in my opinion be devoid of any logic. During the appellate proceedings, the appellant has produced the said statement of Shri Mohd Irfan recorded during the assessment proceedings for AY 2018-19, wherein categorically he has stated to have supplied live animals in assessment year 2017-18, 2018-19, & 2019....
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.... of M/s HMA Agro Industries Limited where the substantive addition of Rs. 109.94 crores was done has been deleted, and the same was basis of the allegation of accommodation entries in the hands of the appellant Shri Mohammad Irfan, where the addition done by his AO was Rs 175,03,63,927/- on protective basis therefore the protective addition should also be deleted. Here I would also like to bring on record that the AO has considered all of the credits in the bank account of Mohammad Irfan as accommodation entries, whereas the amount received from HMA was only Rs 170,70,52,786/ The appellant Shri Mohd Irfan during the course of assessment proceedings of HMA group for assessment year 2018-19 appeared before their assessing officer and gave categorical statement that he was doing the business of sale / purchase of buffaloes for HMA Agro Industries Limited primarily. He had submitted the bank statement, copy of Ledger account, and copy of purchase bills along with arrival sheet to prove that the buffaloes were supplied by him to HMA Agro Industries. It is also seen that the major portion of live animal at the Khurja plant of HMA Agro was purchased from Mohammad Irfan and since nowhere b....
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....imits prescribed u/s 40A(3), as in Rules 6DD an exception has been provided and even the Central Board of Direct Taxes, has issued a circular whereby even it clarifies that purchases of animals is done in cash from traders, then cash can be paid to them subject to fulfilling of certain conditions Thus, the CBDT itself mandates that payment in cash can be done for buying live animals exceeding the limit prescribed u/s 40A(3) by carving out an exception in Rule 6DD. Hence payment done by Shri Mohammad Irfan to his suppliers for which cash has been withdrawn by him from his bank account cannot be stated to be ungenuine Further, in the assessment order of Sh. Irfan and M/s HMA Agro Industries Limited, the AO has not brought on record any kind of evidence that this cash withdrawn by Shri Mohammad Irfan was handover to HMA Agro Industries Limited, so as to prove his point that these were mere accommodation entries. When the sales from M/s HMA Agro Industries Limited have been accepted in totality and no adverse inference has been made regarding those sales, then it cannot be said that for making those sales no purchases were done and were mere accommodation entry. Furth....
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....of the assessment order). 6.11 I also find that the AO has made protective addition vide order dt. 30.09.2021, without making any substantive addition. The AO has held that the substantive addition would be considered in the hands of beneficiaries. In my considered view, protective assessment cannot be independent of substantive assessment, and protective assessment must follow substantive assessment. There can be a substantive assessment without any protective assessment but there cannot be a protective assessment without there be a substantive assessment. Thus in my view, the AO was not correct in making protective assessment of Rs. 175,03,63,927/- in the hands of Sh. Irfan without making any corresponding substantive addition. Thus, grounds of appeal no. 5 to 9 of the appeal are allowed. 8. Aggrieved with the above order revenue is in appeal before us. At the time of hearing Ld. DR submitted that assessee has claimed to have supplied livestock to HMA Agro Industries Ltd. without their being proper documents supporting the above transaction before the Assessing Officer. Considering the documents submitted by the assessee, it is clear that assessee is providin....
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.... the transactions of the assessee for supplying livestock to HMA Industries Ltd. were genuine business (purchase/sale) transactions and not accommodation entries. The ld. CIT(A) reached to this conclusion after independently verifying the documents, books of account and bills/vouchers submitted by assessee and also relied upon the detailed findings given in the case of HMA Agro Industries Ltd where substantive addition made in the AY 2019-20 was deleted by the ld. CIT(A). The ld. CIT(A) also noted that AO in the case of HMA Agro Industries Ltd. for the AY 2018-19, reopened the assessment on this issue of alleged accommodation entries with Sh. Irfan u/s 147 of the Act but made no substantive addition after making detailed verification and examination. ii. The ld. CIT(A) also deleted the substantive addition of estimated commission income of Rs. 1,75,03,300/- on the ground that once it has been conclusively held that Sh. Irfan has not provided accommodation entries to M/s HMA Agro Industries Ltd., there can be no case of earning commission income as a consequence. iii. The ld. CIT(A) deleted the addition of Rs. 6,00,000/- on the ground that this cash was actually wi....
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....tion is as under- 1. The assessment order, dated 31.03.2023 has been passed for AY 2018-19, in the case of M's. HMA Agro Industries Limited covering the issue discussed in the trailing mails. Shri Irfan was also issued summons and his statements were recorded on oath on 28.03.2023. Since he was able to provide the details of transactions and documentary supports in the nature of bills/vouchers, ledgers and account statements, which established that he was carrying out business with M's HMA Agro Industries Limited and therefore no separate addition was made in the hands of HMA Agro Industries Limited for AY 2018-19 on this ground. (The assessment order and the statements of Shri Irfan are being scanned and enclosed with this mail. Some sample documents presented are also being enclosed for reference) (Refer page no. 23 of the CIT(A) order) From the aforesaid paragraph, it is evident that after detailed verification and examination of the facts and documents, including bank statements, ledger accounts, and bills/vouchers, submitted by Sh. Irfan during the assessment proceedings of HMA Agro Industries Ltd., the Assessing Officer himself concluded that the ass....
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....GRO INDUSTRIES LTD. 8. The Id. AO also made an adhoc addition of commission of Rs. 1,75,03,300/- @ 1% of the total deposits/credits Rs. 175,03,63,927/- (including credits/deposits of Rs. 170,70,52,786/- received from M/s HMA Agro Industries Ltd) in the bank accounts of the assessee based on the same allegation that the assessee was not doing any genuine business activity but was only involved in providing accommodation entries in the form of bogus purchases as the assessee failed to prove the genuineness of business transactions done with M/s HMA Agro Industries Ltd. (Refer Para 4.17, page 7 of the AO order) 9. Although this ad hoc addition of commission income was made on a substantive basis in the hands of the assessee, it was entirely dependent upon the outcome of the protective addition of the total credits/deposits in the assessee's bank accounts, which were treated as accommodation entries. The impugned addition of commission income is, therefore, a consequential addition arising out of the protective addition made in the assessee's hands. Accordingly, once it has been conclusively held that the transactions between the assessee and HMA Agro Industri....
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....21 and 22.09.2021 enclosed at page nos. 34-37 & 84 of the PB respectively. * Further, the assessee also furnished the certified ledger of HMA Agro Industries along with sample purchase bills for supply of live-stock vide reply dated 22.09.2021 at page no. 84 of the PB. Copy of certified ledger and sample bills are also enclosed at page no. 89-248 of the PB. Also refer page no. 6 of the AO order where extracts of this reply are reproduced by the AO. 10. Considered the rival submissions and material placed on record, we observed that assessee is supplying livestock to HMA Agro Industries Ltd., on the basis of indent raised to the assessee for the above said supplies by the HMA Agro, the assessee had supplied the livestock on receipt of trade advances. The assessee was compensated with the percentage of commission on the nature of supply. We observed that search and post search proceedings were initiated in the case of HMA Agro Industries Ltd. and in the post search proceedings several statements were recorded from the assessee as well as main personnel of HMA Agro Industries Ltd. It is fact on record that HMA Agro Industries Ltd. is agreed with the fact that they have pur....