ACIT Vs B R R Securities Pvt. Ltd. (ITAT Delhi)
Protective Addition Cannot Survive Once Substantive Addition Is Taxed Elsewhere: ITAT Grants Relief to Conduit Company
The Delhi ITAT upheld the deletion of additions made in the hands of B R R Securities Pvt. Ltd., holding that where the Revenue itself treats a company merely as a conduit for routing accommodation entries and has already taxed the substantive income in the hands of the alleged entry operators, no separate protective addition can be sustained in the hands of the conduit company.
The case arose from a search conducted on the Jain Brothers group (Anand Kumar Jain and Naresh Kumar Jain). Based on seized tally data and other materials, the Assessing Officer alleged that B R R Securities Pvt. Ltd. was one of the entities used for providing accommodation entries. The AO treated credits aggregating to ₹4.12 crore received from various concerns as unexplained cash credits under section 68 on a protective basis and further added ₹1.03 lakh as commission income earned for providing such entries.
The CIT(A) found that the company was merely a conduit through which funds were routed from one party to another and that the actual beneficiaries had already been identified by the Investigation Wing. More importantly, the Revenue had already made and sustained substantive additions in the hands of Anand Kumar Jain and Naresh Kumar Jain, who were found to be controlling and operating these entities. Since the substantive income had already been assessed elsewhere, the protective addition in the company’s hands could not survive.
The Tribunal agreed with this reasoning and relied upon earlier decisions involving the same Jain group. It observed that once the Revenue itself accepts that the company acted only as a conduit and the substantive addition has attained finality in the hands of the persons actually controlling the accommodation entry operations, there remains no justification for taxing the same amount protectively in the hands of the conduit company.
The Tribunal also upheld the deletion of the commission addition, noting that the alleged commission income from accommodation entry activities had already been assessed in the hands of the Jain Brothers. Taxing the same commission again in the hands of the company would amount to duplication.
Accordingly, the Revenue’s appeals for AYs 2014-15 to 2017-18 were dismissed and the relief granted by the CIT(A) was affirmed.
FULL TEXT OF THE ORDER OF ITAT DELHI
The captioned appeals are filed by the Revenue and Cross-Objections are filed by the assessee against the different orders, all dated 26.03.2019 by Ld. Commissioner of Income Tax (A)-29, New Delhi [“Ld. CIT(A)”] passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of different assessment orders, all dated 19.12.2018 passed u/s 153C r.w.s. 153A/143(3) of the Act pertaining to Assessment Years 2014-15 to 2017-18 respectively.
