Case Law Details
PCIT Vs Electrical And Electronic India Ltd. (Delhi High Court)
Delhi High Court Dismisses Revenue’s Appeal Against Protective Basis Addition in PCIT vs. Electrical and Electronic India Ltd.
Introduction: The Delhi High Court recently dismissed an appeal by the revenue against the order dated 18.04.2023 passed by the Income Tax Appellate Tribunal (Tribunal) concerning the Assessment Year (AY) 2010-11. The appeal challenged the Commissioner of Income Tax (Appeals) (CIT(A))’s decision on AYs 2010-11 to 2012-13, specifically addressing the deletion of additions under Section 69 of the Income Tax Act, 1961, related to unexplained investments in the JP Minda Group of companies.
Background: The issue revolved around an aggregate investment of Rs. 4,05,00,000 made by the appellant/respondent in the JP Minda Group. Notably, the addition in the hands of the respondent/assessee was made on a protective basis, with the substantive addition being made in the hands of the JP Minda Group.
Legal Proceedings: The Tribunal, in its order, took into consideration a judgment dated 26.09.2023 by a coordinate bench. This judgment, relating to a bunch of appeals including ITA 358/2022 (Pr. Commissioner of Income Tax (Central)-2 vs. M/s JPM Tools Ltd.) and ITA 360/2022 (Pr. Commissioner of Income Tax (Central)-2 vs. Jay FE Cylinder Ltd.), concluded that the substantive addition made in the hands of the JP Minda Group was dropped on merits.
The revenue’s appeal was based on the argument that the addition was dropped in accordance with the judgment in Commissioner of Income Tax vs. Kabul Chawla (2016) 380 ITR 573, affirmed by the Supreme Court in Principal Commissioner of Income Tax vs. Abhisar Buildwell, 2023 SCC OnLine SC 481.
Court’s Decision: Mr. Sanjay Kumar, representing the appellant/revenue, contended that the Tribunal dismissed the appeal considering the drop of the substantive addition on merits. The Court, however, found no substantial question of law for consideration, given that the addition in the hands of the respondent/assessee was protective.
Conclusion: The Delhi High Court’s decision in the PCIT vs. Electrical and Electronic India Ltd. case reinforces the principle that when an addition is made on a protective basis and the substantive addition is subsequently dropped on merits, it may not give rise to a substantial question of law. The Court’s ruling affirms the Tribunal’s decision, resulting in the closure of the appeal.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. This appeal concerns Assessment Year (AY) 2010-11. Via the instant appeal, the appellant/revenue seeks to assail the order dated 18.04.2023 passed by the Income Tax Appellate Tribunal [in short, “Tribunal”].
2. The Tribunal was called upon to examine the sustainability of the order dated 13.11.2017 passed by the Commissioner of Income Tax (Appeals) [in short, “CIT(A)”] concerning AYs 2010-11 to 2012-13.
3. On merits, the issue that was raised before the Tribunal was whether the CIT(A) had erred on facts and in law in deleting the addition made under Section 69 of the Income Tax Act, 1961 [in short, “Act”], on account of unexplained investments made by the appellant/respondent in the JP Minda Group of companies.
3.1 To be noted, the aggregate amount invested was Rs.4,05,00,000/-. Significantly, the addition in the hands of respondent/assessee was made on a protective basis. The substantive addition had been made in the hands of the JP Minda Group.
4. It is not disputed that insofar as the JP Minda Group is concerned, a challenge was laid before a coordinate bench which was the subject matter of the judgment dated 26.09.2023, concerning a bunch of appeals; the lead appeal being ITA 358/2022, titled Pr. Commissioner of Income Tax (Central)-2 vs. M/s JPM Tools Ltd.
4.1 In particular, this judgment also covered ITA 360/2022, titled Pr. Commissioner of Income Tax (Central)-2 vs. Jay FE Cylinder Ltd.
5. The sum and substance of the judgment dated 26.09.2023 passed by a coordinate bench was that the substantive addition made in the hands of the JP Minda Group was dropped, albeit, on merits.
6. Mr Sanjay Kumar, learned senior standing counsel, who appears on behalf of the appellant/revenue, correctly points out that the addition was dropped on the basis of a judgment passed by a coordinate Bench of this court in Commissioner of Income Tax vs. Kabul Chawla, (2016) 380 ITR 573.
6.1 To be noted, the said judgment has been affirmed by the Supreme Court in Principal Commissioner of Income Tax vs. Abhisar Buildwell, 2023 SCC OnLine SC 481.
7. The Tribunal dismissed the appeal preferred by the appellant/revenue, having regard to the fact that the substantive addition on merits was dropped. As indicated above, the addition in the hands of the respondent / assessee was only made on a protective basis.
8. In these circumstances, we are of the view that no substantial question of law arises for consideration by this court. The appeal is, accordingly, closed.
