DCIT Vs Mangalkalash Trading P. Ltd. (ITAT Mumbai)
Protective Addition u/s 68 & 69C in Hands of Accommodation Entry Provider Not Sustainable Once Substantive Additions Are Confirmed – ITAT Mumbai
The ITAT Mumbai dismissed the Revenue’s appeal for AY 2012-13 & upheld deletion of protective additions u/s 68 & 69C made in the hands of the assessee company, which was alleged to be an accommodation entry provider.
The Tribunal noted that pursuant to a search u/s 132, the AO made protective addition of ₹5.90 crore u/s 68 towards alleged unexplained investment & ₹14.75 lakh u/s 69C towards estimated commission @2.5%, on the footing that the assessee acted as a conduit for routing unaccounted funds. However, substantive additions on identical amounts were already made & confirmed in the hands of the beneficiary companies.
It was held that once substantive additions stand confirmed in the hands of beneficiaries, protective additions on the same amounts cannot survive in principle. The Tribunal relied on settled law that section 69 can be invoked only where investments are not recorded in books, whereas in the present case, investments were duly reflected in the assessee’s balance sheet & stood explained by corresponding liabilities.
The ITAT further held that protective commission addition u/s 69C automatically fails once the protective addition of unexplained investment itself is deleted, particularly when corresponding substantive commission additions have already been confirmed in the hands of beneficiary entities.
Accordingly, the Tribunal upheld the order of CIT(A) deleting the protective additions, subject only to limited verification of actual quantum reflected in books, and dismissed the Revenue’s appeal.
