An appeal against protective assessment should ordinarily await outcome of substantive assessment

 

Income Unexplained cash credit  Protective assessment

An investigation was carried out by DDIT(Inv.) which revealed that some entities were involved in providing accommodation entries to various companies based in Mumbai, which in turn had used said funds for payments to Cooperative Bank at Mumbai which was controlled by Shri K

Since assessee was one of such entities, statement of its Director Shri P was recorded u/s 131 by DDIT(Inv.), wherein, it was accepted that he had got cash of equivalent amount from said Companies and after depositing such cash into assessee’s Bank account, cheques were issued

AO held that accommodation entries were given by assessee to various companies belonging to K Group during PY relevant to AY 2008-09 hence, commission income @2% was added to assessee’s income

AO also made an addition on protective basis observing that unexplained income was assessable on substantive basis in hands of said companies—CIT(A) deleted said addition

Held, protective assessment becomes redundant when substantive assessment becomes final and if substantive assessment fails, it was protective assessment which had to be treated as substantive

An appeal against protective assessment should ordinarily await outcome of substantive assessment so that protective assessment could be inconformity with substantive assessment

CIT(A) did not wait outcome of proceedings arising from substantive assessment and since said information was not forthcoming even after a considerable period from concerned AO, proceeded to dispose of appeals arising from protective assessments by his impugned orders and deleted addition made on protective basis without awaiting final outcome of proceedings arising from substantive assessment

CIT(A) was not justified in deleting additions made by AO on protective basis in all three years under consideration without awaiting for final outcome of proceedings arising from this substantive assessment

Matter Remanded.

DEPUTY COMMISSIONER OF INCOME TAX vs. NALIMBUR SUPPLIERS (PVT.) LIMITED

(2019) 55 CCH 0125 KolTrib