The Income Tax Appellate Tribunal (ITAT), Mumbai bench has held that the protective addition against a company cannot be made if the department has already made the substantive addition against the Managing Director.
In the instant case, the department found that the assessee-Company is involved in hawala transactions. In the statement recorded u/s 132(4), Shri Vishal Kalantri, Managing Director of the company has admitted that cash found in the locker was his own unaccounted income and accordingly has offered it for taxation in the return of income filed for AY 2013-14. Consequent to search notices u/s 153A of the Act, the cases have been selected for scrutiny and during the course of assessment proceedings, the AO has made the addition on the basis of estimated commission income from hawala business in the hands of Shri Vishal Kalantri, on the substantive basis. The AO also made addition towards similar commission income in the hands of the assessee on protective basis on the ground that certain incriminating materials related to hawala business were found from the premises of the assessee company and further, one of the employees, Shri Daudayal Sharma had stated that the assessee company was involved in the business of hawala transactions.
On this basis, the department made a protective assessment against the assessee- Company.
After hearing both the sides, the Tribunal noted that the AO has made protective addition in the hands of the assessee towards estimated commission income derived from hawala transactions on the ground that certain incriminating materials were found in the premises of the assessee and further, one of the employees has stated that the company is involved in hawala transactions.
“It is also an admitted fact that substantive addition made in the hands of Shri Vishal Kalantri has attained finality in view of the order of ITAT, where the addition made by the AO has been examined in the light of incriminating material found during the course of the search. Once, the substantive addition has been considered by the appellate authorities in the hands of Shri Vishal Kalantri, the protective addition made towards commission income in the hands of the assessee could not be sustained. The Ld.CIT(A), after considering relevant submissions, has rightly deleted addition made in the hands of the assessee for all assessment years under consideration. We do not find any error in the findings of Ld.CIT(A) and hence, we are inclined to uphold the findings of Ld.CIT(A) and dismiss the appeals filed by the revenue for AYs 2007-08 to 2013-14,” the Tribunal said.
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