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Judgment
PER SUDHIR KUMAR JM:
The Revenue preferred this appeal, challenging the order dated 08-07-2025 passed by Commissioner of Income-tax (Appeals) -27 New Delhi (in short “Ld. CIT(A)”) arising out from the assessment order dated 25-05-2023 passed by the Assessing Officer for A.Y. 2014-15 under the section 147 r.w.s 143(3) of the Income Tax Act, 1961(In short “the Act”). The assessee also filed the cross objection.
The Revenue raised the following grounds in appeal:
1.Whether the Ld. CIT(A) has erred in the facts and in law in not appreciating the fact that the additions on protective basis were made by the AO on the basis of credible information received from the Investigation wing that the assessee had provided accommodation entry of Rs.11,23,42,220/- in form of bogus purchases made from M/s Sterling Agro Industries Ltd?
2.Whether the Ld. CIT(A) has erred in the facts and in law by ignoring the fact that the assessee was unable to produce original bills, cash books or any documentation identifying the parties to whom the onward sales were made?
3.Whether the Ld. CIT(A) has erred in not appreciating the fact that 97.2% of the credits in the bank account of the assessee were in form of cash? Why would a regular customer buying 200 to 500 litres of milk daily pay in cash?
4.Whether the Ld. CIT(A) has erred in not appreciating that there were only 30-40 persons allegedly bought the milk daily and yet the assessee wasn’t able provide details of even single such buyer?
5.Whether the Ld. CIT(A) has erred in not appreciating that Sterling Agro Industries was engaged in producing milk products like milk powder ghee, etc therefore it could not have sold milk to the assessee in lieu of receipt of Rs.11,23,42,220/-.
6.Whether the Ld. CIT(A) has erred in not appreciating that not even a single cash memo was issued by the assessee for sale of such huge quantities of milk and it had no facility to store 5000-7000 litres of milk which it allegedly bought daily from M/s Sterling Agro Industries Ltd?
7.Whether the Ld. CIT(A) has erred in not appreciating that there was no compliance of summons from M/s Laxmi Roadlines which had allegedly transported the milk?
8.The appellant craves leave to add amend any/all the grounds of appeal before or during the course of hearing of the appeal.
9(a)The order of the Ld. CIT(A) is erroneous and not tenable in law and on facts.
(b)The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of hearing of the appeal.
The brief facts of the case are that the office has credible information against assessee that the assessee has made deposits to the tune of Rs.12,92,24,176/- in the bank account no. 056102000038933matained in IDBI during the F.Y.2013-14, out of which Rs.12,57,02,000/- was deposited by way of cash and Rs.35,22,126/- by way of other credits. The assessee made the payment of Rs.11,23,42,220/- to M/s sterling Agro Industries Limited. The notice under section 142(1) of the Act was issued on 17-01-2023. The Assessing Officer completed the assessment proceedings after making the addition of Rs. 11,23,42,220/- under section 69 of the Act. Being aggrieved the order of the Assessing Officer, the assessee filed the appeal before the Ld. CIT(A) who vide order dated 08-07-2025 allowed the appeal. The Ld. Ld.CIT(A) has observed in his order as under:
6.18In the facts and circumstances of the instant case ratios of the above case laws are squarely applicable in this case. Further, to reiterate relevant points are being discussed as under:
I. The ld. AO while making the additions has solely relied upon the information received from Investigation Wing and assumed that appellant has received accommodation entry by way of purchases.
II. On the other hand the appellant in his submission argued that the ld. AO has not made any independent enquiry and ignored all the documentary evidence.
III. The ld. AO has not doubted on the genuineness of documents submitted by the assessee and if the assessee had a deceitful motive, it would not have produced any documents at the time of assessment. Even no infirmity /discrepancy has been pointed out by the ld. AO in the books of accounts of the assessee u/s 145(3) of the Act, and profit declared has already been adopted.
IV. Once the purchases are supported with confirmed ledgers banking payments and corresponding utilization/sales the purchases cannot be treated as bogus unless cogent material evidences is brought on record to prove that purchase consideration paid has come back to the assessee.
V. Further the Ld. Assessing Officer has accepted sale/trade receipts. Therefore, sale cannot be made without purchase of material.
VI. It is elementary rule of accountancy as well as taxation laws that profit cannot be ascertained without deducting cost of purchases from sales otherwise it would amount to levy of income tax on gross receipts or on sale. Such resource is not permissible under any provisions contained in the Act.
VII. The genuineness of purchase transactions with M/s Sterling Agro Industries Ltd. has already been accepted by the ld. AO in proceeding assessment year ay2013-14 as evident from the Assessment order for AY2013-14.
VIII. It is settled law that while res - judicata does not strictly speaking, apply to income tax proceedings the courts (including the Hon’ble Apex Court) have repeatedly emphasized that where the fundamental facts remained the same in different assessment years, it is not open for the Revenue to take one view in certain years and another view in other years.
IX. In this case, substantive addition has made in the hand M/s Sterling Agro Industries Ltd. and protective addition has made in the hand of the appellant. This office has already accepted the genuineness of the purchases transactions and deleted the addition in the hand of M/s Sterling Agro Industries Ltd. Hence, I am of the considered opinion that merely from the purported information received from investigation Wing it would be too fabricated to interpret that transactions done by M/s Sterling Agro Industries Ltd. with the assessee are bogus and hence such a conclusion reached out by the ld. AO is factually misplaced and unfounded.
6.19Therefore, after careful consideration of the above narrated facts, circumstances of the case and the submissions of the Appellant, Assessment order and respectfully following the ratio of the judgement of the Apex Court and ITAT including jurisdictional ITATs addition of Rs.11,23,42,220/- made u/s 69C of the Act is deleted. Hence, the grounds of appeal are allowed.
6.20As regards other grounds are concerned, Since the appeal has been allowed on the merit of the case, the other grounds have been rendered redundant and adjudication of the same will be only academic in nature, therefore do not warrant any separate adjudication.
7.In the result appeal of the appellant is allowed.
Aggrieved the order of the Ld. CIT(A), the Revenue is in appeal before the Tribunal. The Assessee also filed the cross objection in the appeal.
Cross Objection No 107/Del/2026 The cross objection has filed on the following grounds:
1.That the proceedings u/s 147/148 are without jurisdiction and bad in law.
2.That under facts and circumstances of the case, the proceedings are without jurisdiction as the AO had not complied with the direction issued by Hon’ble Supreme Court case in the case of Asish Agarwal.
3.That under facts and circumstances of the case, the notice issued u/s 148 dt. 20-07-2022 is barred by limitation.
4.That under facts and circumstances of the case, the ld. AO erred in initiating re-assessment proceedings for making on protective basis which is not the purpose of re-assessment under the I. Tax Act.
5.That under facts and circumstances of the case, the impugned assessment order does not survive as the substantive additions had been deleted.
6.That under facts and circumstances of the case, the Ld. CIT(A) had rightly deleted the addition of RS.11,23,42,220/- made under section 69C of the Act on protective basis.
Firstly, we take the ground of the cross-objection no.3, in which the assessee raised the ground that the substantive addition has been deleted than the protective addition made in the hands of the assessee will not survive. We have heard the parties and perused the material available on records. The Ld. AR submitted that the substantive addition made by the AO in the case of M/s Sterling Agro Industries Limited has been deleted by the Ld. CIT(A) and confirmed by the Tribunal being time barred.
The Ld. DR submitted that the assessee did not comply the notices before the AO. The Assessing Officer found that assessee has failed to establish the real business with M/s Sterling Agro Industries. The assessee has failed to produce the original bills, cash books and other documents. The additions made by AO were deleted without confirming the documentary evidences.
In the case of Kanav Metals v. Income Tax Officer ITA No. 7778/Del/2019 for A Y 2014-15 the co-ordinate bench held that if the substantive addition has not been survived on account of being time barred consequently the protective addition made in the hands of the assessee will not survive. The relevant extract of the judgement as under:
7.It is not in dispute that the assessment order has been passed against the assessee on 28/12/2016 by making addition in the hands of the Assessee Firm on protective basis to protect the interest of the Revenue and in the very same assessment order, it is observed that ‘since both the partners of the Firm have admitted and owned the introduction of Rs. 67,50,000/- from their own source to the Assessee Firm and in the absence of no plausible explanation furnished by the partners the reassessment proceedings in their hands are being initiated separately for bringing the said amount to tax’. It is brought to our notice that the said reassessment proceedings u/s 147 of the Act against the partners of the Assessee Firm was dropped on account of same becoming time barred as per the provision of Section 153(2) of the Act on 31/03/2023, which was not disputed by the Ld. DR. It is well settled proposition of law that when substantive addition does not survive on account of being time barred, then the protective addition also does not survive. The said view of ours have been fortified by the order of the Tribunal in (Jodhpur Bench) the case of Ramesh Chand Prem Raj Soni (HUF) Vs. ACIT 2006 (10) TMI-197 dated 16/10/2016, where in it is held as under:-
"6.We meticulously traversed through all the evidences and also took the learned Authorized Representative and Departmental Representative, through all the relevant papers placed in the file to which our attention was drawn. There is no dispute with regard to the facts that all the additions, which are the subject-matter of this appeal or for that matter that of assessment order passed under s. 158BD in the case of the HUF, are made on protective basis. All parallel additions were made in the case of Shri Ramesh Chand Soni individual. The assessment made under s. 158BC in the case of Shri Ramesh Chand Soni does not survive at all, since it has been struck down being time-barred. The addition made on substantive basis have not been decided by deleting the same from assessee's individual hands rather they were thrown along with the block assessment order. meaning thereby, now there is no substantive addition in existence at all; and the protective addition presupposes the existence of substantive additions Let us put it in another words that whenever additions are made, they are only substantive additions. The term protective addition is a misnomer, actually it is a substitutive addition. The 'protective-addition' name has been given to it since it protects the interest of the Revenue Say, if in X's case, addition cannot be ultimately made, it may be considered in the case of Y. Here in such a case there happens to be some doubt as to whom a particular income belongs to when it is not clearly established as to in whose hands a particular income should be added, when there are evidences that it may belong to either of the two, or when scintillating evidences are available from which it is not possible to come to clear-cut conclusion, readily. In the given case the substantive additions have not been declared to not belong to Shri Ramesh Chand Soni. Had that been the case, this protective addition could have been considered and added substantially if it was found to belong to "protective assessee. We don't say that no protective addition can be made under Chapter XIV-B of the Act"
8.In view of the above discussion, since the substantive addition has not been survived on account of being time barred, consequently, the protective addition made in the hands of the assessee herein also will not survive, accordingly, we delete the protective addition by setting aside the order of the Lower Authorities.
9.In the result, Appeal of the assessee is allowed.
In the instant case the substantive addition made in the hand of the M/s Sterling Agro Industries Limited has been deleted by the Ld. CIT(A) and appeal of the Revenue has been dismissed on the ground of limitation of the notice, than the protective addition made in the hands of the assessee will not survive, respectfully following the decision of the Co-ordinate Bench we allowed the ground no. 3 raised by the assessee. Since, we allowed the ground no .3 of the cross objection filed by assessee therefore, the other grounds became academic and need not to adjudicate and left open.
In the result the appeal of the Revenue is dismissed and cross objection filed by the assessee is allowed.