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2021 (9) TMI 339 - AT - Income TaxBlock assessment u/s. 158BC - undisclosed income of the assessee - addition of the credit entries in two bank accounts - addition on protective basis on the ground that the assessee had withdrawn cash from two bank accounts - Second AO jurisdiction to make the addition substantively in the hands of the assessee - appeal raised by the assessee before the Tribunal in second round - assessee challenges that the AO was wrong in making the addition in the second reassessment order of 2002 on a new issue which was not subject matter to the set aside assessment by the Tribunal - HELD THAT:- It is common knowledge that after search u/s. 132 of the Act take place, the ADIT (Inv) files his Investigation Report taking into account, the seized material from all the searched persons/entities which throws light on the discovery of the unearthed undisclosed income of searched persons/entities and if the AO deviates from crucial aspects/facts the Ld. Pr. CIT/CIT would be expected to have stepped into by exercising his revisional jurisdiction u/s 263 of the Act, which has not happened in this case. So the First AO’s action of only making protective assessment is more probable in the overall facts of the case and in all probability therefore, the same was added on a substantive basis in the hands of M/s SWC which fact could not have been disturbed in the facts discussed - Second AO could not have reviewed the order of his predecessor AO which power he does not enjoy. The action of the second AO to hold in the impugned order that no substantive addition was made in the hands of M/s. SWC for ₹ 11.86 cr. is clearly reviewing the order of the First AO and that action AO cannot do, but only the CIT/PCIT u/s 263 of the Act as per the Scheme of the Act is empowered to do; and this finding that no substantive addition of ₹ 11.86 crore was made in the hands of M/s SWC is contradicting as noted supra when in the same breath the Second AO notes that in the Second block re-assessment order of M/s SWC nothing was altered meaning status quo ante i.e. as it is without any change in the case of assessment of M/s SWC is concerned - Second AO did not enjoy the jurisdiction to make the addition substantively in the hands of the assessee Merits of the addition - Assessee has satisfactorily explained that the money has come from the coffers/bank accounts of M/s. SWC and its subsidiaries. And M/s SWC has funded it from ₹ 89.02 crores from ICDs of ₹ 219.77 crores, therefore AO in the block assessment of M/s SWC has disallowed interest expenditure of ₹ 67.65 crores alleging it to be for non-business purpose . Since substantive addition made originally in the hands of M/s SWC has been reiterated by the AO in its reassessment order dated 30.03.2000, the protective assessment was not warranted in the hands of assessee because the assessee has been able to discharge the onus of showing the nature and source of the credit entries in the bank accounts of M/s. Kalo and M/s. Pragati as well as in the bank accounts of Shri N. C. Jain and Shri P. L. Mittal which in turn are sourced from M/s. SWC and its subsidiaries; and it is evident that the source of money for M/s. SWC and subsidiaries was in turn from ICDs as discussed which prompted the AO to disallow in the hands of M/s. SWC the interest expenditure to the tune of ₹ 67.65 crores. Therefore, the addition to the tune of ₹ 12.41 crores made in respect of credit entries in the bank account of M/s. Kalo and M/s. Pragati are unjustified and, therefore, directed to be deleted. Thus, the assessee succeeds on the legal issue as well as on merits. - Decided in favour of assessee.
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