2014 (2) TMI 421 - AT - Income Tax

Tribunal upholds deletion of protective additions in taxpayer's hands, citing lack of evidence

DEPUTY COMMISSIONER OF INCOME TAX Versus SHRI DILIP V DHERAI

The Tribunal dismissed all department appeals, confirming the deletion of protective additions in Shri Dilip Dherai's hands. It found substantive ... Deletion made on addition made by AO on protective basis - Whether the CIT(A) was justified in deleting the protective addition when the land companies are in appeals against the confirmation of substantive addition and thus the issue of substantive addition has not yet reached finality – Held that:- There was no evidence to support the Revenue's case that a huge figure, whatever be its quantum, over and above the figure booked in the records and accounts changed hands between the parties, no addition could therefore be made u/s. 69C of the Act to the income of the assessee - The Tribunal has already given a finding that no addition can be made in the hands of those companies on substantive basis on the basis of material found during the course of search - Neither there was any evidence to show that any cash has changed hand nor there was any confirmation from the sellers from whom the land in question was purchased and after analyzing all these facts the Tribunal came to the conclusion that no addition can be made in the hands of the companies – the additions could not be sustained. Protective assessment can be made if the same amount is added in one hand and the same amount is added in another hand on protective basis - the AO made substantive addition in the hands of land companies and protective basis in the hands of assessee for these three years - The Tribunal has taken a decision that no addition can be made on the basis of material found during the course of search - In the case of the assessee, the addition cannot be deleted merely on the basis of the findings of the Tribunal, even on merit no addition can be made in the hands of the assessee - the protective addition made in the hands of the assessee for these three assessment years, was not justified - the order of the CIT(A) confirmed, who deleted the addition in the hands of the assessee made on protective basis – Decided against Revenue. Issues Involved:1. Deletion of protective addition by CIT(A) when substantive addition was confirmed for land companies.2. Validity of protective assessment in the hands of Shri Dilip Dherai.3. Jurisdiction under Section 153C and the merits of the additions made.4. Treatment of cash found during the search operation.Detailed Analysis:1. Deletion of Protective Addition by CIT(A):The department contested the deletion of the protective addition made by the Assessing Officer (AO) on the grounds that the substantive addition in the hands of the land companies was confirmed. The CIT(A) had deleted the protective addition on the basis that the substantive addition had already been confirmed, thus rendering the protective addition unnecessary. The Tribunal upheld the CIT(A)'s decision, noting that the substantive addition in the hands of the land companies had indeed reached finality, and therefore, no protective addition was warranted in the hands of Shri Dilip Dherai.2. Validity of Protective Assessment in the Hands of Shri Dilip Dherai:The department argued that the protective assessment was valid and necessary to safeguard the revenue's interest, citing the Supreme Court's decision in Lalji Haridas v. ITO and the Gujarat High Court's decision in CIT v. Surendra Gulab Chand Modi. The Tribunal, however, found that the protective assessment in the hands of Shri Dilip Dherai was not justified, as the substantive addition in the hands of the land companies had already been confirmed. The Tribunal emphasized that no prejudice was caused to the assessee by the protective assessment, as it was merely a paper demand.3. Jurisdiction Under Section 153C and Merits of Additions:The Tribunal examined whether the AO had rightly assumed jurisdiction under Section 153C based on the documents seized during the search. It was found that the documents did not belong to the assessee but were seized from the premises of Shri Dilip Dherai. The Tribunal noted that the AO had not established a direct link between the seized documents and the 52 land companies. The Tribunal also highlighted that the AO's satisfaction note was not based on conclusive evidence, and the seized documents did not contain any mention of the land companies. Thus, the Tribunal concluded that the action taken under Section 153C was bad in law.On the merits, the Tribunal found no evidence to support the claim that cash payments had been made outside the books of account. The Tribunal noted that the entire addition was based on loose sheets of paper without any corroborative evidence, such as statements from the land sellers. The Tribunal emphasized that the assessee had not incurred any expenditure that could be deemed as unexplained under Section 69C, and thus, no addition could be sustained on merits.4. Treatment of Cash Found During the Search Operation:For the assessment year 2009-10, the AO had made a protective addition of Rs. 18 lakhs in the hands of Shri Dilip Dherai, which was claimed to belong to M/s Urban Transportation Infrastructure Pvt. Ltd. (UTIPL). The CIT(A) deleted this protective addition, as the amount was admitted by UTIPL. The Tribunal upheld the CIT(A)'s decision, noting that the substantive addition had already been made in the hands of UTIPL, and there was no reason to make a protective addition in the hands of Shri Dilip Dherai.Conclusion:The Tribunal dismissed all the appeals of the department, confirming the deletion of protective additions made in the hands of Shri Dilip Dherai. The Tribunal found that the substantive additions in the hands of the land companies had reached finality and that the protective assessments were not justified. The Tribunal also concluded that the jurisdiction under Section 153C was not rightly assumed, and the additions on merits were not sustainable due to lack of evidence.