2014 (3) TMI 32 - AT - Income Tax

ITAT upholds deletion of unexplained deposits, elder brother's ownership reflected in return

The ITAT upheld the CIT(A)'s decision to delete the addition of Rs.15,72,000 as unexplained deposits in the hands of the assessee for A.Y. 2005-06. The ... Deletion made on account of unexplained deposits – Protective assessment made – Held that:- The contention of the Assessee is accepted that although the reasoning for reopening was very much in the notice of the Income Tax Officer but after considering the explanation and the return of income filed by the brother, the ITO had chosen to accept the returned income - once there was no substantive addition of amount then there ought not to be any question of protective assessment in the hands of the assessee - The Revenue Department has examined the evidences in respect of Sri Kamlesh Kumar Chaudhary and thereupon found them correct – they made no addition in respect of the amount - while deciding the appeal of the assessee, CIT(A) has also noted all of those evidences and held that the said transaction being reflected in the return of Sri Kamlesh Kumar Chaudhary and that return was accepted by the Revenue Department –thus, the assessment of the amount protectively in the hands of the assessee did not survive - the findings of the First Appellate Authority upheld – Decided against Revenue. Issues involved:- Appeal filed by Revenue and Cross Objection by assessee against order of CIT(A) for A.Y. 2005-06.- Addition of Rs.15,72,000 on account of unexplained deposits challenged by Revenue.- Whether protective assessment justified in case of assessee.Analysis:1. The appeal before the ITAT Ahmedabad stemmed from an assessment order under section 143(3) r.w.s 147 of the IT Act, where the AO added Rs.15,72,000 as unexplained deposits in the hands of the assessee based on information received regarding a joint account with the brother of the assessee. The AO initiated penalty proceedings under section 271(1)(c) for furnishing inaccurate particulars of income. The assessee challenged this addition before the CIT(A) (Paragraph 2).2. The CIT(A) deleted the addition after considering that the bank account in question belonged to the elder brother of the assessee and was reflected in his return of income. The CIT(A) found that the elder brother had confirmed ownership of the account and all transactions, with the closing balance reflected in his balance sheet. The CIT(A) noted that the elder brother's assessment was pending but had filed his return well before any notice to the assessee. The CIT(A) concluded that there was no basis for a protective assessment on the assessee (Paragraph 3).3. During the ITAT hearing, the Revenue supported the AO's order, while the appellant's representative argued that since the elder brother's returned income was accepted by the Revenue Department without any addition, there was no need for a protective assessment on the assessee. The ITAT upheld the CIT(A)'s decision, noting that the Revenue had examined the evidence related to the elder brother and made no additions. Consequently, the protective assessment on the assessee was deemed unnecessary (Paragraph 4).4. The ITAT dismissed the Revenue's appeal and the assessee's cross objection. The cross objection raised by the assessee was related to the CIT(A) not adjudicating certain submissions, but it was later withdrawn by the assessee's representative. As a result, the ITAT confirmed the CIT(A)'s findings and dismissed both the Revenue's appeal and the assessee's cross objection (Paragraphs 4.1, 5, 6, 7, 8).