2020 (1) TMI 498 - AT - Income Tax

Tribunal overturns CIT(A) decision on protective addition, directs fresh adjudication

The Tribunal set aside the CIT(A)'s decision to uphold a protective addition of Rs. 1,30,00,000 made by the Assessing Officer in one assessee's case, ... Addition On Protective Basis in the hands of the appellant - addition in respect of cash of ₹ 1.30 crores seized from assessee - whether the same addition can be retained in the hands of two assessees, in one on substantive and other on protective basis? - HELD THAT:- We find that CBDT in order dated 20-12-1971 has authorized the Departmental Authorities to cancel the protective assessment where the substantive assessment had attained finality. Departmental Authorities are bound by the Circulars issued by the CBDT, and should take action in the hands of the assessee after verifying the facts in respect of the status of the addition in the hands of Sh. Rajiv Gulati. CIT(A) is not justified in sustaining the protective addition merely on the reason that the assessee has not provided the status of finality of addition in the hands of Sh. Rajiv Gulati. CIT(A) had access to the records of the department and could have ascertained the status of finality of addition. In our opinion, retaining the addition by the First Appellate Authority, in both substantive in the case of one assessee and protective in the hands of another assessee, is not justified. Set aside order of the ld. CIT(A) and restore the matter back to the ld. CIT(A) for deciding afresh in accordance with law after verifying the records that Sh. Rajiv Gulati has finally accepted addition of ₹ 1.3 Crore in his hand. - Appeal of the assessee allowed for the statistical purposes. Issues Involved:1. Whether the CIT(A) erred in dismissing the appeal and sustaining the addition of Rs. 1,30,00,000 on a protective basis.2. Whether the same addition can be retained in the hands of two assessees, one on a substantive basis and the other on a protective basis.Detailed Analysis:1. Sustenance of Addition on Protective Basis:The assessee's appeal challenged the CIT(A)'s decision to uphold the addition of Rs. 1,30,00,000 made by the Assessing Officer (AO) on a protective basis. The AO had assessed this amount as income of the assessee after a cash amount of Rs. 1,72,67,000 was found and seized by the Directorate of Revenue Intelligence (DRI) at the premises of another individual. During survey proceedings at the assessee's premises, the assessee admitted that Rs. 1,30,00,000 belonged to him. However, the assessee did not reflect this amount in his return of income, and the cheques given during the survey for tax payments were dishonored. Consequently, the AO made a protective addition in the assessee's case, while a substantive addition was made in the case of the individual from whose premises the cash was seized.The CIT(A) upheld the protective addition on the grounds that the assessee failed to provide evidence that the other individual had accepted the addition in his hands. The CIT(A) referenced the assessee's statements during the survey, where the assessee admitted the cash belonged to him and provided details of how the income was generated. Despite this, the assessee did not file a revised return or provide supporting documents for the claimed ownership of the cash.2. Retention of Addition in Both Assessees:The Tribunal examined whether the same addition could be retained in the hands of two assessees, one on a substantive basis and the other on a protective basis. The Tribunal referenced a CBDT order dated 20-12-1971, which authorizes the cancellation of protective assessments where the substantive assessment has attained finality. The Tribunal noted that the Departmental Authorities are bound by CBDT Circulars and should take action accordingly.The Tribunal found that the CIT(A) was not justified in sustaining the protective addition merely because the assessee did not provide the status of the addition in the hands of the other individual. The CIT(A) had access to departmental records and could have verified the status of the substantive addition. Retaining the addition in both cases was deemed unjustified.Conclusion:The Tribunal set aside the CIT(A)'s order and restored the matter for fresh adjudication. The CIT(A) was directed to decide the case afresh after verifying whether the other individual had finally accepted the addition of Rs. 1.3 Crore in his hands. The appeal was allowed for statistical purposes.Order Pronouncement:The order was pronounced in the open court on 10th January 2020.