Unexplained income: company deposits cannot be taxed as a director's income without proof of ownership, so protective additions fall.

Treatment of company deposits as unexplained income focuses on whether the assessee can be shown to be the owner of sums received by a company; the legal principle applied requires positive attribution of ownership before company receipts can be assessed as the director's unexplained income, and absence of such proof defeats the addition. Protective assessments founded solely on a substantive addition lack independent basis once the substantive assessment is deleted; consequently, protective additions must also be set aside where they rest entirely on the deleted substantive finding.

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Issues: (i) Whether the addition of Rs. 59,18,00,000/- made under section 69A of the Income-tax Act, 1961 in the assessment year 2017-18 (and carried protectively into A.Y. 2015-16 and 2016-17) can be sustained as income of the assessee; (ii) Whether the protective additions made in A.Y. 2015-16 and 2016-17 survive once the substantive addition for A.Y. 2017-18 is deleted.

Issue (i): Whether the deposit/receipts collected by M/s IFAMA Builders & Developers Pvt. Ltd. can be treated as unexplained money assessable in the hands of the assessee under section 69A of the Income-tax Act, 1961.

Analysis: The legal framework includes Section 69A of the Income-tax Act, 1961 which applies where an assessee is found to be the owner of money not recorded in books and the assessee offers no satisfactory explanation. The Tribunal examined whether the impugned receipts were owned by the assessee or were receipts of the company and whether there was material to attribute ownership to the assessee. The authorities below treated deposits received by the company as unexplained income of the assessee on the basis of his alleged directorship/managerial appointment, without evidence establishing that the assessee was the owner of the sums or had retained them for his personal use.

Conclusion: The addition of Rs. 59,18,00,000/- under Section 69A is deleted for A.Y. 2017-18. The decision is in favour of the assessee.

Issue (ii): Whether the same addition sustained protectively in A.Y. 2015-16 and 2016-17 can stand after deletion of the substantive addition for A.Y. 2017-18.

Analysis: The Tribunal considered that the addition was made substantively for A.Y. 2017-18 and carried protectively into the earlier years. Having deleted the substantive assessment for the year in which the material was found insufficient to attribute ownership to the assessee, the protective assessments lack independent footing. The Tribunal applied the same reasoning to the protective assessments, noting that deposits collected by the company cannot be assessed as the assessee's income merely because he was a director, absent proof of ownership.

Conclusion: The ground attacking the protective additions for A.Y. 2015-16 and 2016-17 is allowed; the protective additions are deleted. The decision is in favour of the assessee.

Final Conclusion: The appeals are partly allowed by deleting the addition of Rs. 59,18,00,000/- assessed as unexplained money in the assessee's hands for A.Y. 2017-18 and, consequentially, deleting the protective additions for A.Y. 2015-16 and 2016-17; the overall effect is favourable to the assessee.

Ratio Decidendi: Deposits or receipts of a company cannot be treated as the unexplained income of a director under Section 69A of the Income-tax Act, 1961 unless the assessee is shown to be the owner of those sums; protective assessments based solely on a substantive assessment that is deleted cannot survive independently.

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