2014 (2) TMI 804 - AT - Income Tax

Addition on account of investment in flat Protective assessment converted as substantive assessment Held that - The substantial addition has been made in the hands of the firm - The same amount cannot be assessed in the hands of the assessee on substantial basis - There is no material on record by which it can be said that there was some change in the facts and circumstance of the case according to which the assessee could be held to be assessable on substantial basis thus, the protective assessment made in the hands of the assessee could not converted into substantive when there are two assessments one on protective basis and other on substantial basis- it is always advisable to adjudicate both the issues simultaneously. The CIT(A) has committed an error in confirming the addition in the hands of the assessee on substantive basis without examining the finality of the same income in the hands of the firm where department has assessed the same amount on substantive basis - No material has been brought on record to show that whether the said substantial assessment made in the hands of the firm has attained finality thus, the matter remitted back to the AO for re-examination Decided in favour of Assessee.

Summary

Issues:
1. Addition on account of alleged investment in a flat
2. Levy of Penal Interest

Issue 1: Addition on account of alleged investment in a flat

The appeal was filed against an order passed by the CIT(A)-34, Mumbai, for the assessment year 2001-02. The AO noticed that the assessee received a sum of Rs. 20,25,000 regarding the cancellation of a flat not shown in the income tax return. The AO treated this amount as income on a protective basis to protect the Revenue's interest. The assessee contended that the flat was booked by a firm and the investment was made by the firm, not the assessee. The CIT(A) converted the assessment from protective to substantial in the hands of the assessee, upholding the addition. The Tribunal found that the firm's assessment order showed a substantial addition of the same amount, indicating that the income was assessed in the firm's hands on a substantive basis. As there was no change in facts to assess the assessee substantively, the Tribunal set aside the CIT(A)'s order, directing a re-examination by the AO in light of the firm's assessment.

Issue 2: Levy of Penal Interest

No arguments were presented regarding the levy of penal interest. The Tribunal directed the AO to levy interest as per law after completing the assessment based on the directions given for the first issue. The appeal was allowed for statistical purposes.

In conclusion, the Tribunal set aside the CIT(A)'s decision on the addition of alleged investment in a flat, directing the AO to re-examine the issue in light of the firm's assessment. The Tribunal also directed the AO to levy penal interest as per law after completing the assessment based on the re-examination.