2014 (10) TMI 148 - HC - Income Tax

Unexplained advances Initial burden discharged or not - Addition made on substantive basis - Held that - When all the very additions were considered by the ITAT and have been confirmed or considered in the case of firm M/s Ghindmal Kauromal or/and in the case of Roop Chand or/and in the case of Nanak Ram (Dropadi Devi), then the addition cannot be made again in the hands of the assessee - the documents were found in the custody and control of the assessee but when the assessee conveyed that either it pertains to firm or to other persons namely Nanak Ram or Roop Chand, and when both CIT (A) and ITAT have accepted this plea then initial burden was discharged - when the very documents have already been considered by the Tribunal then certainly double addition, one in the hand of the person in whose custody the documents are found and secondly in the case of the other person where substantive addition is made, is not permitted under the IT Act - the addition again cannot be made on the same documents/loose papers in the hands of the assessee and the ITAT rightly came to the aforesaid conclusion. Protective addition was made in the case of assessee whereas substantive addition was either made in the case of M/s Ghindmal Kauromal or/and in the case of Roop Chand or/and in the case of Nanak Ram (Dropadi Devi) and when the above additions have finally been sustained, as observed by the ITAT in the case of M/s Ghindmal Kauromal or/and in the case of Roop Chand or/and Nanak Ram (Dropadi Devi), then it is a finding of fact and no question of law can be said to arise with the facts found by the ITAT - the addition of these very documents had been sustained in some other case relating to the search or other partners or in the case of M/s Ghindmal Kauromal or/and in the case of Roop Chand or/and Nanak Ram (Dropadi Devi), then the Tribunal had rightly deleted the addition as the same cannot be or could not have been made in two hands tribunal rightly rejected the reference application as it does not give rise to any question of law fit for reference - the reference application does not involve any question of law Decided against revenue.

Summary

Issues:
1. Interpretation of additions made in the assessment year 1986-87 based on seized documents.
2. Justification for deleting additions made on various grounds in the case of the assessee.
3. Consideration of protective basis for additions in the case of the assessee.

Analysis:

Issue 1:
The reference application under section 256(2) of the Income Tax Act challenged the order of the Income Tax Appellate Tribunal (ITAT) related to the assessment year 1986-87. The revenue proposed questions regarding the deletion of additions based on seized documents. The Tribunal had deleted various additions made by the Assessing Officer, leading to a dispute over the justification of these deletions.

Issue 2:
The CIT(A) had earlier observed that the additions made on a protective basis in the case of the assessee were deleted since similar additions were confirmed in the case of the firm. The ITAT, upon appeal, further examined the factual findings and upheld the deletions based on the treatment of similar additions in other related cases. The revenue contended that the additions were justified due to the documents found in the possession of the assessee, emphasizing the burden of proof on the assessee to explain the transactions.

Issue 3:
The ITAT rejected the reference application, stating that the findings were factual and did not raise any legal questions. The court agreed with the ITAT's decision, emphasizing that when additions were already considered and confirmed in related cases, making the same additions in the hands of the assessee would be duplicative. The court explained the concept of protective and substantive assessments, highlighting that the revenue authorities have the right to make protective assessments but cannot sustain additions in multiple hands based on the same documents.

In conclusion, the High Court rejected the reference application as it did not involve any question of law. The court upheld the ITAT's decision, emphasizing that the additions in the case of the assessee were not justified due to the treatment of similar additions in related cases and the concept of protective assessments under the Income Tax Act.