2016 (1) TMI 658 - AT - Income Tax

Addition u/s 69 - addition made in the in sum of 8 lakhs on protective basis on account of loan advanced - Held that - We find that the factual transactions have not been properly understood by the ld.AO and the ld.CIT(A). We hold that the assessee only received a sum of 8 lakhs as loan from his brother and had repaid the same to his brother with interest. Hence in these facts and circumstances the relevant section if at all that could be applied would be section 68 and not section 69. Even though the loan transaction of 8 lakhs has been kept outside the books of account by the assessee it cannot be taxed as unexplained cash credit u/s. 68 in the facts of the case as essential three ingredients has been duly proved by the ld.AO himself and contents of the seized documents. We hold that though the loan transaction of 8 lakhs has been kept outside the books by the assessee. It has been proved beyond doubt based on the findings given hereinabove that the essential three ingredients of section 68 has been duly proved. Hence the character of a receipt would not change as admittedly the loan transaction is only capital receipt in the hands of the assessee. Protective assessment - the circumstances under which a protective assessment could be made has not been properly considered by the revenue. There is absolutely no doubt with regard to the fact that the sum of 8 lakhs has already been added in the hands of the assessee s brother for the assessment year 1991-92 u/s. 143(3) vide assessment order dated 25-02-1994 by the very same ld.AO.We hold that if an addition has been sustained for the assessment year 1991-92 in the hands of the assessee it will amount to double addition as substantively it has already been taxed in the hands of the assessee s brother by the very same ld.AO by giving cogent reasons and based on the seized documents found and seized by the search party in the premises of the assessee s brother. Hence there is no justification to make any addition in the hands of the assessee for the very sum of 8 lakhs as cash credit either on substantive or protective basis in the facts and circumstances of the case - Decided in favour of assessee.

Summary

Issues involved:
1. Dismissal of appeal for assessment year 1992-93.
2. Addition of Rs. 8 lakhs on protective basis for assessment year 1991-92.

Detailed Analysis:
1. The appeal for the assessment year 1992-93 was dismissed as withdrawn by the assessee during the hearing, with no objections raised by the Department. The dismissal was based on the decision made by the assessee's representative to withdraw the appeal, leading to the dismissal of the appeal for the said assessment year.

2. In the case of the assessment year 1991-92, the main issue revolved around the addition of Rs. 8 lakhs on a protective basis. The dispute arose from a loan transaction between the assessee and his brother, which was found during a search operation. The Assessing Officer (AO) treated the loan transaction as if the assessee had advanced the amount to his brother, leading to the addition of Rs. 8 lakhs as unexplained investment in the assessee's assessment. However, it was established that the assessee had received the loan from his brother and had repaid it with interest. The AO incorrectly invoked Section 69 instead of Section 68. The Tribunal analyzed the essential ingredients of Section 68, including the identity of the creditor, genuineness of the transaction, and creditworthiness of the creditor, all of which were duly proven. The Tribunal held that the loan transaction was a capital receipt in the hands of the assessee, and there was no justification for a protective assessment as the amount had already been taxed in the hands of the assessee's brother. Therefore, the addition of Rs. 8 lakhs on a protective basis was not justified, and the appeal for the assessment year 1991-92 was partly allowed.

In conclusion, the Tribunal dismissed the appeal for the assessment year 1992-93 and partly allowed the appeal for the assessment year 1991-92 based on the detailed analysis and findings related to the addition of Rs. 8 lakhs on a protective basis in the latter assessment year.