2011 (4) TMI 1521 - AT - Income Tax

Summary

Issues Involved:
1. Sustaining the addition of Rs. 2,18,000/- towards unexplained investment u/s 69 on a protective basis.
2. Legality of protective assessment in appellate proceedings.

Summary:

Issue 1: Sustaining the addition of Rs. 2,18,000/- towards unexplained investment u/s 69 on a protective basis

All these appeals pertain to the same assessee consequent to order passed u/s 155A(a) of the Act. The CIT(A)-I Pune sustained the addition of Rs. 2,18,000/- towards unexplained investment u/s 69 of the Act in the hands of the assessee on a protective basis. The CIT(A) observed that the seized material found in the possession of Shri Shriram Soni did not establish that the assessee had advanced funds to him, and there was no incriminating material found during the search conducted on the appellant's premises. The assessee and his family members had disclosed and offered to tax unaccounted income of Rs. 30 lakhs in returns filed in pursuance of notice u/s 153A. The CIT(A) held that the same income had been held to be taxable on a substantive basis in the case of Shri Shriram Soni, and thus, no addition could be made in the case of the appellant on a substantive basis. However, the CIT(A) directed that the income should be taxed on a protective basis to protect the interest of revenue until the issue reaches finality in appellate proceedings in the case of Shri Shriram Soni.

Issue 2: Legality of protective assessment in appellate proceedings

The learned counsel for the assessee opposed the CIT(A)'s finding, arguing that protective assessment at the appellate stage is not permissible. The counsel relied on several decisions, including CIT Vs. Smt. Durgawati Singh (1998) 234 ITR 249 (Alld), Prakash Wine Agencies Vs ITO (1990) 38 TTJ (All) 39, and Saipem UK Ltd. Vs. Dy. Director of Income-tax (International Taxation) Range 2(1) Mumbai (2007) 108 ITD 545 (MUM), to support the contention that appellate authorities cannot make a protective order. The Tribunal agreed with this view, stating that it was the duty of the CIT(A) to determine the real owner of the income in question and that the issue could not be left undecided in appeal. The Tribunal held that the CIT(A), after upholding the addition on a substantive basis in the other case, could not make a protective appellate order in the case of the assessee. Consequently, the direction of the CIT(A) to sustain the addition on a protective basis was vacated.

Conclusion:

The Tribunal found that the CIT(A) was not justified in directing the Assessing Officer to sustain the addition on a protective basis and vacated the CIT(A)'s direction. All the appeals of the assessee were partly allowed.

Decision pronounced in the open court on 13th April 2011.