2018 (8) TMI 1256 - AT - Income Tax

Protective assessment u/s 153A r.w.s 143 - amounts received from Free Trade Union Multipurpose Trust (FTUMPT) - appellant was assessed to tax u/s 44AD of the Act - Held that - once substantive addition made in the case of alleged beneficiary has been deleted by the ITAT, there is no reason to sustain addition made by the AO towards protective addition in the hands of the assessee more particularly, when assessee has demonstrated with evidence that such receipt has been part of his income-tax returns and also he has carried out necessary repair works to the trust. - Additions deleted - Decided in favor of assessee. Additions u/s 68 - unexplained cash deposits found in two bank accounts - Additions on the ground that there are huge credits in two bank accounts for which the assessee has not filed any explanation to prove sources of income. - Held that - the assessee has filed paper book containing bank statements of two proprietory concerns and bank statements of savings bank account maintained in Bharat co-operative Bank Ltd, Kalina Branch and ICICI Bank, Vile Parle (E) Branch to explain credits found in bank accounts with corresponding withdrawals from other bank accounts, but fact remains that the assessee has not filed a chart explaining date-wise credit found in two bank accounts and corresponding withdrawals from two proprietory concerns bank accounts. - Matter remanded back to the file of AO for examination of facts.

Summary

Issues Involved:
1. Protective addition of amounts received from Free Trade Unions Multi Purpose Trust (FTUMPT).
2. Addition of unexplained cash deposits in bank accounts under Section 68 of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Protective Addition of Amounts Received from FTUMPT:
The revenue challenged the deletion of a protective addition of ?38,50,000 made on account of amounts received from FTUMPT by the assessee. The revenue argued that the CIT(A) erred in deleting the addition without addressing the substantive addition made in the case of Ms. Chandbibi Zaidi, where it was alleged that the managing trustee siphoned off funds under the guise of bogus expenditure on repairs to Kennedy House. The ITAT noted that the assessee had included the amounts received from FTUMPT in his income-tax returns and had followed the principles of deeming net profit under Section 44AD of the Income-tax Act, 1961. The ITAT also considered the decision in the case of Ms. Chandbibi Zaidi, where the substantive addition was deleted, and concluded that the protective addition in the assessee's case could not survive. Consequently, the ITAT upheld the CIT(A)'s decision to delete the protective addition, dismissing the revenue's appeals for AYs 2004-05, 2005-06, and 2006-07.

2. Addition of Unexplained Cash Deposits in Bank Accounts:
The assessee contested the addition of unexplained cash deposits found in two bank accounts under Section 68 of the Income-tax Act, 1961. The AO had made the addition on the ground that the assessee failed to explain the sources of income for the credits found in the bank accounts. The assessee argued that the deposits were from known sources, including withdrawals from his two proprietary concerns, M/s Sai Civil Décor and M/s Mahalaxmi Enterprises, and transfers from his HUF and wife's accounts. The ITAT observed that the assessee had not provided detailed explanations during the assessment proceedings but later submitted a paper book containing bank statements and other evidence. The ITAT decided to remand the issue to the AO for fresh examination, directing the AO to consider the evidence and delete the additions if the sources were satisfactorily explained. If not, the AO was instructed to determine the peak credit and sustain the addition to that extent. Thus, the ITAT allowed the assessee's appeals for AYs 2006-07 to 2010-11 for statistical purposes.

Conclusion:
The ITAT dismissed the revenue's appeals and allowed the assessee's appeals for statistical purposes. The ITAT upheld the CIT(A)'s decision to delete the protective addition related to amounts received from FTUMPT and remanded the issue of unexplained cash deposits for fresh examination by the AO. The order was pronounced in the open court on 21st August 2018.