2018 (9) TMI 1095 - HC - Income Tax

Protective addition - Addition of undisclosed income (on money consideration received by the assessee) - addition made on the ground that the assessee firm signed in the sale deed as confirming party, which, as such, was between the partners of the assessee firm in their individual capacity - Tribunal deleting the addition on the ground that no material has been brought on record in respect of the assessment made - survey under Section 133A - Held that - The assessee firm was merely a confirming party and no consideration was received by the assessee firm with respect to the transaction of transfer of certain lands and that the transaction was in favour of the partners of the firm in their individual capacity and that no similar addition was made in the hands of those partners in their individual accounts and that as such, the addition was made by the Assessing Officer in hands of the assessee as protective addition , it cannot be said that the learned Tribunal has committed any error in deleting the addition made by the Assessing Officer on account of alleged on money consideration received by the assessee firm. We are in complete agreement with the view taken by the learned Tribunal.- decided against revenue

Summary

Issues:
1. Whether the Appellate Tribunal was right in upholding the decision of the CIT(A) and deleting the addition of ?4,72,31,590 on the ground of lack of material evidence?
2. Whether the addition made by the Assessing Officer was justified in the case where the transaction was between partners of the assessed firm in their individual capacity?

Analysis:
Issue 1: The primary issue in this case was whether the Appellate Tribunal was correct in affirming the decision of the CIT(A) to delete the addition of ?4,72,31,590 due to the absence of sufficient evidence. The facts revealed that a survey under Section 133A of the Act was conducted at the business premises of the assessee, resulting in the Assessing Officer adding the aforementioned amount as undisclosed income. However, the CIT(A) overturned this decision, stating that the transaction was not directly involving the assessee firm but the partners in their individual capacity. The ITAT upheld this decision, emphasizing that no consideration was received by the assessee firm in the transfer of lands, leading to the deletion of the addition. The High Court concurred with the ITAT's reasoning, concluding that as no error was committed in deleting the addition, no substantial question of law arose, and hence, the appeal was dismissed.

Issue 2: The second issue revolved around the justification of the addition made by the Assessing Officer concerning a transaction between the partners of the assessed firm in their individual capacity. The Assessing Officer had considered the firm as a confirming party in the transaction and added the amount as alleged on money consideration received by the firm. However, the CIT(A) and subsequently the ITAT found that since the transaction was not directly related to the firm and no similar addition was made in the partners' individual accounts, the addition was deemed as a "protective addition." The High Court agreed with this interpretation, emphasizing that the transaction was between the partners individually, leading to the deletion of the addition by the lower authorities. Consequently, the High Court upheld the decision and dismissed the appeal, as no interference was warranted.

In conclusion, the High Court upheld the decisions of the lower authorities to delete the addition of ?4,72,31,590 due to the lack of material evidence and the nature of the transaction being between the partners of the assessed firm in their individual capacity. The judgment emphasized the importance of considering the specific circumstances of a transaction and individual capacities while making such additions, leading to the dismissal of the appeal.