2022 (3) TMI 894 - AT - Income Tax

Advance to the company from out of the cash receipt - addition on protective basis - CIT(A) deleted the addition made by the AO on the ground that since the sources and creditworthiness were proved in the substantive assessment, protective assessment did not have legs to stand - HELD THAT - If a protective assessment is to be invoked u/s 68 of the Act, the conditions laid down in section 68 should be satisfied. The assessee has offered explanation to the satisfaction of the AO on the credit worthiness and the source of funds deposited into the bank account of the company. This was not disputed by the AO in his order. The AO has also not rejected the explanation, by the company, where it is implied that the AO has accepted the source. In this case also the assessee has provided explanation regarding the source of cash deposits, and has also accepted the real estate income, filed revised return and discharged his liability in payment of taxes. We find from the order of Ld.CIT(A) that the addition of ₹ 1,74,52,500/- made on substantive basis since the loan creditor provided evidences to the satisfaction of Ld.CIT(A). As the assessee has provided documentary proof for receipt of money during the substantive assessment of the company, the addition of the same on the basis of protective assessment does not have legs to stand - impugned addition shall be deleted - Decided in favour of assessee. Receipt of cash - Valid proof - CIT(A) ought not have accepted the assessee s claim rejected in the absence of valid proof and should have rejected the mere entry in the creditor s books of account - HELD THAT - As assessee has advanced a sum of ₹ 5.20 crores to M/s Gowtham Buddha Textiles Pvt. Ltd. out of the real estate income admitted by the assessee. We see from the record submitted by the Ld.AR that the assessee has shown the amount of ₹ 5.20 crore as investment in his books of accounts. We also find that this fact was also recorded by assessee to Q No 7 in his sworn statement during the course of scrutiny assessment in the case of Gowtham Buddha Textile Park Pvt. Ltd, for the A.Y. 2014-15 to 2017-18 u/s 131 of the Act. We therefore find no merit in the argument of the Ld.DR and, we dismiss the ground raised by the revenue. In the result, appeal filed by the revenue is dismissed.

Summary

Issues:
1. Validity of the order of the Ld.CIT(A)
2. Acceptance of the assessee's claim of cash receipt
3. Addition of &8377; 1,74,52,500/- in the assessment

Analysis:
1. The appeal was filed by the Revenue against the order of the Commissioner of Income Tax (Appeals)-3 for the A.Y. 2017-18. The Revenue raised concerns about the correctness of the Ld.CIT(A)'s order on both legal and factual grounds. The Ld.CIT(A) had accepted the assessee's claim of cash receipt without sufficient proof and the Revenue contested this decision.

2. The brief facts of the case revealed that a search operation was conducted on the assessee, who is the proprietor of a company. The assessee filed returns admitting income but faced challenges regarding certain deposits and advances. The Assessing Officer proposed additions due to discrepancies in the claimed advances and deposits. The Ld.CIT(A) reviewed the case and found that the sources and creditworthiness were proven in the substantive assessment, leading to the deletion of the addition made by the AO on protective basis.

3. The key contention revolved around the addition of &8377; 1,74,52,500/- in the assessment. The Revenue argued that the assessee failed to provide proof for the cash payment and the source of funds. However, the Ld.AR presented evidence of investments and unaccounted income disclosure to support the assessee's position. The Ld.CIT(A) had already deleted the addition in the substantive assessment due to satisfactory explanations and documentary proof provided by the company. Therefore, the Tribunal upheld the Ld.CIT(A)'s decision to delete the impugned addition.

4. The Tribunal further addressed the issue of the assessee advancing a sum of &8377; 5.20 crores to another entity, which was supported by the real estate income admitted by the assessee. The Ld.AR presented documentation to substantiate this claim, and the Tribunal found no merit in the Revenue's arguments. Consequently, the Tribunal dismissed the appeal filed by the Revenue and the cross objections filed by the assessee.

In conclusion, the Tribunal upheld the decision of the Ld.CIT(A) to delete the addition in the assessment, based on the satisfactory explanations and documentary evidence provided. The Tribunal also dismissed the Revenue's appeal and the assessee's cross objections, finding no merit in the Revenue's arguments against the assessee's claims.