2024 (12) TMI 181 - AT - Income Tax

Addition in applying provision of Section 56(2)(viib) in retrospective manner - Addition on protective basis without framing any substantive assessment to this clinching effect in the alleged other person/husband s hands - AO invoked the impugned statutory provision thereby treating the said differential sum as assessee s income from other sources which has been confirmed in the lower appellate discussion - HELD THAT - Both the learned lower authorities have made the impugned addition on protective basis without framing any substantive assessment to this clinching effect in the alleged other person/husband s hands. The question as to whether such a course of action making protective addition on ex ascendant cautela basis, in absence of a substantive addition, came up for consideration before this tribunal s learned co-ordinate bench in Suresh K. Jajoo vs. ACIT 2010 (3) TMI 874 - ITAT MUMBAI . Thus, we conclude that the impugned protective addition made on standalone basis in absence of a substantive assessment, is not sustainable in law. The same is directed to be deleted in very terms.

Summary

Issues:
Validity of addition under section 56(2)(viib) in the assessment year 2014-15.

Analysis:
The appeal was against the National Faceless Appeal Centre's order under section 143(3) of the Income Tax Act, 1961. The assessee raised several grounds challenging the addition of Rs. 35,38,000 under section 56(2)(viib). The Assessing Officer treated the difference between the purchase consideration and stamp value of a jointly acquired asset as income from "other" sources. The validity of this addition was a key issue. The addition was made on a protective basis only, as the ownership arrangement and payment details were not clear. The lower authorities confirmed this addition, but the tribunal found it unsustainable in law.

The Assessing Officer added the differential sum on a protective basis under section 56(2)(viib) in the assessee's hands. However, the ownership and payment details were not determined conclusively. The tribunal cited a previous case to explain the concept of protective assessment, emphasizing that it should always be subsequent to a substantive assessment. The tribunal concluded that the protective addition made in the absence of a substantive assessment was not legally sustainable. Therefore, the tribunal ordered the deletion of the protective addition.

In summary, the tribunal allowed the assessee's appeal, directing the deletion of the protective addition made under section 56(2)(viib) on a standalone basis. The tribunal found that the addition was not sustainable in law without a substantive assessment. The order was pronounced on 29.08.2024.