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TMI Blog2022 (8) TMI 789X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s Shri Ram Borewell & Construction Company, it was noticed that during the year assessee introduced capital in cash of Rs.32,00,000/- and received interest on partner's capital of Rs.3,84,000/- and remuneration of Rs.9,09,520/-. The AO on perusal of the return of income noted that the assessee has neither established the source of capital nor declared the interest and remuneration received. Accordingly, notice u/s 148 was issued on 11.03.2016 in response to which assessee filed return of income declaring income of Rs.2,20,150/- on 13.12.2016. It is noted that the the assessee vide letter dated 19.12.2016 explained that during the year under consideration neither any capital was introduced by her in the firm nor any remuneration nor interest was received from the firm. It was pointed out that in the appeal filed before Hon'ble ITAT, Jaipur Bench by the firm, the partners stated in their affidavits that they have not introduced any capital in the firm nor received any interest or remuneration but due to miscommunication/ misunderstanding between the tax auditor and the accountant, the incorrect financial statements and audit report was prepared. Therefore, the accounts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that the set aside assessment of the firm was completed on 28.12.2017 wherein after rejecting the fresh information/ evidences, the AO in Para 8 made addition of the alleged capital introduced by the partners in the hands of the firm and also disallowed the interest and remuneration paid to the partners on substantive basis. However, the Ld. CIT(A) held that he is in agreement with the stand taken by the AO about protective addition and accordingly, confirmed the order of AO. The observation of the ld. CIT(A) is as under:- ''6. I have perused the written submissions submitted by the ld. AR and the order of AO. In the facts and circumstances of the case, I am in agreement with the stand taken by the AO about the protective addition made in the hand of appellant. On the facts and in the circumstances of the case, the protective additions of Rs.3,84,000/-, Rs.9,09,520/- and Rs.32,00,000/- are confirmed.'' 2.3 During the course of hearing, the ld. AR of the assessee prayed that once the addition is confirmed in the hands of the firm M/s. Shri Ram Borewell & Construction Co. on substantive basis then the same addition cannot be confirmed in the hands of the assessee on protecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been added/ disallowed. Therefore, the protective addition confirmed in the hands of the assessee is unjustified and uncalled for. 4. Hon'ble ITAT Ahmedabad Bench in case of Prakash Wine Agencies vs. ITO 38 TTJ 39 has held that right to make protective assessment is given to ITO but the appellant authority cannot evade the issue brought before it by way of appeal either by an assessee who is substantially assessed or one who is protectively assessed. Again Hon'ble Allahabad High Court in case of Smt. Hemlata Agarwal vs. CIT 64 ITR 428 held that Tribunal as a fact finding body cannot confirm the protective assessment. Therefore, once the addition is confirmed in the hands of firm M/s Shri Ram Borewell & Construction Co. on substantive basis, the same addition cannot be confirmed in the hands of the assessee on protective basis. In view of above, protective addition made by the AO and confirmed by the Ld. CIT(A) cannot stand and the same be directed to be deleted.'' 2.4 On the other hand, the ld. DR strongly relied on the orders of the lower authorities. 2.5 We have heard the counsel of both the parties and perused the materials placed on record including the decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding before the ld. CIT(A). Thus, in this way, the addition made by the AO in the hands of the firm has not attained finality. Thus, the ld. CIT(A) while passing the impugned order had categorically held that he is also in agreement with the stand taken by the AO about the protective addition made in the hands of the assessee. It is an admitted fact that the assessee is a partner in the firm and in the case of the assessee protective addition has been made by the respective AO, however, substantive addition has already been made in the hands of the firm M/s Shri Ram Borewell & Construction Co. and the appeal of M/s Shri Ram Borewell & Construction Co. is still pending before the ld. CIT(A) and it has attained finality. We are cautious of the fact that there is no statutory provision in the Income Tax Act to make addition on protective basis. In fact, as per provision of the Income Tax Act, the income is to be assessed only in the hands of the person to whom it belongs and it cannot be assessed in the hands of other person. This is a very basis of levy of Income Tax. However, it may so happen in certain cases that Income Tax Authorities are not clear as to whom income belongs. Hence ..... X X X X Extracts X X X X X X X X Extracts X X X X
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