AI Structured Summary
Not yet generated for this judgment
Judgment
PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER :
This appeal is filed by the assessee against the order of ld. Commissioner of Income-tax (Appeals), Delhi-26 [“Ld. CIT(A)”, for short] dated 09.02.2026 for the AY2020-21.
At the time of hearing, ld. AR of the assessee brought to our notice the relevant facts of the case and his submissions as under. He submitted that the sole issue involved in the present appeal is that the ld. CIT(A) has affirmed the findings of the Assessing Officer, who made a protective addition of Rs 6,00,00,000/- under Section 69A of the Income-tax Act, 1961 (for short ‘the Act’), to the returned income of the assessee. However, no corresponding substantive addition has been made in the hands of any other person, rendering the protective addition unsustainable in law.
He further submitted that it is evident from the assessment order passed in the case of Shri Pankaj Goel. (at page 11) that the tabular details show, at Row No. 5, the alleged receipt of Rs.6 crores by the assessee from Radhey Shyam, which is duly reflected in the assessee’s bank account. Apart from this entry, no material relating to the assessee was found in the alleged WhatsApp chats. He submitted that the additions in the case of Shri Pankaj Goel are based on the transactions referred to in Rows 2, 3, 4, 8, 9, 10 and 11. He placed a copy of assessment order on record as Annexure-1.
He further submitted that paras 4.11, 4.12 and 4.14 of the assessment order in the case of Shri Pankaj Goel clearly show that the addition made in his hands is Rs.9 crores, which does not include any substantive addition in respect of the Rs.6.00,00,000/- on the basis of which a protective addition has been made in the hands of the assessee.
Accordingly, he submitted that the Assessing Officer has made the impugned addition in the hands of the assessee solely on a protective basis, alleging that a corresponding substantive addition had been made in the hands of Shri Pankaj Goel. However, the assessment order of Shri Pankaj Goel unequivocally establishes that no substantive addition of Rs.6,00,00,000/- in respect of the impugned transaction has been made. Consequently, he submitted that the protective addition made in the hands of the assessee is legally unsustainable, erroneous, and liable to be deleted.
He further submitted that it is a well-settled principle of law that a protective addition cannot be sustained in the absence of a corresponding substantive addition in the hands of any person. Accordingly, the impugned protective addition is legally unsustainable and liable to be deleted. In this regard, he placed reliance on the decisions of ITAT, Gauhati bench in the case Income Tax Officer vs Keshava Nanda Kakati in ITA No.460/GAU/2019 dated October 2021, which discussed all relevant case laws decided by the Hon’ble Courts.
On the other hand, ld. DR of the Revenue relied on the findings of the lower authorities.
Considered the rival submissions and material placed on record. We observed that the solitary issue involved in the present appeal is that whether the protective addition can be made when no corresponding substantive addition has been made in the hands of any other person. In this regard, we observed that the issue involved is squarely covered in favour of the assessee by the decision of ITAT, Gauhati bench in the case Income Tax Officer vs Keshava Nanda Kakati (supra) wherein various other relevant decisions were also discussed. For the sake of brevity, we reproduce the relevant findings of the aforesaid decisions as under :-
“8.We have heard both the parties and perused the records. We note that the Ld. CIT(A) has made a categorical finding of fact that there was no substantial addition of such an amount (Rs. 1,51,56,830/-) made prior in the case of M/s. Society of Education and this finding of fact has not been rebutted/controverted or assailed by the revenue before us by filing specific ground to this effect in this appeal. From a perusal of the grounds of appeal raised by the revenue (supra), it is clear that the revenue has only assailed the decision of the Ld. CIT(A) in deleting the protective addition made by the AO to the tune of Rs. 1,51,56,830/-. And it can be very well seen that the basis for deletion resorted by Ld CIT(A) to delete the protective assessment in the hands of assessee was because there was no substantial addition in the hands of M/s. Society of Education. This crucial fact has not been rebutted/controvered/assailed before us. Therefore, this finding of fact of Ld CIT(A) crystallizes (i.e. no substantive addition in the hands of M/s. Society of Education) and, therefore, we do not find any infirmity in the order passed by the Ld. CIT(A) on this issue on deletion of protective addition without substantial addition. We also take note that the Ld. CIT(A) to come to such a decision has taken note of relevant decisions of this Tribunal which reads as under:
"In the case of ITO vs. Fussy Financial Services Private Limited [I.T.A. No.44/DEL/2014 dated 05/06/2017, it was held/averred, as follows, by the Hon'ble ITAT-Delhi:
We further note that the analysis of the investment account reveal that the company has made investment of Rs.5,04,01,000/. The statement given by Sh. PN Jha assumes importance wherein he categorically admitted that the company was doing the business of investment and finance and during the year the bank accounts of the company have been used to provide the accommodation entries. The addition of Rs.3,17,67,951/- made by the Assessing Officer on protective basis, which is not sustainable in the eyes of law, because in this case the AO himself stated in the assessment order that the Department is looking after the cases of beneficiaries and the amounts channelized through this group would be taxed in the hands of the beneficiaries, the amount of total credits of Rs.3,17,67,951/- made in its bank account with Kotak Mahindra Bank, KG Marg, New Delhi, during the year is added to the income of the assessee on protective basis. In this case we find that AO has not made any substantive assessment. There may be Substantive assessment without any protective assessment, but there cannot be any protective assessment without there being a substantive assessment.
In the case of M.P. Ramchandran vs. DCIT [129 TTJ 190 at page 195], it was held/averred, as follows, by the Hon'ble ITAT:
"In order to give a different colour, the ld. DR contended that this disallowance was made on protective basis only and hence cannot be equated with the substantive disallowance. We have noted above about the validity and presumption of the protective assessment in general. Protective assessment cannot be independent of substantive assessment. Thus protective assessment is always successive to the substantive assessment. There may be a substantive assessment without any protective assessment but there cannot be any protective assessment without there being a substantive assessment. In simple words there has to be some substantive assessment/addition first which enables the AO to make a protective assessment/addition. Substantive addition/assessment is Keshava Nanda Kakati, A.Y. 2016-17 made in the hands of the person in whose hands the AO prima facie holds the opinion that the income is rightly taxable. Having done so and with a view to protect the interest of the Revenue, if the AO is not sure that the person in whose hands he had made the substantive addition rightly, he embarks upon the protective assessment. Thus the protective assessment is basically based on the doubt of the AO as distinct from his belief which is there is the substantive assessment."
In the case of Gregory & Nicholas vs. ACIT [I.T.A. No.5102/Mum/2006 &IT(SS)A No.24/Mum/2009 dated 01/03/2007], it was held/averred, as follows, by the Hon'ble ITAT (Mumbai):
"21.In the case of Suresh K. Jaju (2010) 39 SOT 414(Mum), E-Bench of the Tribunal at page 532 to 533 held as follows:
"The AO made the following observations:
"As the assessee has already offered this income in assessment year 2001-02, the same is assessed in this year to protect the interest of the revenue"
Whether the above observations are enough to conclude that the assessment of the capital gains as long-term capital gain in assessment year 2001-02 by the Assessing Officer was only a protective assessment? We have already seen the ratio laid down by the Hon'ble Supreme Court in the case of Lalji Haridas (supra) wherein the Hon'ble Supreme Court while recognizing the concept of protective assessment has very clearly laid down that there must be an exhaustive enquiry and the question as to who is liable to pay (in this case which year the capital gain is to be assessed and whether as long-term capital gain in assessment year 2001-02 or short term capital gain in assessment year 2000-01) should be determined after hearing objections. He should determine the question in the case of one person (in this case of the other person (in this case in other year) in whose case assessment has to be made protectively. Thus, protective assessment has to be done only after substantive assessment is done. An assessment can be considered as protective only when there is substantive assessment. Thus, substantive assessment has to precede protective assessment."
In the case of G.K. Consultants Ltd. vs. ITO [ITA No.1502/Del/2013 dated 27/06/2014], [upheld in CIT vs. G.K. Consultants Ltd., 2016 (6) TMI 136 Delhi High Court], it was held/averred, as follows, by the Hon'ble ITAT Delhi:
"19.On careful consideration of above contention, we are of the view that there may be a substantive assessment without any protective assessment but there cannot be any protective assessment/addition without substantive assessment/addition, meaning thereby there has to be some substantive assessment/addition first which enables the AO to make a protective assessment/addition. In the present case, the AO proceeded to make protective assessment by way of reopening of assessment of the assessee appellant company without being a substantive assessment on the date of assumption of jurisdiction u/s 147 of the Act which is not permissible as per decision of ITAT, Mumbai in the case of M.P. Ramachandaran vs. DCIT (supra) and Suresh K Jajo vs ACIT (supra)." [Emphasis given by us]
9.In the light of the aforesaid decision of the Tribunal and based on the discussion, we do not find any infirmity in the action of Ld. CIT(A) to have deleted the protective assessment in the hands of the assessee when the fact was that there was no substantive addition in the hands of M/s. Society of Education or other assessee's and ergo the same is confirmed.”
Respectfully following the aforesaid decision, we are of the considered view that the protective assessment in the hands of the assessee is not sustainable when the fact was that there is no substantive addition in the hands of Shri Pankaj Goel or other assessee’s and accordingly, the appeal filed by the assessee is allowed.
In the result, the appeal filed by the assessee is allowed.