2018 (6) TMI 1700 - AT - Income Tax

Undisclosed income - Unexplained deposits in bank account - as per the ITS information AO came to know that the assessee has deposited in Kotak Mahindra Bank for acquiring bonds/debenture - CIT(A) was of the view that the assessment has to be made on substantive basis in the case of the assessee as the assessee is having his own business and has been filing regular return of income and convinced that the addition of Rs. 1 lakhs - HELD THAT - Bench asked the ld. DR to furnish the details of substantive additions made in the hands of Shri Ajay Taneja or any other person. The ld. DR could not furnish such details. On the other hand he pointed out that no substantive additions have been made in the hands of any other member of the Taneja Group. In our considered opinion if no substantive additions have been made in any other hands there is no room for addition to be made on protective basis in the hands of the assessee. In our considered view there cannot be any protective assessment without there being a substantive assessment. We therefore decline to interfere with the finding of the ld. CIT(A). - Decided against revenue.

Summary

Issues:
1. Addition of undisclosed income in the hands of the assessee.
2. Validity of the addition made by the Assessing Officer.
3. Assessment on substantive basis versus protective basis.
4. Lack of substantive additions in the hands of related parties.

Analysis:
The appeal before the ITAT Delhi concerned the addition of undisclosed income of Rs. 73.85 lakhs made by the Assessing Officer in the hands of the assessee for the assessment year 2008-09. The Assessing Officer found that the assessee had deposited a significant amount in a bank account for acquiring bonds/debentures. The source of this deposit was questioned, leading to the conclusion that the cash deposited was undisclosed money linked to a group run by a third party. The Assessing Officer made the addition on a protective basis due to the lack of explanation from the assessee.

Upon appeal, the CIT(A) considered the assessee's regular income filings and business activities, determining that a nominal addition of Rs. 1 lakh was justified, and directed the deletion of the remaining amount from the assessee's income. The Revenue challenged this decision, arguing for the validity of the initial addition. However, the Bench noted the absence of substantive additions in the hands of related parties, leading to the dismissal of the Revenue's appeal.

The ITAT Delhi held that without substantive assessments in related parties' hands, a protective assessment on the assessee was unwarranted. Protective assessments require a substantive basis, and in the absence of such, the addition in the hands of the assessee was deemed unjustified. Consequently, the appeal of the Revenue was dismissed, affirming the CIT(A)'s decision to delete the substantial addition from the assessee's income for the relevant assessment year.