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October 19, 2023

Protective addition also fails when substantive addition is time-barred

Protective addition also fails when substantive addition is time-barred

Fact and issue of the case

This appeal by Assessee is filed against the order of Learned Commissioner of Income Tax (Appeals)-35, New Delhi [“Ld. CIT(A)”, for short], dated 30/08/2019 for Assessment Year 2014-15.

Grounds taken in this appeal are as under:

That the Learned CIT(Appeals) had erred both in Law as well as in facts of the Case in upholding addition of Rs.67,50,000/- and recording her finding that “nor has it been conclusively established that the funds introduced factually belonged to the partners and not the appellant firm” The above finding has been recorded without judicious consideration of facts and particularly in view that statement of both the partners have been recorded during the course of Assessment proceedings where both the partners have confirmed introduction of cash in the firm as contribution to their capital.

The Learned CIT(Appeals) had committed a grave mistake of law by not following various judgments of various High Courts inspite of the fact that identical question have been squarely decided by respective High Courts and Learned CIT(Appeal) has not recorded any reasons for not following the judgments cited before her during the course of appeal proceedings.

That Learned CIT(Appeals) had erred both in law as-well-as in facts of the case in confirming addition of Rs.4,879/-, the amount of interest under Section 244(A) which was alleged of not having not been declared in statement of accounts. The appellant craves leave of this Honorable Court to add, amend, substitute or delete any of the grounds of appeal at the time of arguments.”

Brief facts of the case are that, the assessee filed return declaring income of Rs. 12,220/-. During the year under consideration, the assessee shown to have derived income from wholesale business of scrap. The case of the assessee was selected for complete scrutiny, during the course of the assessment proceedings it was noticed from the balance-sheet of the Assessee Firm that an addition of Rs. 67,50,000/- (Rs. 35,0,000/- in Sh. Dhiraj Harjai account and Rs. 32,50,000/- in Sh. Neeraj Harjai account) was made to the Firm during year under consideration.

Observation of the court

In view of the above discussion, since the substantive addition has not been survived on account of being time barred, consequently, the protective addition made in the hands of the assessee herein also will not survive, accordingly, we delete the protective addition by setting aside the order of the Lower Authorities.

In the result, Appeal of the assessee is allowed.

Order pronounced in open Court on 19th September, 2023


In the result, appeal of the assessee is allowed and ruled in favour of the assessee

Read the full order from here


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