The Income Tax Appellate Tribunal (ITAT), Allahabad Bench ruled that protective assessment has no independent standing but dependent on the final outcome of the substantive assessment.
The income of the assessee, Siya Ram Gupta for Assessment Year 2003-04 was assessed on protective basis to the tune of Rs. 70,000/- by AO, vide assessment order passed under section 143(3) of the 1961 Act , as against returned income of Rs. 60,000/-.
The additions on the substantive basis were made by AO in the hands of Shri Siya Ram Gupta, vide assessment order passed by AO under section 143(3) of the 1961 Act. The Siya Ram Gupta filed the first appeal with CIT(A) against the assessment order dated 29.03.2006 passed by AO under section 143(3) of the 1961 Act, which appeal stood dismissed by CIT(A).
It could be seen from the appellate order of CIT(A) in the case of Siya Ram Gupta that the income of the assessee namely Siya Ram Gupta (HUF) was upheld to be brought to tax in the hands of Shri Siya Ram Gupta as he has admitted that income of the assessee belongs to him and entire undisclosed income found during the search was also surrendered in the hands of Siya Ram Gupta.
Since, the income of the assessee was held to be taxable in the hands of Siya Ram Gupta on substantive basis by CIT(A), hence based on that the CIT(A) while disposing of appeal of the assessee held that since substantive additions in the hands of Mr. Siya Ram Gupta is already upheld by CIT(A), the additions to income on protective basis in the hands of the assessee is not sustainable and hence the appeal of the assessee stood dismissed by CIT(A).
The tribunal while adjudicating appeal of the assessee is of the view that by deleting the additions to income on protective basis in the hands of the assessee by CIT(A) while adjudicating appeal of the assessee on the grounds that similar additions stood affirmed on substantive basis in the case of Mr. Siya Ram Gupta, has in fact allowed the appeal of the assessee as the additions stood deleted and the tribunal was pleased to reverse the final order of CIT(A), wherein the CIT(A) on its part has dismissed the appeal of the assessee.
The coram of Vijay Pal Rao and Ramit Kochar noted the CIT(A) dismissed the appeals of the assessee because the same had become infructuous because the substantive additions made of the income of the assessee in the hands of Mr. Siya Ram Gupta stood confirmed in the hands of Shri Siya Ram Gupta and in view of that protective addition of the same amount of income in the hands of the assessee would not stand.
“Once the substantive assessment in the case of Mr. Siya Ram Gupta is confirmed, the protective assessment has no independent standing but depends on the final outcome of the substantive assessment. Thus, to that extent, order of the tribunal stand modified and MA filed by Revenue is allowed,” the ITAT said.
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