The Indore Bench of the Income Tax Appellate Tribunal (ITAT), ruled that the Re-Assessment under Section 147 of Income Tax Act, 1961 cannot be invoked to make a Protective Addition.
The Assessing Officer (AO) received an information to the effect that a cash payment of Rs. 5 lakhs were made by assessee, Amit Agrawal, to the Society during the previous year 2008-09 relevant to AY 2009-10 under consideration. Acting thereon, the AO confronted the assessee, in response to which the assessee categorically denied to have made any such payment to the aforesaid society.
Further, the assessee also submitted that the agreement for purchase in respect of which the cash-payment of Rs. 5 lakhs were alleged to have been made by assessee to the society, was a forged document and not signed by assessee.
However, the AO was not convinced and proceeded to reopen assessment by issuing notice under Section 148 of the Income Tax Act. Finally, the AO made an addition of Rs.5 lakhs in the hands of assessee on protective basis. Aggrieved by the action of AO, the assessee went in first appeal to the CIT(A) but however did not get any relief.
Placing a strong reliance on these judicial precedents, the AR strongly argued that the present re-assessment under Section 147 of the Income Tax Act made by the AO to make a protective addition is not sustainable and hence the same deserves to be quashed.
The Two-member Bench comprising Suchitra Kamble, Judicial Member and BM Biyani, Accountant Member observed that “We find that in the present case the addition has been made on protective basis by invoking section 147 of the Income Tax Act which is not a valid action as per aforesaid decisions.”
The Bench concluded by noting that the re-assessment framed by revenue authorities under Section 147 of the Income Tax Act, in the present case is not valid and the same is unsustainable.
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