ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, MADURAI vs. M/S. SUSHMA CINE ARTS, MADURAI

Since the issues arising for consideration in the aforesaid appeals are identical in nature, emanate from a common factual matrix, and the rival submissions advanced by the learned representatives of both the sides are substantially similar, these appeals were heard together. Accordingly, for the sake of convenience, consistency, and to avoid repetition of facts and findings, we deem it appropriate to dispose of the same by this common order.

At the outset, it is observed that both the appeals preferred by the Revenue are barred by limitation by a delay of 6 days. The Revenue has filed petitions seeking condonation of the said delay, explaining the circumstances which led to the belated filing of the appeals. The Ld.AR appearing for the assessee has not raised any serious objection to the condonation of the delay. Having considered the averments made in the condonation petitions and the reasons stated therein, and keeping in view the settled principle that substantial justice should ordinarily prevail over technical considerations where the delay is neither deliberate nor attributable to any mala fide conduct, we are satisfied that the Revenue was prevented by sufficient cause from filing the appeals within the prescribed period of limitation. Accordingly, the delay of 6 days in filing both the appeals is condoned. The appeals are admitted and taken up for adjudication on merits.

The brief facts, as borne out from the assessment records, are that the assessee is a partnership firm engaged in the business of film distribution under the name and style of “Sushma Cine Arts”. The firm consists of four partners, viz., Shri N. Alagarsamy, Smt. Nagalakshmi, Smt. A. Divya and Smt. Aishwarya. Shri N. Alagarsamy, the Managing Partner, is stated to be actively engaged in the business of film distribution and exhibition under the same trade name as a sole proprietor and is stated to exercise operational control over more than fifty cinema theatres situated in the Madurai–Ramanathapuram region.

A search and seizure action u/s.132 of the Act was conducted on 02.08.2022 in the cases of Shri N. Alagarsamy and the assessee-firm. The search, inter alia, covered the business premises at Madurai, the alternate office premises at Chennai and certain other connected premises. During the course of the search, various books of account, loose sheets, digital ledgers, electronic storage devices and other electronic records were found and seized from the aforesaid premises under different annexures.

Consequent upon the search, notices u/s.148 of the Act were issued on 26.03.2023 for the assessment years 2020-21 and 2021-22. As the assessee did not file returns of income in response thereto, notices u/s.142(1) of the Act were issued from time to time calling upon the assessee to furnish the requisite details and supporting documents. The assessee eventually filed its submissions on 23.03.2024. Upon examination of the seized material and the discrepancies allegedly noticed therein, the AO issued show-cause notices dated 24.03.2024 proposing various additions.

During the course of the reassessment proceedings, the AO examined the electronic records seized during the search, including data maintained in Tally software, Excel spreadsheets and ledger backup files. According to the AO, the Tally data maintained in the name of the assessee-firm reflected cinema collections which had allegedly not been recorded in the regular books of account, amounting to Rs.26,25,23,754/- for the A.Y.2020-21 and Rs.7,29,28,108/- for the A.Y.2021-22.

In response, the assessee submitted that the partnership firm had discontinued its business operations and that the transactions reflected in the impugned Tally data pertained exclusively to the individual business carried on by Shri N. Alagarsamy in his personal capacity. The AO, however, did not accept the said explanation, primarily on the ground that the Permanent Account Number (PAN) of the assessee-firm continued to remain active and that the

The AO further examined a Toshiba hard disk bearing Serial No.514JTON7TLTH seized during the course of search. The said hard disk contained certain Excel files stored under a folder titled “Daily Collection Report”, which, according to the AO, had been prepared and maintained by Shri A.K.Ravikumar, stated to be the data-entry operator. On comparison of the figures reflected in the Excel files with the corresponding Tally data, the AO noticed further differences amounting to Rs.11,87,24,861/- for the A.Y.2020-21 and Rs.92,08,969/- for the A.Y.2021-22. Treating the said differences as further suppression of sales, the AO made protective additions in the hands of the assessee-firm and corresponding substantive additions in the hands of Shri N.Alagarsamy.

The AO also noticed, for the A.Y.2021-22, a separate discrepancy relating to the film “Master”. According to the excel spreadsheets seized during the course of search, the total collections from the said film aggregated to Rs.10,94,27,500/-. The AO observed that while the collections received through RTGS had been accounted for, the alleged cash component amounting to Rs.5,92,15,000/- had not been recorded in the regular books of account. The said amount was, therefore, treated as unaccounted cash receipts and added on a protective basis in the hands of the assessee-firm, with a corresponding substantive addition in the hands of Shri N.Alagarsamy.

The AO was of the view that the assessee had failed to reconcile the discrepancies noticed in the seized electronic records or substantiate its explanation by producing contemporaneous and verifiable documentary evidence. Relying upon the seized electronic data and the alleged failure of the

Accordingly, the AO completed the reassessments u/s.147 r.w.s 144 of the Act vide separate orders dated 31.03.2024, making the following protective additions in the hands of the assessee-firm:

The assessee-firm contended before the Ld.CIT(A) that its principal partner, Shri N. Alagarsamy, had been managing and attending to the day-to- day affairs of the firm up to 31.03.2018. Thereafter, the assessee-firm became inactive from A.Y. 2019-20 onwards and did not carry on any business activity. Consequently, no returns of income were filed by the assessee-firm for the assessment years under consideration.

It was further submitted that collections aggregating to Rs.26,25,23,754/- and Rs.7,29,28,108/- for AY(s) 2020-21 and 2021-22, respectively, had already been offered to tax by Shri N.Alagarsamy in his individual capacity as the proprietor of M/s.Sushma Cine Arts. Therefore, according to the assessee, there was no justification for making protective additions of the very same receipts in the hands of the assessee-firm.

As regards the additions made on account of alleged suppression of sales, arising from the difference between the collections recorded in the Tally data and those reflected in the Excel spreadsheets, as well as the addition relating to the alleged cash receipts from the movie “Master,” the assessee contended that the said transactions pertained exclusively to Shri N.Alagarsamy in his individual capacity. Accordingly, such transactions could not be brought to tax, even on a protective basis, in the hands of the assessee- firm.

In view of the foregoing submissions, the assessee-firm prayed before the Ld.CIT(A) that the protective additions made by the AO for AY(s) 2020-21 and 2021-22 be deleted.

The Ld.CIT(A), having examined the factual matrix and the submissions of the assessee, came to the conclusion that the protective additions were unsustainable and accordingly deleted the same by observing as under:

The Ld.DR, appearing on behalf of the Revenue, vehemently relied upon the assessment order passed by the AO as well as the grounds raised in the present appeal. It was contended that the Ld.CIT(A) erred in deleting the protective additions made by the AO without properly appreciating the facts and circumstances of the case. The Ld.DR, therefore, urged that the impugned order of the Ld.CIT(A) be set aside and that the assessment orders passed by the AO be restored.

Per contra, the Ld.AR, appearing on behalf of the assessee, strongly supported the impugned order passed by the Ld.CIT(A) and submitted that the findings recorded therein are based upon a proper appreciation of the facts available on record, the material gathered during the course of assessment proceedings, and the settled principles of law governing the issue of protective assessment. It was submitted that the order passed by the Ld.CIT(A) is a detailed, well-reasoned and speaking order, wherein each of the issues arising out of the assessment order has been independently examined in the light of the evidence on record and applicable judicial precedents. According to the Ld.AR, the Revenue, while preferring the present appeal, has failed to demonstrate any factual infirmity, legal error, perversity of findings, or misapplication of law in the order of the first appellate authority so as to warrant interference by this Tribunal.

The Ld. AR further submitted that Shri N. Alagarsamy, who is the key partner of the assessee-firm, has been independently carrying on the business of movie distribution in his individual capacity as a sole proprietor under the trade name "Sushma Cine Arts". It was explained that although the partnership firm also bears the name "Sushma Cine Arts", the assessee-firm had become completely inactive from A.Y.2019-20 onwards and had not carried on any business operations thereafter. Consequently, according to the Ld. AR, during the assessment years under consideration, no movie distribution activity whatsoever was undertaken by the assessee-firm and the entire distribution business was exclusively carried on by Shri N. Alagarsamy in his individual capacity. Therefore, it was argued that there existed no factual or legal basis for attributing the distribution business or the income arising therefrom to the assessee-firm.

The Ld.AR further contended that the very concept of a protective assessment presupposes the existence of a genuine uncertainty regarding the person in whose hands a particular income is liable to be assessed. It was submitted that in the present case no such uncertainty ever existed. During the course of search proceedings, no incriminating material whatsoever was found

The Ld.AR further submitted that the mere fact that Shri N. Alagarsamy was using the trade name "Sushma Cine Arts" in his proprietary capacity cannot, by itself, lead to the inference that the business receipts earned by him individually are liable to be protectively assessed in the hands of the partnership firm bearing the same name. It was argued that the AO had failed to record any specific finding identifying the alleged uncertainty which necessitated the protective assessment in the hands of the assessee-firm. According to the Ld. AR, neither the assessment order nor the material relied upon by the AO disclosed any ambiguity regarding the ownership of the impugned income. Therefore, the protective additions were made purely on assumptions and conjectures without satisfying the well-settled legal requirements governing protective assessments. It was thus submitted that the Ld. CIT(A) has rightly appreciated these legal and factual deficiencies while deleting the protective additions.

Adverting to the protective additions of Rs.26,25,23,754/- and Rs.7,29,28,108/- made towards alleged suppressed sales for AY(s) 2020-21 and 2021-22 respectively, the Ld.AR submitted that these figures admittedly represented the turnover disclosed by Shri N.Alagarsamy in his individual return of income and were duly reflected in his Profit and Loss Account for the relevant assessment years. Inviting our attention to the audited financial statements as well as the assessment orders passed in the individual case of Shri N.Alagarsamy, the Ld.AR demonstrated that the AO himself had accepted the

With regard to the protective additions of Rs.11,87,24,861/- and Rs.92,08,969/- made towards alleged suppression of sales based on excess turnover reflected in the Excel sheet vis-à-vis the Tally data for AY(s) 2020-21 and 2021-22, the Ld.AR submitted that the very same issue had already been adjudicated by the Ld.CIT(A) in the appellate proceedings relating to Shri N.Alagarsamy in his individual capacity. Drawing our attention to paragraph 6.5.16 at page 81 of the appellate order dated 15.12.2025 passed in the individual case of Shri N. Alagarsamy, the Ld.AR submitted that the Ld.CIT(A) had categorically held that the entire suppressed turnover could not be brought to tax and that only the profit element embedded in such suppressed turnover was liable to be assessed. Accordingly, by adopting the Gross Profit ratio applicable to the respective years, the Ld.CIT(A) sustained substantive additions only to the extent of Rs.61,14,330/- and Rs.7,89,208/- for AY(s) 2020- 21 and 2021-22 respectively.

The Ld.AR further submitted that the Revenue, while filing appeal before this Tribunal against the order passed in the individual case of Shri N. Alagarsamy, has not challenged the findings of the Ld.CIT(A) sustaining the substantive additions on estimated Gross Profit basis. According to the Ld.AR, once the substantive assessment in the hands of Shri N. Alagarsamy has attained finality and the Revenue itself has accepted the determination of taxable income therein, the corresponding protective additions cannot be permitted to survive in the hands of the assessee-firm. It was contended that

Referring to the protective addition of Rs.5,92,15,000/- made towards alleged cash collections relating to the movie “MASTER”, the Ld. AR submitted that this issue has also attained finality in the individual case of Shri N.Alagarsamy. Inviting attention to the appellate order passed by the Ld.CIT(A) in the individual proceedings, the Ld.AR submitted that the said addition was deleted by holding that no separate addition was warranted since the alleged cash collections already stood subsumed and duly accounted for in the peak credit computation, on the basis of which substantive additions had been sustained in the hands of Shri N. Alagarsamy. Therefore, according to the Ld. AR, once the issue stood finally concluded in the substantive assessment, there remained absolutely no basis for retaining a corresponding protective addition in the hands of the assessee-firm.

Summarising the aforesaid submissions, the Ld.AR contended that every protective addition made by the AO has either been substantively assessed, adjudicated, and attained finality in the individual hands of Shri N. Alagarsamy, or otherwise lacked any factual foundation linking the assessee-firm with the alleged income. It was submitted that the Ld.CIT(A), after a comprehensive examination of the factual matrix and the applicable legal principles, has rightly held that the protective additions made in the hands of the assessee-firm were unsustainable. Accordingly, the Ld.AR prayed that the well-reasoned order of the Ld.CIT(A) be upheld in its entirety and that all the grounds raised by the Revenue be dismissed.

We have carefully considered the rival submissions advanced by both the parties, perused the orders of the authorities below and examined the material

At the outset, we find that the assessee-firm has consistently maintained that it had discontinued its business operations with effect from 01.04.2018 and had not carried on any film distribution activity during the previous years relevant to the assessment years under consideration. The entire film distribution business during the relevant period was stated to have been carried on by Shri N. Alagarsamy in his individual capacity as proprietor under the trade name “Sushma Cine Arts”. This factual assertion has not been effectively rebutted by the AO through any credible evidence.

The AO has not brought on record any film distribution agreement entered into by the assessee-firm during the relevant previous years. No invoice, receipt, bank statement, cash book, ledger account, statutory registration, correspondence with film producers or exhibitors, theatre settlement statement or any other commercial document has been identified as belonging to the assessee-firm. The AO has also not established that any part of the impugned collections was received in any bank account belonging to the assessee-firm or was utilised for the purposes of the firm. None of the parties were examined to establish that the partnership firm continued to carry on business during the relevant years. In the absence of such foundational material, the allegation that the impugned receipts represented the income of the assessee-firm remains unsupported by evidence.

On a careful examination of the assessment orders, we find that the AO proceeded primarily on two considerations, namely, that the PAN of the

We are unable to approve the reasoning adopted by the AO in making the impugned protective additions. The approach of the AO is internally inconsistent and mutually destructive. On the one hand, the AO has treated the seized Tally data, Excel spreadsheets, Daily Collection Reports and other electronic records as belonging to the proprietary business of Shri N.Alagarsamy and has made substantive additions in his individual hands. On the other hand, without identifying any independent material connecting the very same records with the assessee-firm, the AO has simultaneously made protective additions in the hands of the firm merely because the expression “Sushma Cine Arts” appeared in the electronic data and the PAN of the firm remained active. Once the AO himself had concluded, for the purpose of substantive assessment, that the business and the corresponding income belonged to Shri N. Alagarsamy, it was incumbent upon him to demonstrate a genuine and subsisting uncertainty regarding the ownership of the income before resorting to a protective assessment in the hands of the firm. The assessment orders do not record any such uncertainty. They do not contain any comparative examination of the constitution of the firm, the proprietary concern, the respective bank accounts, contractual arrangements, books of account or the flow of funds. The AO has merely reproduced the seized figures and, on the

We have also carefully gone through the detailed findings recorded by the Ld.CIT(A) in paragraphs 6.2.1 to 6.2.9 of the impugned appellate order. The Ld.CIT(A) has taken note of the precise additions made by the AO, namely, the alleged suppressed sales and sales not admitted amounting to Rs.11,87,24,861/-, Rs.26,25,23,754/-, Rs.92,08,969/- and Rs.7,29,28,108/-, as well as the addition of Rs.5,92,15,000/- relating to the movie “MASTER”. The Ld.CIT(A) has thereafter examined the source and custody of the seized digital material, the cessation of the business of the assessee-firm from 01.04.2018, the substantive assessments framed in the hands of Shri N. Alagarsamy and the absence of any independent evidence connecting the assessee-firm with the impugned transactions. The first appellate authority has further recorded that the Tally ledgers, Excel-based Daily Collection Reports and digital spreadsheets forming the basis of the additions were found in the personal or business premises of Shri N. Alagarsamy and were themselves treated by the AO as reflecting the income of his proprietary business. These findings are borne out from the assessment records and are not shown to be contrary to any material available on record.

We concur with the findings of the Ld.CIT(A) that the AO failed to conduct any meaningful enquiry to establish a nexus between the seized material and the business of the assessee-firm. The Ld.CIT(A) has specifically noticed that no evidence was brought on record to show that the assessee-firm received,

We further concur with the observation of the Ld.CIT(A) that the existence of an active PAN is not determinative of the carrying on of business. A PAN is merely an identification number allotted for the purposes of the Act. Its continued existence cannot constitute evidence that the assessee-firm was operational during the relevant period. The AO was required to establish, through positive material, that the firm continued to undertake film distribution activities and that the impugned receipts accrued to or were received by it. The AO failed to discharge this basic evidentiary burden.

The Ld.CIT(A) has also recorded that the explanation of the assessee- firm, namely, that the activities reflected in the seized data pertained exclusively to the proprietary business of Shri N. Alagarsamy, was not disproved by the AO. We find no infirmity in this conclusion. The AO rejected the explanation without examining the author of the electronic records, without verifying the underlying agreements, without tracing the collections to the bank accounts of the respective entities and without identifying any commercial document in the name of the assessee-firm. A rejection of an explanation, in the absence of any enquiry or contradictory evidence, cannot by itself constitute proof of the opposite proposition.

The Revenue has not been able to demonstrate that any of the aforesaid findings of the Ld.CIT(A) are perverse. A finding can be regarded as perverse only where it is unsupported by any evidence, is contrary to the material on

It is also significant that the electronic data relied upon by the AO was not shown to have been maintained or controlled by the assessee-firm through any identified employee, partner or authorised representative acting on behalf of the firm during the relevant period. The Excel files contained in the Toshiba hard disk were stated to have been prepared by Shri A.K.Ravikumar, described as a data-entry operator. However, the AO did not examine him for the purpose of ascertaining whether he maintained the data for the assessee-firm or for the proprietary concern of Shri N.Alagarsamy. No statement of Shri A.K.Ravikumar has been referred to in the assessment orders as establishing the ownership of the electronic data in favour of the assessee-firm. The omission to conduct such a basic enquiry materially weakens the very foundation of the protective additions.

The concept of protective assessment is a judicially recognised mechanism intended to safeguard the interests of the Revenue in cases where there exists a bona fide and genuine doubt as to the person in whose hands a particular income is assessable. It is not an independent source of power to assess the same income indiscriminately in the hands of multiple persons. A protective assessment presupposes an identifiable income, a genuine

In the present case, there was no genuine uncertainty regarding the person carrying on the business reflected in the seized records. The AO himself treated Shri N.Alagarsamy as the person chargeable to tax and completed substantive assessments in his individual hands. The Ld.CIT(A) thereafter examined the additions in the individual assessments and adjudicated the taxability of the disputed receipts. We therefore agree with the Ld.CIT(A) that, once the income had been identified, substantively assessed and adjudicated in the hands of Shri N.Alagarsamy, the legal basis for maintaining parallel protective additions in the hands of the assessee-firm ceased to exist.

Insofar as the additions of Rs.26,25,23,754/- for A.Y.2020-21 and Rs.7,29,28,108/- for A.Y.2021-22 are concerned, the material on record shows that these amounts represented turnover already disclosed by Shri N.Alagarsamy in his individual returns of income and reflected in the Profit and Loss Accounts of his proprietary business. The AO, while completing the substantive assessments in his hands, proceeded on the basis that the said turnover belonged to him. The Revenue has not brought before us any material to show that these receipts were excluded from the individual accounts or that they were actually received by the assessee-firm.

Once the turnover has been disclosed and assessed in the hands of Shri N.Alagarsamy, the same turnover cannot be retained as a protective addition in the hands of the partnership firm in the absence of any material establishing that the firm was the real owner thereof. A protective assessment cannot be continued merely as a precautionary measure after the substantive assessment has been accepted and the person liable to tax has been clearly identified.

The AO appears to have proceeded on the assumption that the use of the expression “Sushma Cine Arts” in the electronic records necessarily referred to the partnership firm. This assumption overlooks the undisputed explanation that Shri N.Alagarsamy was independently conducting his proprietary business under the very same trade name. Where a trade name is common to two concerns, the AO was required to examine the surrounding commercial circumstances, including the underlying contracts, receipts, bank accounts, tax invoices, GST records, theatre agreements and accounting entries, before attributing the transactions to either concern. No such exercise was undertaken. The mere nomenclature appearing in electronic records cannot be treated as conclusive of the legal ownership of the underlying income. Electronic data, like any other evidence, must be examined in conjunction with its authorship, custody, context, purpose, corroborative records and the actual flow of funds. In the present case, the AO has not undertaken such an examination. The additions were made solely on the basis of figures appearing in the electronic data without establishing that the assessee-firm was the entity that earned, received or controlled the corresponding amounts.

As regards the additions of Rs.11,87,24,861/- for A.Y.2020-21 and Rs.92,08,969/- for A.Y.2021-22, representing the alleged excess of collections reflected in the Excel spreadsheets over the Tally data, we find that the same issue was substantively examined in the appellate proceedings in the individual case of Shri N. Alagarsamy. The Ld.CIT(A), after considering the nature of the alleged suppressed turnover, held that the entire gross receipts could not be assessed as income and that only the profit element embedded therein was liable to tax. Accordingly, substantive additions were sustained only to the extent of Rs.61,14,330/- for A.Y.2020-21 and Rs.7,89,208/- for A.Y.2021-22 by applying the relevant gross profit rates.

The Revenue has not demonstrated before us that the findings recorded in the individual appellate proceedings regarding the quantification and

With regard to the addition of Rs.5,92,15,000/- relating to the alleged cash collections from the movie “MASTER”, we find that the issue has also been examined in the substantive appellate proceedings of Shri N. Alagarsamy. The Ld.CIT(A) deleted the separate addition after recording a finding that the alleged cash collections stood subsumed in the peak credit computation on the basis of which the substantive addition had been determined. The Revenue has not placed any material before us to controvert the said factual finding.

Once the alleged cash collections have already been considered as part of the peak credit computation in the substantive assessment, a separate addition of the same amount would amount to duplication even in the hands of Shri N. Alagarsamy. It follows with greater force that the same amount cannot be retained on a protective basis in the hands of the assessee-firm, which has not been shown to have received or controlled any part of such collections.

We also concur with the findings of the Ld.CIT(A) that the subsequent resort to a best judgment assessment u/s.144 of the Act could not cure the absence of a factual or legal foundation connecting the assessee-firm with the alleged income. The power to make a best judgment assessment is not a licence to make arbitrary additions. Even an assessment u/s.144 of the Act must be founded upon relevant material and must disclose a rational nexus between the material available and the conclusion reached. Non-compliance with statutory notices may permit the AO to draw reasonable inferences, but it does

In the present case, the seized figures could not have been mechanically lifted and assessed in the hands of the firm merely because the firm did not file returns in response to the notices u/s.148 of the Act or because the AO was dissatisfied with the explanation furnished. The liability to tax must arise from income earned, received or deemed to accrue to the particular assessee under the provisions of the Act. The AO was first required to establish that the impugned transactions belonged to the partnership firm. That foundational requirement has not been satisfied.

The principle against double taxation of the very same income in the hands of two different persons is implicit in the scheme of protective and substantive assessments. While the Revenue may, in an appropriate case, make a substantive assessment in one hand and a protective assessment in another pending resolution of a genuine doubt, it cannot ultimately recover tax twice on the same income. Nor can it perpetuate a protective assessment after the substantive liability has been finally determined. The protective assessment is contingent and dependent upon the outcome of the substantive assessment; it has no independent existence after the underlying uncertainty is resolved.

The Ld.DR has relied upon the assessment orders and reiterated that the seized records were maintained in the name of the assessee-firm. However, repetition of the reasoning contained in the assessment order cannot substitute for evidence. The Revenue was required to demonstrate before us how the findings of the Ld.CIT(A) were contrary to the seized material or suffered from perversity. No such attempt has been made. The grounds raised by the Revenue are general in nature and do not identify any specific document or transaction establishing that the assessee-firm carried on the impugned business.

We also find merit in the contention of the Ld.AR that the Revenue cannot approbate and reprobate on the same set of facts. Having treated the receipts as belonging to Shri N. Alagarsamy for the purpose of substantive assessment and having accepted his disclosed turnover as part of his proprietary business, the AO could not, without bringing any contrary evidence, simultaneously contend that the very same receipts might belong to the partnership firm. A protective assessment cannot be used to overcome the absence of evidence or to keep multiple assessments alive indefinitely.

On the totality of the facts, we are satisfied that the Ld.CIT(A) has correctly appreciated the distinction between the assessee-firm and the proprietary business of Shri N.Alagarsamy, notwithstanding the use of the common trade name “Sushma Cine Arts”. The legal status of a partnership firm is distinct from the individual status of its partners for the purposes of assessment under the Act. Income can be assessed in the hands of the firm only when it is shown to have accrued to, arisen to or been received by the firm. The mere association of a partner with the firm or the use of a common trade name cannot justify attribution of the partner’s proprietary income to the firm.

The impugned order of the Ld.CIT(A) is a detailed, reasoned and speaking order. The Ld.CIT(A) has examined the nature and custody of the seized material, the status of the assessee-firm, the substantive assessments

The Revenue has failed to demonstrate that the findings of the Ld.CIT(A) are perverse, contrary to the record or based upon an incorrect application of law. On the contrary, the assessment orders reveal that the protective additions were made without establishing a factual foundation, without recording any genuine uncertainty as to the person assessable and without conducting the basic enquiries necessary to link the impugned income with the assessee-firm. We accordingly concur with the observations and findings recorded by the Ld.CIT(A) in paragraphs 6.2.1 to 6.2.9 of the impugned order and hold that the said findings are neither arbitrary nor perverse, but are based upon a proper appreciation of the material available on record.

We therefore hold that the AO was not justified in making the protective additions merely on the basis of the continued existence of the PAN of the assessee-firm, the use of a common trade name and the presence of figures in the seized electronic records. These circumstances, in the absence of corroborative evidence linking the transactions with the assessee-firm, were insufficient to discharge the burden resting upon the Revenue. The AO’s action was based upon presumptions and was contrary to the substantive assessments framed by him in the hands of Shri N.Alagarsamy.

Accordingly, we concur with the findings of the Ld.CIT(A) that the protective additions of Rs.26,25,23,754/- and Rs.11,87,24,861/- for A.Y.2020- 21 and Rs.7,29,28,108/-, Rs.92,08,969/- and Rs.5,92,15,000/- for A.Y.2021-22 were unsustainable both on facts and in law. The deletion of the said additions by the Ld.CIT(A) does not call for any interference.

In the result, the appeals filed by the Revenue in ITA Nos.1324 & 1323/Chny/2026 for both the assessment years are dismissed.