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Facts
The Assessing Officer made two additions to the assessee's income for AY 2013-14: Rs. 1,45,73,000/- under Section 68 for unsecured loans (on a protective basis) and Rs. 8,73,656/- to net profit. Substantive assessments were also initiated against the four loan creditors for the Rs. 1,45,73,000/- in AY 2012-13. The CIT(A) confirmed both additions, converting the protective addition of Rs. 1,45,73,000/- in the assessee's hands to a substantive one.
Held
The Tribunal ruled that taxing the same amount twice on a substantive basis in different hands is impermissible. Since substantive additions for Rs. 1,45,73,000/- were already completed and attained finality in the hands of the loan creditors for AY 2012-13, the addition in the assessee's hands for AY 2013-14 was deleted. The addition of Rs. 8,73,656/- to the net profit was confirmed as the assessee could not substantiate its objection.
Key Issues
The key issues are whether an addition for unsecured loans, initially made on a protective basis in the assessee's hands, can be confirmed on a substantive basis by the CIT(A) when substantive assessments for the same amounts have already been completed and attained finality in the hands of the loan creditors, and if the CIT(A) can convert a protective addition to a substantive one without issuing a show-cause notice under Section 251(2) of the Act.
Sections Cited
Section 68 of Income Tax Act, 1961, Section 143(3) of Income Tax Act, 1961, Section 147 of Income Tax Act, 1961, Section 251(2) of Income Tax Act, 1961, Section 263 of Income Tax Act, 1961, Section 264 of Income Tax Act, 1961
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Income Tax Appellate Tribunal, ALLAHABAD BENCH, ALLAHABAD
Before: SHRI ANADEE NATH MISSHRA & SHRI SUBHASH MALGURIA
2013-14 against impugned appellate order dated 29/11/2019 of Commissioner of Income Tax (Appeals) [“CIT(A)” for short]. In this appeal, the assessee has originally raised the following grounds:
“1. That in any view of the matter the assessment made on an income of Rs.1,69,93,140/- by order dated 08/03/2016 passed u/s 143(3) of the Income Tax Act is bad both on the facts and in law.
That in any view of the matter the addition u/s 68 made by the Assessing Officer on protective basis and the learned CIT(A) was wrong in considering the addition on substantive basis.
That in any view of the matter the learned CIT(A) was not correct in making the addition on substantive basis without bringing any positive material on record nor any opportunity was provided to the assessee before forming an opinion hence the learned CIT(A) travelled beyond jurisdiction to decide the appeal hence the addition made is highly unjustified.
That in any view of the matter the addition of Rs.1,45,73,000/- as made by the CIT(A) on substantive basis is not correct when in the case of respective depositors proceeding u/s 148 was initiated and in their case after due verification Assessing Officer made the addition in the hands of depositors hence the addition made on substantive basis in the hands of assessee firm is highly unjustified.
That in any view of the matter the addition of Rs.8,73,653/- as made by applying net rate of 8% by Assessing Officer and his action as confirmed by CIT(A) is highly unjustified.”
(B) The assessee filed additional grounds of appeal as under:
(B.1) No objection was raised by Revenue to admission of additional grounds.
(B.1.1) In view of the foregoing and considering the nature of the additional grounds, it is found that additional grounds of appeal are nothing but facts of the case; or are of the nature that are inherent in grounds No. 2,3 and 4 taken by the assessee in original grounds of appeal filed along with Form-
36. When an appellant finds grounds of appeal amending the original grounds of appeal (by way of additional grounds) but these grounds are inherent in the original grounds of appeal specifically raised (and not in a vague or ambiguous or unspecific ground taken in a general manner; such as ground -1 of the original grounds of appeal in the present case); then such additional grounds of appeal are essentially sub-grounds of the original ground(s) of appeal which further elaborate the original ground(s) of appeal taken specifically; and provide assistance to the Bench in proper adjudication. Therefore, liberal approach is to be adopted in its admission, especially when the respondent does not object. We, therefore, admit the grounds of appeal taken by the appellant under the description of ‘Additional Grounds’.
(C) In this case assessment order dated 08/03/2016 was passed u/s 143(3) of the Act whereby the assessee’s total income was assessed at Rs.1,69,93,140/- as against returned income of Rs.15,46,480/-. In the aforesaid assessment order, an addition of Rs.8,73,656/- was made to net profit of the assessee on estimation basis. Further addition of Rs.1,45,73,000/- was made u/s 68 of the Act, treating unsecured loans taken by the assessee from four persons as not genuine. The aforesaid four persons are Mr. Sachin Tiwari, Rohit Kumar Tripathi, Nitesh Kumar Tripathi and Ravindra Nath Tripathi from whom the assessee received loans amounting to Rs.31,55,000/-, Rs.32,20,000/-, Rs.26,98,000/- and Rs.55,00,000/- respectively. The aforesaid total addition of Rs.1,45,73,000/- was made in the hands of the assessee on protective basis. Further, information was passed by the Assessing Officer to concerned assessing authority of the aforesaid four persons to assess respective amounts on substantive basis. The assessee filed appeal in the office of the learned CIT(A). Vide impugned appellate order dated 29/11/2019, the learned CIT(A) dismissed the assessee’s appeal while the learned CIT(A) confirmed the aforesaid addition of Rs.8,73,656/- to the net profit of the assessee. He not only confirmed the addition totaling Rs.1,45,73,000/- but also changed the nature of the addition of aforesaid amount of Rs.1,45,73,000/- from protective basis to substantive basis. Aggrieved, the assessee has filed the present appeal in Income Tax Appellate Tribunal.
(D) In the course of appellate proceedings in Income Tax Appellate Tribunal, a paper book containing the following particulars was filed from the assessee’s side:
(D.1) Further, a separate paper book, containing the following particulars, with regard to the aforesaid additional grounds of appeal, referred to in foregoing paragraph no. (B) of this order was filed from the assessee’s side:
(D.2) The learned D.R. also filed a paper book, containing the following particulars:
(E) At the time of hearing, learned A.R. for the assessee drew our attention to written submissions, contained at page numbers A-D and 1-4 of the aforesaid paper book. He also drew our attention to decided precedents contained in the aforesaid paper book, as per following citations:
(i) Smt. Ganigara Rekha Venugopal vs. ACIT [2023] 200 ITD 141/149 taxmann.com 186 (Bangalore-Trib) (ii) Northern Operating Services (P.) Ltd. vs. JCIT [2023] 200 ITD 145/149 taxmann.com 52 (Bangalore-Trib) (iii) Income Tax Officer vs. Swaran Fastners [2021] 89 ITR (Trib) 650 (Chandigarh)
(iv) Income Tax Officer vs. Mega Collections (P.) Ltd. [2023] 201 ITD 404/151 taxmann.com 403 (Surat-Trib) (v) K.P. Manish Global Ingredients (P.) Ltd. vs. ACIT [2021] 191 ITD 548/131 taxmann.com 158 (Chennai-Trib) (vi) Virendra Natwarlal Jariwala vs. DCIT [2021] 191 ITD 555/131 taxmann.com 159 (Surat-Trib)
(E.1) As regards the additional grounds of appeal, learned A.R. for the assessee drew our attention to written submissions, contained in separate paper book, which is reproduced below for the ease of reference:
(E.1.1 The learned D.R., as regards the aforesaid addition of Rs.8,73,656/- to net profit, placed reliance on the impugned order of the learned CIT(A) and on the assessment order. As regards the other addition totaling Rs.1,45,73,000/-, the learned D.R. supported the order of the learned CIT(A). He submitted that the Assessing Officer had erred in making the addition on protective basis in the absence of substantive assessment. He further submitted that this appeal pertains to assessment year 2013-14. The learned D.R, taking us through the paper book filed by him, highlighted that no addition of equivalent amount was made in the hands of the aforesaid four persons (namely Mr. Sachin Tiwari, Rohit Kumar Tripathi, Nitesh Kumar Tripathi and Ravindra Nath Tripathi) of corresponding amount in assessment year 2013-14. He further submitted that the learned CIT(A) did not enhance the quantum of addition but merely changed the nature of the addition from protective addition to substantive addition as regards the aforesaid amount of Rs.1,45,73,000/-. He also submitted that the learned CIT(A) was not required to issue show cause notice to the assessee for changing the nature of the addition (from protective to substantive) as there was no enhancement of income.
(E.2) In his rejoinder, learned A.R. for the assessee submitted that Revenue did not subject the assessment order passed by the Assessing Officer to revision proceedings u/s 263 of the Act. Therefore, he contended, the assessment order had attained finality qua the Revenue. He also submitted that substantive additions of the aforesaid amount totaling Rs.1,45,73,000/- were made in the hands of the aforesaid four persons (namely Mr. Sachin Tiwari, Rohit Kumar Tripathi, Nitesh Kumar Tripathi and Ravindra Nath Tripathi) in assessment year 2012-13 instead of assessment year 2013-14 after due application of mind by the Assessing Officer. The aforesaid persons claimed before their respective Assessing Officers that the aforesaid amounts were brought forward from the earlier year (previous year relevant to assessment year 2012-13). The aforesaid four persons had explained to the Assessing Officer that the corresponding amounts were deposited in the respective bank accounts of the aforesaid four persons during financial year relevant to assessment year 2013-14. Therefore, the Assessing Officer, after due application of mind, had made the addition in assessment year 2012-13 instead of assessment year 2013-14. He contended that the addition in the hands of the aforesaid four persons in assessment year 2012-13 on substantive basis pertains to protective assessment of same amounts in the hands of the assessee in assessment year 2013-14. He further submitted that the aforesaid four persons have also paid the assessed tax pursuant to assessment orders; and that the assessment orders of the aforesaid four persons have also attained finality as these have not been subjected to revision proceedings u/s 263 or u/s 264 of I.T.Act; nor have they been subjected to reassessment proceedings u/s 147 of the I.T. Act.
(E.2.1) We have heard both sides. We have perused materials on record. Relevant facts are not in dispute. It is not in dispute that the aforesaid addition of Rs.1,45,73,000/- was made on protective basis in the assessment order and information was passed on to the Assessing Officers of the aforesaid four persons (namely Mr. Sachin Tiwari, Rohit Kumar Tripathi, Nitesh Kumar Tripathi and Ravindra Nath Tripathi) to make addition in the hands of the aforesaid four persons on substantive basis. Thus, it was well considered choice exercised by Revenue to assess the amounts in the hands of the aforesaid four persons on substantive basis, after application of mind. It is not in dispute that the Assessing Officers of the aforesaid four persons, after due application of mind, chose to assess the aforesaid corresponding amount in the hands of aforesaid four persons in assessment year 2012-13 instead of assessment year 2013-14. Thus, it was also a well considered choice exercised by Revenue to assess the income in assessment year 2012-13 instead of in assessment year 2013-14; in the hands of the aforesaid four persons. Further, it is also not in dispute that no proceedings u/s 263 or u/s 264 or u/s 147 of the I.T. Act have been initiated by Revenue. Thus, it is held that the aforesaid choices made by Revenue have attained finality. It is also not in dispute that the aforesaid additions made in the hands of the aforesaid four persons in assessment year 2012-13 do correspond with the unsecured loans received by the assessee from them in assessment year 2013-14. It is also not in dispute that the additions in the hands of the aforesaid four persons in assessment year 2012-13 was made on substantive basis. Having assessed the amounts in the hands of the aforesaid four persons on substantive basis after well considered choices made by Revenue which attained finality, it is unreasonable, unjust and wholly unsustainable for Revenue to take the stand that the same amount should also be taxed on substantive basis in the hands of the assessee. The amount in question i.e. Rs.1,45,73,000/- cannot be taxed twice on substantive basis in different hands as it will amount to addition of the same income twice in the facts and circumstances of the present appeal. In view of the foregoing, the aforesaid addition of Rs.1,45,73,000/- is hereby deleted.
(F) As regards the addition of Rs.8,73,656/- to the net profit of the assessee, learned A.R. for the assessee failed to persuade us that the addition was excessive, unreasonable, unjust or against law. Therefore, the addition of Rs.8,73,656/- made to the net profit of the assessee is confirmed.
In the result, the appeal of the assessee is partly allowed.
(Order pronounced in the open court on 24/09/2025)