ACIT Vs Bhagwan Singh (ITAT Lucknow)
When Substantive Addition Stands Final, Protective Addition Cannot Survive- Jewellery & Cash Seized – Protective Additions in Employees’ Hands Quashed by ITAT
The facts showed that the police had intercepted Shri Bhagwan Singh & Shri Sunil Garg at Banda with ₹10 lakh cash & 20.678 kg gold jewellery valued at ₹6.48 crore. Both stated that the cash & jewellery belonged to their employer, M/s Giriraj Ornaments (Prop. Shri Sachin Agarwal). These assets were later requisitioned u/s 132A. During assessment, both individuals reiterated that the assets belonged to the employer, who subsequently disclosed the same in his return of income. Despite this, AO made protective additions of ₹3.24 crore (half of jewellery value) & ₹5 lakh (half of cash) each in their hands, aggregating to ₹3.29 crore, while the same assets were substantively assessed in the hands of Shri Sachin Agarwal.
On appeal, CIT(A) deleted the protective additions noting that the substantive addition in the hands of Shri Sachin Agarwal covered the same assets & that he had owned up the jewellery & cash in his return. Department appealed, arguing that since the substantive assessment was pending in Sachin Agarwal’s case, the protective additions should survive.
