Punit Jain Vs DCIT (ITAT Delhi)
Delhi ITAT Deletes ₹7.15 Crore Protective Addition After Substantive Assessment in Another Person’s Hands Was Quashed-Protective Addition Cannot Survive Independently
The Delhi ITAT deleted a substantial protective addition of ₹7.15 crore under Section 69A, holding that once the corresponding substantive addition made in the hands of another person had already been deleted by the Tribunal, the protective addition could no longer survive.
The assessee had filed his return declaring income of ₹13.08 lakh. The case was selected for complete scrutiny under CASS because of large cash deposits during demonetisation and an abnormal increase in sales accompanied by a fall in profitability. The AO ultimately made an addition of ₹7.15 crore under Section 69A on a protective basis, besides an addition of ₹2.80 lakh relating to unexplained cash deposits.
The ₹7.15 crore addition had been made protectively in the assessee’s hands because the corresponding amount had been assessed substantively in the hands of Nitin Gupta. However, in Nitin Gupta’s case, the Coordinate Bench had subsequently quashed the substantive assessment itself.
The earlier Tribunal order in Nitin Gupta’s case had found two fundamental jurisdictional defects. First, the assessment suffered from lack of a valid Section 153D approval. The approval was a common approval covering several persons and years and was held to be a mechanical exercise without proper application of mind. The Tribunal therefore held the assessment to be non est in the eyes of law.
Secondly, the assessment was based upon documents seized during a search conducted in the case of other persons. The Tribunal held that where seized documents belonging to the assessee were relied upon, the Department could not simply proceed by making a regular assessment under Section 143(3) without invoking the legally appropriate jurisdiction under Section 148 or Section 153C, as applicable. The assessment was quashed on this independent ground as well.
In Punit Jain’s appeal, the Departmental Representative could not controvert the fact that the substantive addition had already been deleted. The ITAT therefore held that the corresponding protective addition in the assessee’s hands “cannot survive” and directed its deletion.
However, the assessee did not succeed on the separate ₹2.80 lakh addition. The AO had estimated this amount at 10% of cash deposits of ₹28 lakh. Although the assessee argued that the addition was based merely on guesswork and estimation, the Tribunal noted that he had failed to produce clinching documentary evidence substantiating the source of the cash deposits. It therefore declined to interfere and sustained the ₹2.80 lakh addition.
Cases Discussed:
- ACIT Vs. Serajuddin and Co. (SC), [2024] 163 com118 (SC)
- PCIT Vs. Anuj Bansal (SC), [2024] 466 ITR 254 (SC)
- PCIT Vs. MDLR Hotels (P) Ltd. (Delhi HC), [2024] 166 taxmann.com 327 (Delhi)
- PCIT Vs. Shiv Kumar Nayyar (Delhi HC), [2024] 163 taxmann.com 9 (Delhi)
- PCIT Vs. Naveen Kumar Gupta (Delhi HC), (2024) 168 com574 (Del)
- PCIT Vs. Sapna Gupta (Allahabad HC), [2023] 147 taxmann.com 288 (All.)
FULL TEXT OF THE ORDER OF ITAT DELHI
The instant appeal filed by the assessee is directed against the order dated 31.08.2025 passed by the Ld. Commissioner of Income-tax (Appeals)-Delhi-26 under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) arising out of the Assessment Order dated 30.12.2019 passed by the Assessment Unit, Income-tax Department under Section 143(3) of the Act for Assessment Year 2017-18.
2. For A.Y. 2017-18 the assessee filed his return of income on 29.08.2017 declaring total income of Rs. 13,08,100/-. The case was processed u/s 143(1) at the returned income. Subsequently, the case was selected for complete scrutiny under CASS on account of large cash deposited during demonetization period and abnormal increase in sales with decrease in profitability as compared to earlier years. Statutory notices issued under Section 143(2)/142(1) were duly responded by the assessee. The AO completed the assessment at Rs. 7,30,88,100/- by adding Rs. 2,80,000/- on account of unexplained cash deposit u/s 68 and Rs. 7,15,00,000/- under Section 69A on protective basis to the returned income. In appeal the Learned CIT(A) affirmed the action of the Learned AO. Hence, the assessee is in appeal before this Tribunal.
3. Learned counsel for the assessee at the very outset submitted that addition of Rs. 7,15,00,000/- was made on protective basis in the hands of the assessee whereas the substantive addition in the hands of Nitin Gupta has since been deleted by the coordinate Bench vide order dated 13.08.2025 rendered in cross appeals filed by the assessee and the revenue in ITA Nos. 1990 & 2195/Del/2023 for A.Y. 2017-18, by observing as under:
“These assessee’s and Revenue’s cross appeals ITA No.1990 & 2195/Del/2023 for assessment year 2017-18, arise against the Commissioner of Income Tax (Appeals)-31 [in short, the “CIT(A)”], New Delhi’s order dated 10.05.2023 passed in case no. 1121/21- 22, involving proceedings under section 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’).
Heard both the parties. Case files perused.
2. We note at the outset that there arise the twin legal issues of validity of the impugned section 143(3) assessment framed by the Assessing Officer dated 30th December, 2018 inter alia for want of a valid section 153D approval as well as on account of a fact that the learned lower authorities had neither initiated section 148 or section 153C proceedings herein, as the case may be.
3. We now advert to the basic relevant facts in the instant twin cross appeals. There is not dispute that the learned departmental authorities had carried out the search in question dated 25.11.2016 in Mr. MohitGarg& Others’ cases wherein “certificates/documents belonging to the assessee were seized” as per the assessment order dated 30.12.2018. The assessee filed his return on 28.03.2018 declaring total income/loss of Rs.9,84,010/- . The Assessing Officer issued section 143(2) notice dated 28.09.2018; and, thereafter, he finalized his assessment in question inter alia making various additions which are not discussed herein since we are dealing with the above twin legal issues at this stage. The assessee appears to have challenged the Assessing Officer’s foregoing action before the CIT(A) who has partly accepted his lower appeal. This is what leaves both these parties aggrieved who have preferred their respective cross appeals herein. 4. We now come to the above former issue of validity of the impugned assessment for want of a section 153D approval. Learned counsel has invited our attention to page 10 in his paperbook indicating a common approval dated 29.12.2019 involving total eight persons including the assessee at serial no. 3 in assessment years 2011-12 to 2016-17.
4. It is in this factual backdrop that we sought to verify the clinching fact herein as to whether there is any separate approval for the impugned assessment year 2017-18 in the assessee’s case or not. No satisfactory reply has come from the Revenue side throwing sufficient light on the issue. We are thus constrained to hold that there was a common approval in the assessee’s and other seven persons’ cases which has already been held as not a substantive compliance to the provisions of the Act in ACIT Vs. Serajuddin and Co. [2024] 163 com118 (SC), PCIT Vs. Anuj Bansal [2024] 466 ITR 254 (SC), PCIT Vs. MDLR Hotels (P) Ltd. [2024] 166 taxmann.com 327 (Delhi), PCIT Vs. Shiv Kumar Nayyar [2024] 163 taxmann.com 9 (Delhi) and PCIT Vs. Sapna Gupta [2023] 147 taxmann.com 288 (All.) already deciding the very issue in assessee’s favour and against the department. Their lordships further hold that such a mechanical exercises of section 153D approval could not be mechanically finalized in absence of the prescribed authority having properly applied its mind. We thus decide the above former legal question in the assessee’s favour and against the department to conclude that the impugned assessment framed by the Assessing Officer on 30th December, 2018 is itself a non-est one in the eyes of law.
5. The outcome would be hardly any different qua the above latter legal issue as well wherein the learned departmental authorities appear to have proceeded against the assessee based on some seized document belonging to him (supra). That being the case, we are of the considered view that in absence of either section 148 reopening proceedings or section 153C proceedings; as the case may be, the learned departmental authorities could not have proceeded against the assessee in the assessment year 2017-18 which happens to be the year of a search. We further wish to quote PCIT Vs. Naveen Kumar Gupta (2024) 168 com574 (Del) that even section 148 proceedings could be initiated in such an instance. We are of the considered view in this backdrop that whether in section 148 or section 153C proceedings, learned Assessing Officer could not have simply proceeded against the assessee u/s 143(3) assessment, and, therefore, we quash his impugned assessment on this latter aspect as well. The Revenue’s corresponding vehement submissions on both these issues are hereby rejected in very terms. All other pleadings between the parties herein stand rendered academic.
6. This assessee’s appeal ITA No.1990/Del/2023 is allowed and Revenue’s cross appeal ITA No.2195/Del/2023 is dismissed, in above terms. A copy of this common order be placed in the respective case files.”
4. Ld. DR could not controvert the aforesaid factual position. Since the substantive addition made in the hands of Nitin Gupta on the same issue has been deleted by the Coordinate Bench of the Tribunal the protective addition made in the hands of the instant assessee cannot survive. Accordingly, addition of Rs. 7,30,88,100/-made in hands of the assessee on protective basis is hereby deleted.
5. As regards addition of Rs. 2,80,000/- the assessee’s stand is that the Assessing Officer added 10% of the cash deposit of Rs. 28,00,000/- as unexplained cash credit on guess work and estimation. However looking into the fact that assessee could not substantiate his claim by adducing clinching documentary evidence in support of impugned cash deposit we do not find any reason to interfere with the orders of authorities below on this count. Ground is rejected.
6. In the result assessee’s appeal is partly allowed.
Order pronounced in the open court on 10/08/2026.
