Delhi ITAT Deletes ₹7.15 Crore Protective Addition After Substantive Assessment Quashed

By CA Vijayakumar Shetty Income Tax Judiciary August 12, 2026

TaxGuru Citation: 2026 taxguru.in 10671
Case Name: Punit Jain Vs DCIT (ITAT Delhi)
Appeal Number: Only available for paid members
Date of Judgement/Order: Only available for paid members
Related Assessment Year: 2017-18
Courts: All ITAT, ITAT Delhi

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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:

FULL TEXT OF THE ORDER OF ITAT DELHI