Protective assessment during Black Money Act proceedings: deletion sustained where substantive proceedings pending and no incriminating material found

Validity of protective assessment under the Income-tax Act where substantive proceedings under the Black Money (Undisclosed Foreign Income and Assets) Act remain pending. The tribunal noted assessments relied on search material and information from an overseas company but concluded the Assessing Officer completed the protective Income-tax assessment prematurely before conclusion of Black Money Act proceedings; the appellate authority deleted the protective assessment for lack of incriminating material on record, and the tribunal declined to disturb that deletion, dismissing the Revenues grounds.

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Issues: (i) Whether protective additions under the Income-tax Act, made on the basis of information received from foreign jurisdictions and public-domain material prior to completion of substantive assessment under the Black Money (Undisclosed Foreign Income and Assets) Act, are sustainable.

Analysis: The appeals concern protective additions made under the Income-tax Act on the basis of information received from foreign competent authorities and public-domain sources relating to alleged undisclosed foreign bank accounts and a foreign company, and the completion of those protective assessments prior to completion of substantive assessment under the Black Money Act. The facts show reassessment under the Income-tax Act proceeded on a protective basis while substantive proceedings under the Black Money Act were pending. The tribunal applied the legal framework distinguishing protective from substantive assessments and examined whether protective assessment completed before substantive determination under the Black Money Act is permissible, having regard to the principle that substantive assessment must precede and that protective assessment completed prematurely is vulnerable to being set aside. The tribunal also considered absence of incriminating material recovered during the search and the reliance on information exchanged by competent authorities.

Conclusion: The protective additions made under the Income-tax Act are not sustainable where completed prior to finality of substantive assessment under the Black Money Act and where no incriminating material from the search established the assessed additions; the protective additions and related minor addition are deleted and the revenue appeals are dismissed.

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