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2023 (2) TMI 845
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....sment Years 2008-09 to 2010-11. 2. Firstly, regarding the stay applications filed by the respective assessees against the demand raised by the Assessing officer, the ld AR taken us through the stay applications and submitted that in all these cases, more than 30% of tax demand raised by the Assessing officer has already been deposited by the respective assessees and they have a fair chance on merits of the case. It was submitted by the ld AR that he is ready to argue the appeals on merits and the remaining demand may be stayed till the matter is heard and disposed off. 3. The ld Sr. DR submitted that a report dated 15.11.2022 has been received from the office of PCIT(Central), Gurgaon that the instructions have been issued to the concerned Assessing officer not to take any coercive action to recover the demand outstanding till the decision of the Hon'ble Punjab and Haryana High Court in CWP No. 20234/2013 filed by the Department against the order of the Income Tax Settlement Commission dated 30.06.2013 in case of Bhushan Power and Steel Ltd. 4. Considering the aforesaid submissions made by both the parties and the material available on record, the aforesaid stay petitions ....
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....y the Ld. DCIT, CC-1, Chandigarh ('A.O') u/s 68 of the Act although no corresponding substantive assessment with respect to the impugned issue existed in the case of any other assessee, thus acting against the judicially established principle that there cannot be a protective assessment/addition without there being a substantive assessment/ addition. 5. That the Ld. CIT(A) has erred in confirming the addition made by the Ld. A.O. u/s 68 on a protective basis by violating the judicially settled law that it is not permissible for appellate authorities to make protective orders. 6. That without prejudice to Additional Ground No.2, the Ld. CIT(A) has erred in upholding the impugned addition of Rs.37,31,00,000/- 'the impugned amount' made by the Ld. A.O. u/s 68 of the Act on a protective basis despite the categorical finding contained in the assessment order u/s 153A that Bhushan Power & Steel Ltd. was the ultimate & actual beneficiary of the alleged accommodation entries thus, leaving no room for doubt with respect to the actual ownership of the alleged unaccounted income (as per the A.O's own finding) and thereby rendering the impugned protective ....
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....urt decisions in case of Chitturi Subbanna Vs. Kudapa Subbanna & Others 1965 AIR 1325 and in case of National Thermal Power Co. Ltd. Vs. CIT [1998] 229 ITR 383 (SC) wherein it has been held that the Tribunal has the jurisdiction to examine a question of law which arises from the facts as found by the authorities below and having a bearing on the tax liability of the assessee. 8. The ld CIT/DR objected to the admission of the aforesaid grounds of appeal and submitted that these grounds of appeal were not taken before the ld CIT(A) and therefore, the same cannot be admitted for the first time before the Tribunal. 9. We have heard the rival contentions and purused the material available on record. The additional grounds raised by the assessee and as contended by the ld AR are additional ground no. 4, 5 & 7 which relates to whether protective additions can be made by the Assessing officer where there is no corresponding substantive assessment made in hands of any other person and whether the protective assessment so made can be confirmed and enhanced by the ld CIT(A). In our view, these are purely legal grounds of appeal and involves questions of law. We find that the relevant fa....
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....of the Department throughout has been that the amount received as share application money received by the assessee company from various other companies and which were later invested as share application money in M/s Bhushan Power & Steels Limited represent the unexplained income of M/s Bhushan Power & Steels Limited. It was submitted that M/s Bhushan Power & Steel Limited had moved an application under section 245C(1) on 12/12/2011 before the Income Tax Settlement Commission which was admitted and thereafter order under section 245D(4) was passed by the Income Tax Settlement Commission on 30/06/2013. It was submitted that before the Income Tax Settlement Commission, the Department had argued that the amount received by M/s Bhushan Power & Steel Ltd. from assessee company as share application money be treated as unexplained income of M/s Bhushan Power & Steel Ltd which was however not accepted by the Income Tax Settlement Commission. It was submitted that against the said order of the Income Tax Settlement Commission, the Department has moved a Civil Writ Petition before the Hon'ble Punjab & Haryana High Court which is currently pending adjudication. It was submitted that vide the s....
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....eel Ltd. in its reply filed on 12.12.2011. The reply filed by the assessee has already been discussed in para 22 above. Vide this office showcause notice dated 16.12.2011, the assessee was showcaused as to why an amount of Rs. 37,31,00,000/- should not be added back to taxable income on protective basis. The case of the assessee was fixed for 23.12.2011. Vide written reply dated 21.12.2011, the assessee reiterated the submission which were made in the replies, earlier filed by the assessee on 07.10.2011 and 12.12.2011. Regarding protective assessment, the submission of the assessee was that addition of aforesaid amount on protective basis is bad in law. The submission of the assessee has been duly considered, there is no bar under the Income Tax Act, 1961 to make protective addition. Findings of the revenue are that in view of discussion in the preceding paragraphs, the entire amount of Rs. 153,99,00,000/- taken as share application money by M/s Bhushan Power & Steel Ltd. company through the process of accommodation entries is treated as income of the company M/s Bhushan Power & Steel Ltd. u/s 68 of the I. T. Act and M/s Bhushan Power & Steel Ltd. has filed an application ....
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....servations of the Assessing Officer while completing assessment for assessment year 2001- 02which we have extracted above cannot be said to be an expression of his intention to make a protective assessment of the capital gain as long-term capital gain. It is an assessment pure and simple. Firstly, the words used by the Assessing Officer do not express his intention that the long-term capital gain is being brought to tax by way of protective assessment. Secondly, there is no substantive assessment already made treating the capital gain as short-term capital gain. Therefore, there can be no protective assessment." 19. It was submitted that the aforesaid proposition has been followed in another recent Mumbai Benches decision in case of Pegasus Properties (P.) Ltd. Vs. DCIT reported in 193 ITD 514 (Mumbai - Trib.), wherein it was held as under: "9.3 In the instant case before us, admittedly, no substantive addition of Rs. 13,86,600/-was made by the revenue either in the hands of M/s. Fisher Health Resorts (P.) Ltd or in the hands of any other person. In Respectfully following the aforesaid decision, since no substantive addition was made, the protective addition made in the....
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...., he is limiting his submissions to the extent of legality of protective addition made by the AO vis - a-vis the substantive addition in hands of M/s Bhushan Power & Steel Ltd. It was submitted that in the in the instant case, M/s Bhushan Power & Steel Ltd. has moved a petition before the Income Tax Settlement Commission and in Rule 9 report, substantive additions were proposed by the Department in the hands of M/s Bhushan Power & Steel Ltd. It was submitted that Income Tax Settlement Commission has since disposed off the said petition vide its order dt. 30/06/2013 wherein it didn't make the substantive additions in hands of M/s Bhushan Power & Steel Ltd. It was submitted that the Department has not been accepted the said order passed by the Income Tax Settlement Commission and has moved a Civil writ petition no. 20234 of 2013 before the Hon'ble Punjab & Haryana High Court which is currently pending adjudication. It was submitted that since M/s Bhushan Power & Steel Ltd. has moved a petition before the Hon'ble Income Tax Settlement Commission, therefore to protect the interest of the Revenue, protective addition was made in the hands of the assessee company. It was submitted that t....
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....application before the Settlement Commission on 12/12/2011 for Assessment Year 2004-05 to 2011-12 (including the impugned assessment year 2008-09) and the Department in its Rule 9 report submitted before the Settlement Commission has proposed substantive additions in the hands of M/s Bhushan Power & Steel Ltd, however, the Settlement Commission in its order passed u/s 245D(4) dated 30/06/2013 didn't make the substantive addition of share application money in the hands of M/s Bhushan Power & Steel Ltd. The contents the said report of the DCIT, Central Circle-1, Chandigarh read as under: "2. In this regard, the desired report as to the present status of CWP No. 20234/2013 and as to the factual report in first search cases of the group in this case is submitted as under:- A. Present status of CWP No. 20234/2013:- As regard, the status of CWP No. 20234/2013, under reference, it is submitted that the same is pending for adjudication as on date. Further, as checked from the official site of the Hon'ble Punjab & Haryana High Court, there is no next date of hearing fixed in this case. B- Factual report in first search cases of the group:- A ....
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....mission were initiated by an application moved by M/s Bhushan Power & Steel Ltd on 12/12/2011 (well before passing of the impugned assessment order dated 23/12/2011) but were concluded by passing of the order u/s 245D(4) dated 30/06/2013 (subsequent to passing of the impugned assessment order). Even in the order so passed by the Settlement Commission subsequent to the passing of the impugned assessment order, as so stated by the Revenue, no substantive additions were made in the hands of M/s Bhushan Power & Steel Ltd. It is therefore a case where no substantive addition has been made in hands of M/s Bhushan Power & Steel Ltd and at the same time, only protective assessment has been made in the hands of the assessee and which has been confirmed by the ld CIT(A) on protective basis. 28. The question that arises for consideration is whether there is any bar under the Income tax Act to make such protective addition in hands of the assessee company, the inter-play between the substantive and protective assessment and where in absence of substantive addition made in hands of M/s Bhushan Power & Steel Ltd or any other person, whether protective addition can be made and sustained in the....
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.... precautionary measure against the eventuality of its being finally held that the income is not liable to be taxed in his brother's hands", and "until the question of liability to pay tax in respect of the income in question is finally determined it may not be possible to safely predicate that it is the income of one and not of the other, and the respondent's case appears to be that in such circumstances protective assessments have to be made so that the income may not escape taxation altogether". Taking the said contentions into consideration, the Hon'ble Supreme Court held that the case of the Revenue is clearly that the notices issued against the two brothers by their respective Income-tax Officers are intended to determine who is responsible to pay tax for the income in question and thereafter, has laid down the following legal proposition: "In cases where it appears to the income-tax authorities that certain income has been received during the relevant assessment year but it is not clear who has received that income and prima facie it appears that the income may have been received either by A or B or by both together, it would be open to the relevant income-ta....
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....ne place. Sometimes they may be made by different officers as, for example, where an officer assessing A thinks that certain income belongs to him but another officer assessing B is of the opinion that the income is his. Sometimes the same officer may find that an assessee before him is returning a particular income but is of the opinion that it should be assessed in the hands of a firm or a family and not in the hands of the person who returned it. It has been held that the officer may, when in doubt (Not otherwise : CIT v. Shri Ramchandraji Maharaj Ka Bada Mandir [1988] 73 CTR (MP) 79), to safeguard the interests of the Revenue assess it in more than one hand (Lalji Haridas v. ITO [1961] 43 ITR 387 (SC)). But this procedure can be permitted only at the stage of the assessment as, at higher levels, it is possible for the appellate or revisional authority to give a clear finding as to the assessee who is liable to be so assessed leaving the one who is aggrieved to get redress by appropriate proceedings. (See Dayabai v. CIT [1985] 154 ITR 248 (MP)). In any event, if, at the stage of the Tribunal or High Court it is found that the same income is assessed in both places, the Departmen....
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....hargeable to tax has escaped assessment and clause (a) includes a case where no return of income has been furnished by the assessee although his income or the income of any other person in respect of which he is assessable exceeds the maximum amount which is not chargeable to tax. As the reasons which have been disclosed to the assessee would indicate, this is not a case where an assessee has not filed a return of income simplicitor. The whole basis of the reopening is on the hypothesis that if the provisions of Sections 61 to 63 are attracted as has been claimed by the assessee, and the income of Rs.32.83 Crores which has been claimed by the assessee to be exempt is treated as exempt, in that event an alternate basis for taxing the income in the hands of the AOP of the contributories is sought to be set up. For the reasons already indicated, the entire exercise is only contingent on a future event and a consequence that may enure upon the decision of the Tribunal, that again if the Tribunal were to hold against the Revenue. A reopening of an assessment under Section 148 cannot be justified on such a basis. There has to be a reason to believe that income has escaped assessment. ....
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.... to be made in the block assessment in the hands of the assessee. During the pendency of the appellate proceedings before the Ld. CIT(A), the AO recorded the reasons for escapement of income and issued a notice under section 148 of the Act dt. 26/03/2003 and one of the reasons which weighed heavily with the AO for issuing notice under section 148 of the Act was that the assessee has claimed huge advertisement and publicity expenses which was not allowable and the initiation of reassessment proceedings and consequent reassessment order was assailed again before the ld CIT(A) and then, it came up for consideration before the Coordinate Bench. The Coordinate Bench observed that the AO formed his opinion about alleged escapement of income even before passing of the order by the Ld. CIT(A) against the block assessment and even from the reasons recorded by the AO, it is seen that this item was taken up for consideration in reassessment not as per the AO's belief about the escapement of income but the fact that the assessee has consistently been of the opinion that such disallowance is not warranted in the block assessment being not within in the purview of Chapter XIV-B of the Act. The C....
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....the AO may be sure of only one person having earned an income but he may be uncertain of the year in which the income was earned i.e. year one or year two. In such a case, he can tax such income in both the years of course subject to the other provisions in one year on substantive basis and in the other year on the protective basis. The Coordinate Bench thereafter gone ahead and examined the situation when the regular assessment was originally made and later on, it comes to the notice of the AO that some income chargeable to tax has escaped assessment and in the interim, the block assessment order under section 158BC has been passed wherein such income has already been included in the block assessment, whether the AO can resort to provisions of reassessment to include the same income on protective basis. It was held by the Coordinate Bench that the protective assessment cannot be independent of substantive assessment. The protective assessment is always successive to the substantive assessment. There may be a substantive assessment without any protective assessment but there cannot be any protective assessment without there being a substantive assessment. It was held that there has....
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.... broker bill on 12-4-2000 and delivery of shares and its corresponding pay-in/pay-out took place only on 12-4-2000. Since the corresponding sale and delivery had taken place only on 12-4-2000, i.e., after expiry of one year from date of purchase of shares, the capital gain on sale of 37,000 shares was claimed to be a long-term capital gain and offered to tax in the assessment year 2001-02. In the course of assessment, the Assessing Officer did not come to any definite conclusion regarding taxability of long-term capital gain. He expressed the opinion that as per the delivery of shares and broker's bill, there was only an incident of long-term capital gains on sale of shares. He, however, expressed an opinion that if the date of contract note of the broker was taken, then the transaction would relate back to the assessment year 2000-01 and the capital gain would also be short-term capital gain. Thereafter, the Assessing Officer merely made the observation that since the assessee had already offered the income in the assessment year 2001-02, the same was to be assessed in the said year to protect interest of the Revenue. Subsequently, the Assessing Officer reopened the assessment pro....
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.... assessment. It thereafter held that in the instant case, the observations of the Assessing Officer while completing assessment for the assessment year 2001-02 could not be said to be an expression of his intention to make a protective assessment of the capital gain as long-term capital gain. It was an assessment pure and simple. Firstly, the words used by the Assessing Officer did not express his intention that the long-term capital gain was being brought to tax by way of protective assessment. Secondly, there was no substantive assessment already made treating the capital gain as short-term capital gain. Therefore, there could be no protective assessment. Thirdly, there had been a demand (without any limitation that it should not be recovered) raised pursuant to the above assessment which also showed that the said assessment was not a protective assessment but a substantive assessment. 37. The Coordinate Bench thereafter held that where the assessment for the assessment year 2001-02 was not a protective assessment but assessment pure and simple, could the Assessing Officer entertain a belief that income chargeable to tax had escaped assessment. It held that the law on this asp....
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.... cash was from subscription from members for health club facilities. The Assessing officer, however, disregarded these contentions and proceeded to tax the cash in the hands of the assessee company on protective basis under Section 69A of the act. While doing so, the Assessing officer doesn't make any mention as to whether any substantive addition was made in the hands of Fisher Health Resorts Private Limited or any other person. On appeal, the ld CIT(A) observed that there is no evidence that Fisher Health Resort Private Limited had owned up the cash and no confirmation from the said company has been filed regarding cash belonging to them. The ld CIT (A) also observed that no explanation has been given by the assessee that this cash has been considered in the hands of Fisher Health Resorts Private Limited. In the said background, on further appeal, the Coordinate Bench held that only protective addition has been made in the hands of the assessee company. It was held that normally, protective assessment is made only where the Revenue entertains doubt as to in whose hands a particular income is to be assessed, this is primarily done to protect the interest of the Revenue, therefore,....
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.... proper to consider the sum credited in the Savings Bank Account (supra) as his own. The AO noted that there were withdrawals amounting to Rs. 94,55,938/- by the members on various dates. According to him, the assessee could not prove that the said bank account was exclusively used for the purpose of college and that the gross receipt shown by the assessee society does not match with the cash deposits as claimed by the assessee. Therefore, the AO was of the opinion that the total credit made in the said bank account amounting to Rs. 1,51,56,830/- need to be treated as "income from other sources" in the hands of the assessee and added to the total income of the assessee on protective basis to safeguard the interest of Revenue and he also observed in the assessment order that the substantive addition would be made by the respective AO of M/s Society of Education (Alpha Beta College) and that the information regarding this is being passed to the that AO of the college and thus he made protective assessment in the hands of the assessee to the tune of Rs. 1,51,56,830/-. On appeal, the ld CIT(A) held that in the absence of any prior substantive addition in the case of M/s. Society of Edu....
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....to provide the accommodation entries. The addition of Rs. 3,17,67,951/- made by the Assessing Officer on protective basis, which is not sustainable in the eyes of law, because in this case the AO himself stated in the assessment order that the Department is looking after the cases of beneficiaries and the amounts channelized through this group would be taxed in the hands of the beneficiaries, the amount of total credits of Rs. 3,17,67,951/- made in its bank account with Kotak Mahindra Bank, KG Marg, New Delhi, during the year is added to the income of the assessee on protective basis. In this case we find that AO has not made any substantive assessment. There may be Substantive assessment without any protective assessment, but there cannot be any protective assessment without there being a substantive assessment. In the case of M.P. Ramchandran v. DCIT [129 TTJ 190 at page 195], it was held/averred, as follows, by the Hon'ble ITAT : "In order to give a different colour, the ld. DR contended that this disallowance was made on protective basis only and hence cannot be equated with the substantive disallowance. We have noted above about the validity and presumpti....
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.... other year) in whose case assessment has to be made protectively. Thus, protective assessment has to be done only after substantive assessment is done. An assessment can be considered as protective only when there is substantive assessment. Thus, substantive assessment has to precede protective assessment." In the case of G.K. Consultants Ltd. v. ITO [IT Appeal No. 1502 (Delhi) of 2013, dated 27-6-2014], [upheld in CIT v. G.K. Consultants Ltd., [IT Appeal No. 86 of 2015, dated 24-5-2016] High Court], it was held/averred, as follows, by the Hon'ble ITAT Delhi : "19. On careful consideration of above contention, we are of the view that there may be a substantive assessment without any protective assessment but there cannot be any protective assessment/addition without substantive assessment/addition, meaning thereby there has to be some substantive assessment/addition first which enables the AO to make a protective assessment/addition. In the present case, the AO proceeded to make protective assessment by way of reopening of assessment of the assessee appellant company without being a substantive assessment on the date of assumption of jurisdiction u/s 147 of t....
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....ian Medical Trust, however, in the order so passed by the Income Tax Settlement Commission u/s 245D(4), there was no discussion about any undisclosed investment in aforesaid immoveable property which is apparently suggestive of the fact that such a proposal was not accepted by Income Tax Settlement Commission and as a matter of fact, no addition was made in the hands of M/s Indian Medical Trust on substantive basis. The Coordinate Bench further noted that subsequently the AO has drawn an inference that since the matter relating to investment in the land at Jugalpura has not been considered by Income Tax Settlement Commission in the hands of M/s Indian Medical Trust (in whose hands substantive addition was originally proposed by the department), the protective addition originally made in the hands of the assessee u/s 143(3) r/w 153A in respect of the said transaction needs to be converted into substantive addition and thereafter, the AO changed his earlier position as taken in the original assessment proceedings and proceeded to converted the protective addition into substantive addition in the hands of the assessee by way of impugned order dated 15.09.2017. The Coordinate Bench acc....
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....ided by the appellate authority and pursuant to decision by the appellate authority, the AO can take the necessary action to finally assess the income in right hands and enforce recovery of taxes. In the instant case, as we have noted above, there is no substantive addition in hands of Indian Medical trust and in the case of the assessee, post completion of original assessment proceedings and during the pendency of the appellate proceedings before the ld CIT(A), the AO took a suo-moto decision to convert protective assessment into substantive assessment and raised the demand notice for recovery of taxes on the assessee, thereby initiating the recovery proceedings against the assessee. As to the basis of such change in position of the AO, the ld CIT(A) has also recorded a finding that post completion of the original assessment proceedings, there are no fresh facts or enquiries which have been conducted by the AO and all the enquiries and facts were forming part of the original assessment proceedings and only basis is that there was no reference to the issue of investment in hands of Indian Medical Trust in the order of the Settlement Commission. Such a change in position thus amount....