TaxTMI 
TaxTMI 
TaxTMI 
2023 (2) TMI 845
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....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 have become infructious. At the same time, given th....
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....ng 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 additions made in the hands of the Assessee to be infructuous, nugatory and bad-in-law. 7. That the Ld....
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.... 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 facts are available on record and basis the same, these grounds of appeal can be examined and disposed off after hearing the contenti....
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....er 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 said writ petition, the Department is still agitating that the amount of share application money received from the assessee company to be tr....
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....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 before the Hon'ble Settlement Commission. Needless to say that the above findings would form part of our report to be sent to the Hon'ble Commission. Notwithstanding....
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....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 hands of the assessee company does not survive. Hence, we have no hesitation in directing the Id.AO to delete the addition made in the sum of Rs. 13,86,600/- on protective basis u/s. 69A of th....
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.... 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 there is no bar under law to make the protective addition which has rightly been made by the AO and confirmed by the Ld. CIT(A). 24. It was further submitted that the decision relied on by the Ld. AR a....
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.... 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 search and seizure operation u/s 132(1) of the Income Tax Act (here-in-after referred as "Act"), was carried out. by the Department at the business premises of the M/s Bhushan Power & Steel Ltd. (BPSL) along with residential / business premis....
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....he 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 hands of the assessee. 29. The concept of protective assessment has not been defined in the Income Tax Act and there are no specific provisions governing the same. At the same time, it is an established departmental practice, which has gained judicial recognition b....
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....le 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-tax authorities to determine the said question by taking appropriate proceedings both against A and B." The Hon'ble Supreme Court further held that: "We would, however, like to add one direction in fairness to the appellants. The proceedings taken against both the appellants s....
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....ticular 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 Department should provide relief suo motu to one of them. (ITO v. Bachu Lal Kapoor [1966] 60 ITR 74 (SC)). There can be precautionary assessments but not protective recovery. (CIT v. Cochin Co. Pvt. Ltd. [1976] 104 ITR 655 (Ker.)). But where an assessment is intended to be protective, it should be so expressed.....
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....en 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. 'Has escaped assessment' indicates an event which has taken place. Tax legislation cannot be rewritten by the Revenue or the Court by substituting the words 'may escape assessment' in future. Writing legislation is a constitutional function entrusted to the legislature." 32. We now refer to some....
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....r 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 Coordinate Bench observed that how the disallowance of Rs. 527.85 lacs out of the advertisement expenses can be a reason of belief that income has escaped the assessment, when the AO himself has taxed the same in the block assessment of this very assessee for the period which also covers the year in question. It w....
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.... 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 to be some substantive assessment / addition first which enables the AO to make a protective assessment / addition. It was held that the substantive addition / assessment is made in the hands of the person in whose hands the AO prima facie holds the opinion that the income is rightly taxable. Having done so and wi....
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.... 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 proceedings for assessment year 2000-01 and brought to tax income arising from sale of 37,000 shares as short-term capital gain. While doing so, the Assessing Officer relied upon Circular No. 704, dated 28-4-1995 wherein the CBDT had instructed officers of the revenue to adopt the date of broker's note/bill as date of t....
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....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 aspect is very clear. The belief entertained by the Assessing Officer should be that of an honest and reasonable person based upon reasonable grounds. The reason to believe should be held in good faith and should not be a mere pretence. In the instant case, the Assessing Officer brought to tax the capital gain as a LTCG in ....
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.... 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, either in the hands of the assessee, addition under section 69A should have been made on substantive basis, and in the hands of Fisher Health Resort Private Limited, it should have been made on protective basis or vice versa. It was held that very strangely the addition has been made under section 69A in the hands of the ....
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....ss 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 Education, no protective assessment could have been made by the AO in the hands of assessee and, therefore, the action of the AO was held as bad in law and the addition was deleted. On further appeal by the Revenue, the Coordinate Bench held that where there was no prior substantive addition in the hands of M/s. Society of Educ....
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....ould 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 presumption of the protective assessment in general. Protective assessment cannot be independent of substantive assessment. Thus 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. In ....
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....ed 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 the Act which is not permissible as per decision of ITAT, Mumbai in the case of M.P. Ramachandaran v. DCIT (supra) and Suresh K Jajo v. ACIT (supra)." 9. In the light of the aforesaid decision of the Tribunal and based on the discussion, we do not find any infirmity in the action of Ld. CIT(A) to have deleted the protective assessment in the hands of the assessee when the fact was that there was no substan....
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....he 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 accordingly held that it is a case where there was no substantive addition made in the hands of Indian Medical trust at first place and in absence of substantive addition, the AO has proceeded with protective assessment in the hands of the assessee, it cannot be sustained. It was further held that subsequent to completion of original assessment proceedings made on protective basis in hands of the assessee, realizing the ....
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....late 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 amounts to change of opinion on same set of facts. In any case, once the ld CIT(A) was ceased of the matter, the AO could have brought this up before the ld CIT(A) and sought necessary directions. Where however, the AO still hold the belief to take suo-moto action to convert protective assessment into substantive assessment, he could have invoked his jurisdiction in terms of section 147 on satisfaction of conditions specified ther....