ACIT vs M/s Jagatjit Industries Ltd.

“This is an appe al pre ferre d by the Revenue against the order of Ld. CIT(A), Guwahati- 2 dated 30.09.2019 for assessment year 2016-17.

2.

The sole gro und raised by the Revenue is as unde r:

“That in the fact and circumstances of the case and law in matter, the Ld. CIT(Appeals) is not justified in dele ting the protective addition made by the Assessing O fficer of Rs. 1,51,56,830/- for the A.Y . 2016-17."

3.

From perusal of the aforesaid ground raised by the Revenue , it is tak en no te that the Revenue is aggrieved by the action of the Ld. CIT(A) who de leted the protective addition made by the AO o f Rs. 1,51,56,830/-.

4.

Brief fact of the case as noted by the AO is that the assessee has filed the re turn o f income on 2.03.2018 showing total inco me of the assessee at Rs. 4,62,800/-. The AO note d that the case was selected for scrutiny thro ugh CASS and reason for scrutiny selection “substantial cash deposit in the bank account”. The assessee pursuant to the notice u/s 142(1) o f the Act, in this regard brought to the notice of the AO that the savings bank acco unt no. 33727278376 has been ope ned for the purpose of Junio r Co lle ge and 2 ITA No. 460/Gau/2019 Keshava Nanda Kakati, A.Y . 2016- 17 duly reflected about the same in the return of income of the Society o f Education (Alpha Be ta Colle ge) for the year under consideratio n which runs the Junio r Co lle ge ; and the sums de posi ted/withdrawn in the bank account are not pertaining to him and so he is not maintaining any details of the cas h de posits or withdr awals in the said bank account. It w as bro ught to the notice o f AO that the deposit/withdr awal of sums are re flected in the book s of Junio r College and he was not in a positio n to produce the books of the Junior Colle ge during his assessm ent proceedings because the Junior College is manage d by M/s Society of Education and, there fore it was submitted before the AO that it is not just and pro per to consider the sum credite d in the Savings Bank Account (supr a) as his o wn.

5.

After rece ipt of the reply from the assessee, the AO noted that there were withdr awals amounting to Rs. 94,55,938/- by the members on various dates. According to him , the asses see could not prove that the said bank account was e xclusively used fo r the purpose o f colle ge and that the gross recei pt shown by the assessee socie ty (A.Y. 2016-17) do es not match with the cash depo sits as claimed by the as sessee. The refore , 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 adde d to the total income of the assessee on prote ctive basis to safe guard the i nte rest of revenue and he also observe d in the assessment o rder that the substantive addition would be made by the respective AO of M/s Society o f Education (Alpha Be ta Colle ge) and that the information re gar ding this is being passed to the that AO of the college and thus he made protective assess ment in the hands of the assessee to the tune o f Rs.1,51,56,830/- .

6.

Aggr ieved the assessee pre ferre d an appeal be fore the Ld. CIT(A) who was ple ased to hold that in the abse nce of any prior substantive addition in the case o f M/s. Society o f Education, no protective assessment could have been made by the AO in the hands of assessee and, therefore, the action o f the AO is bad in law and, therefore, he deleted the same.

7.

Aggrieved by the aforesaid action of the Ld. CIT(A), the revenue is before us.

8.

We have he ard both the parties and pe ruse d the records . We note that the Ld. CIT(A) has made a catego rical finding of fact that there was no s ubstantial addition of such an amount (Rs. 1,51,56,830/-) made prio r in the case of M/s. Society of Education and this finding of fact has not been rebutte d/controve rte d or assailed by the revenue before us by filing specific ground to this e ffect in this appe al. From a perusal of the grounds of appeal raised by the revenue (supra), it is clear that the revenue has only assaile d the dec isio n of the Ld. CIT(A) in deleting the pro tective addition made by the AO to the tune of Rs. 1,51,56,830/-. A nd it can be very well see n that the basis for deletion resorted by Ld CIT(A) to dele te the pro tective asse ssment in the hands of assessee was because there was no substantial addition in the hands o f M/s. Socie ty o f Educat ion. T his crucial fact has not been rebutted/ controvered/assailed before us . Therefore, this finding of fact of Ld CIT (A) crystallizes (i.e. no substantive addition in the hands of M/s. Society o f Education) and, the refore , we do not find any infirmity in the order passed by the Ld. CIT(A) on this issue on deletion of protective additio n without substantial additi on. We also take note that the Ld. CIT(A) to come to such a decisio n has taken no te of relevant decisions of this Tribunal which reads as under:

“In the case o f IT O vs. Fussy Financial Ser vices Private Limited [I.T .A. No.44/DEL/ 2014 dated 05/06/ 2017, it was held/ aver red, as follows, by the Hon’ble ITAT-Delhi:

We fur the r note that the analysis of the investm ent account reveal that the company has made investment of Rs.5,04,01,000/. The statement given by S h. PN J ha assumes importance wherein he categorically adm itted that the company was doing the business o f investment and finance and during the year the bank accounts of the company have been used to pro vide the accommodation entr ies. The addition of Rs.3,17,67,951/- made by the Assessing Office r on protective basis, which is not sustainable in the eyes of law, because in this case the AO himself state d in the assess ment orde r that the Department is loo king after the case s of beneficiaries and the amounts channelize d thro ugh this group wo uld be taxe d 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 B ank , 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 assessme nt. There may be Substantive assessment without any pro tective assessment, but there canno t be any pro tective assessment without there being a substantive assessment.

In the case of M.P. R amchandr an vs. DCIT [129 TTJ 190 at page 195], it was held/ave rre d, as follows, by the Hon’ble ITAT:

“In orde r to gi ve a diffe rent co lour, the ld. DR contended that this disallowance was made on protective basis o nly and hence cannot be equated with the substantive disallo wance. We have note d abo ve abo ut the validity and presumption o f the pro tective assessment in gene ral. Pro tective asses sment cannot be independent of substantive assessment. Thus protective assessment is always successive to the substantive assessment. There may be a substantive assessment witho ut any pro tective assessment but the re canno t be any protective assessment without there being a substantive assessment. In simple words the re has to be so me substantive assessment/addition first whi ch enables the AO to make a protective assessment/addition. 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 do ne so and with a view to pro tect the interest of the Revenue , if the A O is not sure that the person in whose hands he had made the substantive addition rightl y, he embarks upon the pro tective assessment. Thus the protective assessment is basically based o n the doubt of the AO as distinct from his belief which is there is the substantive assessment.”

In the case o f Grego ry & N ichol as vs . ACIT [I.T .A. No.5102/Mum/2006 & IT(SS)A No.24/Mum/2009 dated 01/03/ 2007], it was he ld/averred, as fo llo ws, by the Hon'ble ITAT (Mumbai):

“21.

In the case of Suresh K. Jaj u (2010) 39 SOT 414(Mum), E-Benc h of the Tribunal at page 532 to 533 held as follows:

“The AO made the following observations: "As the assessee has already offere d this income in assessment year 2001-02, the same is assesse d in this ye ar to protect the interes t o f the reve nue ."

Whethe r the abo ve observations are e nough to conclude that the assessment of the capital gains as long-term capital gain in assessm ent year 2001-02 by the Assessing Officer was only a protective assessment? We have already see n the ratio laid down by the Hon'ble Supreme Court in the case of Lalji Haridas (supra) wherein the Hon'ble S upreme Court w hile recognizing the conce pt of pro tective assessment has very clearly laid down that the re must be an exhaustive enquiry and the question as to who is liable to pay (in this case which year the capital gain is to be assessed and whethe r as long-term capital gain in assessment year 2001- 02 or short term capital gain in assessment ye ar 2000-01) should be de termined after hearing objections. He should dete rmine the question in the case o f one person (in this case of the o the r person (in this case in other year) in whose case assessment has to be made protectively. Thus, protec tive assessment has to be done only after substantive assessment is done. An assessment can be conside red as protective only when there is substantive assessment. Thus, substantive assessment has to pre cede protective assessment."

In the case of G.K. Consultants Ltd. vs. ITO [ITA No.1502/Del/2013 dated 27/ 06/ 2014], [upheld in CIT vs. G.K. Co nsultants Ltd., 2016 (6) TMI 136 Delhi High Court], it was held/ave rre d, as fo llows, by the Hon'ble ITAT Delhi:

“19.

On care ful conside ration o f above contention, we are o f the vie w that there may be a substantive assessment witho ut any protective assessment but there cannot be any pro tective assessment/additio n without substantive assessment/addition, meaning thereby there has to be so me substantive assessment/addition first which enables the AO to make a protective assessment/additio n. In the present case , the AO proceede d to make protective assessment by way of reopening of assessment o f the assessee appellant company witho ut being a substantive assessment on the date of assumption of jurisdiction u/s 147 o f the Act which is not permissible as pe r decisio n of ITAT, Mumbai in the case of M.P. Ramachandaran vs. DCIT (supra) and Suresh K J ajo vs ACIT (supra)." [Emphasis given by us]

9.

In the light o f the aforesaid decision o f the Tribunal and based o n 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 ass essee when the fact was that the re was no substanti ve addition in the hands of M/s. Society of Educ ation o r other assessee’s and ergo the same is confir med.

10.

In the result, the appeal of the reve nue is dismisse d.”