Income Tax Appellate Tribunal - Mumbai
Gregory & Nicholas , Goa vs Assessee on 1 March, 2007
1
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "G", MUMBAI
Before Shri J. Sudhakar Reddy, Accountant Member
and Shri Vijay Pal Rao, Judicial Member.
I.T.A. No. 5102/Mum/2006.
Assessment year : 2002-03.
AND
IT(SS)A No.24/Mum/2009
Block Period from 01-04-96 to 18-02-2003.
M/s Gregory & Nicholas, Asstt. Commissioner of Income-tax,
C/o Mr. Rahul Shah, Vs. Central Circle-47,
Club Cubana, 83, Mumbai.
Xim Waddo, Arpora Bardez,
Goa.
PAN AADFG2702Q
Appellant. Respondent.
Appellant by : Shri Vijay Mehta.
Respondent by : Shri Pavan Ved
.
ORDER
Per J. Sudhakar Reddy, A.M. :
Both these appeals are filed by the assessee. ITA No. 5102/Mum/2006 is an appeal against the order passed by the CIT(Appeals) Central-III, Mumbai on 05- 07-2006 against the order passed u/s 144 of the Act by the AO on 08-03-2005 for the assessment year 2002-03. IT(SS)A No.24/Mum/2009 is directed against the order passed by the CIT(Appeals) Central-III, Mumbai dated 01-03-2007 in an 2 appeal against an order passed u/s 158BD read with section 158BC dated 26-04- 2006 for the block period 01-04-96 to 18-02-2003.
2. There is a delay of 654 days in filing of the appeal against the order of the CIT(Appeals) dated 01-03-2007 i.e. in the proceeding u/s 158BD
3. As the issues that arise in both these appeals are interconnected, for the sake of convenience, we heard them together and dispose of the same by way of this common order.
4. Mr. Vijay Mehta, learned counsel for the assessee first argued the issue of condonation of delay. He took this bench through the condonation petition filed by the assessee as well as the affidavit filed by him. His case is that the same amount has been assessed both in the regular assessment as well as in the block assessment and he was under a bonafide belief that the single appeal would be sufficient. He further submits that this belief arose out of advice given to him by a local Chartered Accountant at Goa. Later, this mistake was realized and the appeal against the block assessment order as confirmed by the CIT(Appeals) was filed with a petition for condonation of delay..
5. Mr. Vijay Mehta further filed an affidavit given by Mr. Ganesh M. Daivajna, Chartered Accountant and partner of M/s Ganesh Ganesh Daivajna & Co., Goa wherein the Chartered Accountant stated that in view of the fact that the same addition was made twice and as an appeal had already been filed against the order of the CIT(Appeals) for the assessment year 2002-03, he on his misunderstanding of law and facts, did advise the assessee that only one appeal need to be filed in this case. The learned counsel argued that this is not a case where the assessee has not acted nor a case of inaction and it is a case where the assessee has been continuously pursuing the remedy and it turned out that the assessee wrongly failed 3 to prefer an appeal in time against the block assessment order as confirmed by the CIT(Appeals) and that too on legal advise. He submitted that in such situation the appeal delay should be condoned. He relied on the following decisions :
i) Collector, Land Acquisition vs. Mst. Katji 167 ITR 471.
ii) Priyanka Chopra vs. ACIT, ITA No.4045/Mum/2009 and ITA No. 2019/Mum/2010 C-Bench, Order dated 10th Dec., 2010.
He drew our attention to page 17 and submitted that under similar facts and circumstances, the Tribunal condoned the delay of 240 days in filing the appeal. He also referred the case laws cited at pages 12 and 13 of the order and relied on the same. He also relied on certain other decisions based on which he submits that the delay has to be condoned.
6. Mr. Pavan Ved, learned CIT-DR, on the other hand, strongly opposed the contentions of the assessee and submitted that this is not a fit case for condonation of delay. He filed a copy of section 1 of the Indian Evidence Act wherein it is stated that Indian Evidence Act, 1872 does not apply to affidavits presented to any Court or Officer or proceedings before an Arbitration. He pointed out that the affidavits in question were not properly verified. He relied on the decision of the Hon'ble Supreme Court in the case of A.K.K. Nambiar, Appellant v. Union of India and another, Respondents, AIR 1970 Supreme Court 652 and argued that affidavits which are not properly verified, cannot be admitted in evidence. He vehemently contended that the facts mentioned in the affidavits are not proved and in such circumstances no condonation can be granted. He further pleaded that if the Tribunal wants to entertain the affidavit of the Chartered Accountant, Mr. Ganesh M. Daivajna, then he should be given an opportunity to cross examine the professional.
47. After hearing rival contentions on the issue of condonation, we hold as follows.
8. The assessee has been agitating this addition in various forms including the Tribunal. The Chartered Accountant of the assessee Mr. Ganesh M. Daivajna at para 4 and 5 of his affidavit stated as follows :
"4. I say that since the addition in both the assessments was confirmed byt Ld. Commissioner of Income-tax (Appeals) vide order dated 05.07.2006 for A.Y. 2002-03 and vide order dated 01.03.2007 for the block period, I advised that the addition cannot be made at two places. Since appeal is already filed before Hon'ble ITAT against the order of CIT(A) for A.Y. 2002-03 on 27.09.2006, there was no need to file any appeal against the order of Ld. CIT(A) in respect of the block period.
5. I say that the said advice was given based on my understanding of the law and the facts of the case.
In the condonation petition the assesse pleads that he was under a bonafide belief that the same amount cannot be added twice in two different assessments which is a double addition and in such circumstances, under an advice of a professional he believed that the single appeal would suffice. In our humble opinion, the delay caused due to wrong legal advice given by the counsel should be condoned as the delay was due to a reasonable cause. This Bench of the Tribunal in the case of Priyanka Chopra (supra) at para 20, 21 and 22 at pages 13 to 17 observed as follows :
20. After considering the rival contentions and the relevant material, we find that the assessee was agitating, the issue of inclusion of Rs.5 lakhs as professional income instead of showing as loan, in the proceedings before the AO arising from the order passed by the CIT under section 263. The AO did not accept the claim of the assessee while passing the assessment order. Similarly, the CIT(A) has also declined to accept the claim of the assessee by relying the decision of the Hon. 5 Supreme Court in the case of Goetz(India) Ltd reported in 2006, 284 ITR 323(SC). We further note that during the appellate proceedings before the CIT(A) against the order passed u/s 143(3) r.w.s 263, the CIT(A) has issued a demand order dated 03.02.2009 for verification of the claim of the aseseee regarding the loan amount of Rs..5 lakhs mistakenly included in the income as professional income. The AO in the remand report dated 04.03.2009 verified the claim and found as valid. Thus, it is clear that the assessee was pursuing this issue in the assessment proceedings and appellate proceedings arising from the order passed u/s 263 and did not raise this issue by filing the appeal against the impugned order arising from the original assessment order. The assessee has supported her explanation by way of filing the affidavit as well as the affidavit of Shri Anil Sikhari, CA. It is stated in the affidavit by the Representative that he has advised the assessee to file appeal only against the order arising from the order u/s 263 proceedings and raise this issue.
Therefore, the assessee was not advised to file the appeal against the impugned order arising from the original assessment order. It is settled law that while deciding the condonation of delay, the court should take a lenient view. The mistake on the part of the counsel may in certain circumstances be taken into account in dealing in delay. There is no general proposition that mistake of counsel itself is always a sufficient ground. It is always a question whether the explanation and reasons for delay was bonafide or was merely devise to cover an ulterior purpose such as latches on the part of the litigant or an attempt to save limitation in an underhand way. No doubt the assessee has to believe and repose faith in their representative/advocate after having paid the fee and given the requisite instructions to his/her Representative. A litigant may be justified in believing that his/her Representative would discharge his professional obligation. Therefore in the case, where it is brought on record that the party has done everything in its power which is necessary for legal proceedings, the court should be liberal in considering the sufficient cause and should lien in favour of such party. However, the litigant does not stand to benefit by filing an appeal at a belated stage. Whenever substantial justice and technical consideration are opposed to each other, cause of substantial justice has to be preferred. Court should 6 take justice oriented approach while deciding the application for condonation of delay . It does not mean a litigant has license to approach the court at its will.
21. In the case of N Balakrishnan V/s M Krishnamurthy reported in (1998) 7, SCC 123 vide paragraphs 9 and 13 have held as under :
"9. It is axiomatic that condonation of delay is a matter of discretion of the court Section 5 of the Limitation Act does not say that such discretion can be exercised only if the delay is within a certain limit. Length of delay is no matter, acceptability of the explanation is the only criterion. Sometimes delay of the shortest range may be uncondonable due to want of acceptable explanation whereas in certain other cases delay of very long range can be condoned as the explanation thereof is satisfactory. Once the court accepts the explanation as sufficient it is the result of positive exercise of discretion and normally the superior court should not disturb such finding, much less in reversional jurisdiction, unless the exercise of discretion was on whole untenable grounds or arbitrary or perverse. But it is a different matter when the first cut refuses to condone the delay. In such cases, the superior cut would be free to consider the cause shown for the delay afresh and it is open to such superior court to come to its own finding even untrammeled by the conclusion of the lower court.
13. It must be remembered that in every case of delay there can be some lapse on the part of the litigant concerned. That alone is not enough to turn down his plea and to shut the door against him. If the explanation does not smack of mala fides or it is not put forth as part of a dilatory strategy the court must show utmost consideration to the suitor. But when there is reasonable ground to think that the delay was occasioned by the party deliberately to gain time then the court should lean against acceptance of the explanation. While condoning delay the Could should not forget the 7 opposite party altogether. It must be borne in mind that he is a looser and he too would have incurred quiet a large litigation expenses. It would be a salutary guideline that when courts condone the delay due to laches on the part of the applicant the court shall compensate the opposite party for his loss."
22. From the facts and circumstance of the case as well as from the record, we find that the assessee has explained sufficient and reasonable cause for not taking steps within the time prescribed for filing the appeal. Therefore, we are of the considered view that this is fit case for condonation of delay, particularly when the assessee has already raised this issue in another appeal arising from the proceedings u/s 263. Therefore, we are satisfied with the explanation given by the assessee that there is no malafide or willful motive on the part of the assessee for not filing the appeal within the time. Accordingly, the delay is condoned.
The propositions laid down by the Tribunal applies to the facts of this case.
9. On the issue of condonation of delay we find that recently the Hon'ble Supreme Court in the case of Improvement Trust, Ludhiyana vs. Ujagar Singh and Others, Civil Appeal No. 2395 of 2008, judgment dated 9th June, 2010, at para 1 held as follows :
"While considering the application for condonation of delay no straight jacket formula is prescribed to come to a conclusion if sufficient and good grounds have been made out or not. Each case has to be made from its facts and the circumstances in which party acts and behaves. From the conduct, behavior and attitude of the appellant it cannot be said that it has been absolutely callous and negligent in prosecuting the matter. "
Thereafter at para 2, it held as follows :
"After all, justice can be done only when the matter is fought on merits and in accordance with law rather than to dispose it of on such technicalities and that too at the threshold. "8
At para 3 it held as follows :
" It is pertinent to point out that unless malafide are writ large on the conduct of the party, generally as a normal rule, delay should be condoned. In the legal arena, an attempt should also be made to allow the matter to be contested on merit rather than to throw it on such technicalities. "
10. Coming to the submissions made by the learned DR, it is well settled that the provisions of the Evidence Act are not strictly applicable to the proceedings before the Tribunal. When facts are stated by way of an affidavit, they cannot be summarily dismissed. Coming to the decision of the Hon'ble Supreme Court in the case of A.K.K. Nambiar, it was the case of investigation relating to a criminal charge against the Government Servant. The affidavit in that case was filed to support a petition, wherein allegations were made by the Petitioner against the Chief Minister of Andhra Pradeh and other persons, who were not made a party. The affidavit filed by the petitioner and affidavits filed in answer to the appellant's petition, were not verified. In such circumstances, the Hon'ble Court held that "The reasons for verification of affidavits are to enable the Court to find out which facts can be stated to be proved on the affidavit evidence of rival parties". It further observed that the importance of verification is to test the genuineness and authenticity of the allegations and also make the deponent responsible for the allegations. Under those circumstances the affidavits could not be admitted as evidence. In the case on hand, the affidavits were in fact executed before a Notary. The affidavits are filed in support of the petition for condonation of delay. The question of admission of a document as an evidence, as in a criminal case does not arise in proceeding before Tribunal. As the Evidence Act does not strictly apply to income-tax proceedings, these affidavits cannot be, in our humble opinion, rejected. Coming to the contention of the Revenue that they should be given an 9 opportunity to cross examine the professional who gave affidavit of having given a certain advice, we find that no counter has been filed by the Revenue against the petition for condonation of delay. In such circumstances, the request for cross examination at this stage cannot be granted. The Chartered Accountant in this case has categorically stated by way of an affidavit that in his understanding of the law at that point of time, he did advise that only one appeal need be filed, as the addition is of the same issue, in both the appeals. Based on this legal advice, we hold that the assessee was under a bonafide belief, that he need not file an appeal against the order of the CIT(Appeals) dated 01-03-2007. Thus the delay. We find that the delay was not because of any malafide or deliberate intention and in fact the assessee has been pursuing a legal remedy in other proceedings. Thus we are of the considered opinion that the assessee has explained the delay, by giving sufficient and reasonable explanation which is supported with evidence.
11. On these facts and circumstances, we condone the delay and admit the appeal in IT(SS)A.No. 24/Mum/2009.
12. ITA No. 5102/Mum/2006.
Mr. Vijay Mehta, learned counsel for the assessee, took up the appeal for the assessment year 2002-03. He submitted that the very same addition was made by the AO, both in the block assessment, as well as in the regular assessment. He filed a sheet giving chronology of events and pointed out that the regular assessment order u/s 144 was passed on 18-03-2005 for the assessment year 2002-03 and that thereafter a notice u/s 158BD was issued on 12-08-2005, for the reason that the original notice dated 20-04-2004 could not be served. He pointed out that the regular assessment order was passed much before the passing of the assessment order in the block assessment and took this Bench through the same. Referring to the last paragraph of the assessment order dated 18-03-2005, he submitted that the 10 AO has loosely used the word, that this is a protective assessment, in reality though, it is not so. He contended that the Income-tax Act, 1961, does not permit protective assessments and it is only through certain judgments of the Courts of Law that protective assessments are permitted. He pointed out that the courts while holding that the AO is entitled to make protective assessment, had laid down certain guide lines which have to be followed. As per the learned counsel, the AO does not have unfettered powers to do protective assessments and the conditions laid down by the Court have to be fulfilled before making a protective assessment. As per the learned counsel, the pre-requisites for making a protective assessment are as follows:
a) The reasons for making a protective assessment should be mentioned in the order.
b) The entity and the assessment year in which the substantive addition has been made, has to be mentioned in the protective assessment order..
c) There should be a declaration in the assessment order, as well as in the demand notice, that this is a protective assessment and it should also be stated that, the demand arising out of the protective assessment, will not be recovered.
d) A substantive assessment must necessarily precede the protective assessment.
e) In case of a protective assessment there should not be any penalty proceedings, unless a protective assessment is converted into a substantive assessment.
He relied on the following case laws for this proposition :
i) Lalji Haridas vs. ITO and another 43 ITR 387. ii) Dilip Kumar Jain vs. ITO 5 ITD 552. iii) ITO vs. Miss Vasudha Bajoria 40 ITD 414 (Cal.) iv) M.P. Ramchandran vs. DCIT 129 TTJ 190 at page 195. 11
He vehemently contended that the addition was in fact made on substantive basis as for the assessment year 2002-03, tax demand was raised and coercive measures had been initiated against the assessee, for recovering this demand in the regular assessment and penalty has also been levied u/s 271(1)(c). He filed copies of the proceedings of the AO to prove his point. He also pointed out that the substantive addition has not preceded the addition u/s 144 and on this ground also it cannot be stated that this is a protective addition. He contended that mear mention that this is a protective addition does not decide the issue. Thus he submitted that this is a substantive addition made u/s 143(3)/144 for the assessment year 2002-03 and that this is not a protective addition.
13. On merits he submitted that, the addition is based on certain statements taken from third parties and the assessee has not been given an opportunity to cross examine those person. Thus he submits that the addition is bad in law.
14. The learned DR, Mr. Pavan Ved, opposed the contentions of the assessee and submitted that the assessee has not raised the issue that the addition in the regular assessment, is not the protective assessment, before the first appellate authority. He took this Bench through the statement of facts filed by the assessee before the CIT(Appeals) and submitted that nowhere in the statement of facts the assessee has raised the contention that this is not a protective assessment. Thus as per the learned DR the issue is raised for the first time. Further, the learned DR submitted that notice u/s 158BD was originally issued on 20-04-2004, and that it could not be served, and that the AO had always an intention of making the addition in the block assessment order. Thus the order u/s 144 dated 18-03-2005, being subsequent to the original notice u/s 158BD, is only a protective assessment order. He pointed out that satisfaction was recorded by the AO while issuing notice u/s 158BD and that the 143(3) order was passed because it was getting time barred.
12He vehemently contended that the entire addition was made based on a statement and material gathered from certain advertising agency and the AO has the right to make an addition in the correct hands. He contended that just because wrongly an addition has been made u/s 144, the addition u/s 158BD cannot be knocked away. In sum and substance the learned DR argues that the addition for the assessment year 2002-03 was only a protective addition. He further submits that the same addition cannot be made at two places and that the Department is duty bound to delete the addition in one of the assessments and that the assessee may approach appropriate authority for relief. On merits, he submitted that the assessee should be provided with an opportunity to cross examine the person who has given a statement against him. On a query from the Bench, the learned DR has not cited any contrary case law on the issue.
15. In reply, the learned counsel for the assessee pointed out that the entire addition was based on the material and statement gathered under survey u/s 133A on 26-03-2003 as evident from the assessment order. He took this Bench through pages 2 and 3 of the assessment order and submitted that it is not a case where the addition was made based on any material received by the AO as result of search in the case of a third party. On the issue not being raised before the CIT(Appeals), Mr. Vijay Mehta submits that the assessee is arguing that the assessment for the assessment year 2002-03 is a substantive assessment and hence there is no reason for him to state anything contrary to his stand in the statement of facts for the assessment year 2002-03. He pointed out that in an appeal against the block assessment order, this issue was agitated before the CIT(Appeals) and the CIT(Appeals) has dealt with the issue at pages 3,4 & paras 1.2 to 1.4. Thus he contends that this is not a new issue at all. He reiterated that the pre-conditions laid down by the various Courts have not been followed by the AO while stating 13 that the said addition, assessment for the assessment year 2002-03 was a protective assessment.
16. Rival contentions heard. On a careful consideration of the facts and circumstances of the case and a perusal of the papers on record and the orders of the authorities below as well as the case laws cited, we hold as follows.
17. At last para of page 2 of the assessment order the AO states that a survey action u/s 133A was carried on on the assessee on 26-03-2006 and statement of Mr. Danial Shah, Director of the assessee company u/s 131 of the Act was recorded. It is further stated that during the survey operations the assessee company could not produce any documentary evidence or video clips of the advertisements. Thereafter it is stated that one Mr. Dilip Chhabria, Director of Sunjeet Advertising Pvt. Lt., had admitted on oath during search operation that accommodation bills were issued on 5% commission. The AO made an independent enquiry on 26-03-2003, with Commercial Officer, Doordarshan. The Director, Doordarshan vide letter dated 02-04-2003 denied of having telecast any advertisement pertaining to Sunjeet Advertisement Pvt. Ltd. At the last para the AO held as follows :
" Therefore, in view of the above, it is evident that the assessee company has booked bogus bills of advertisement through M/s Sinjeet Advertising Pvt. Ltd. so as to reduce its taxable income. Hence, an amount of Rs.80,73,120/- is being allowed as bogus advertisement expenditure and added back to the total income of the assessee company on a protective basis."
18. A perusal of this assessment order demonstrates that the AO has not followed the pre-requisites and guidelines laid down by the Courts, while calling an assessment, as one which is done on a protective basis. He has merely stated 14 that this is a protective assessment. No mention is made as to where the substantive assessment is made.
19. From the facts on record it is seen that, the notice of demand issued u/s 156 on 18-03-2005 along with assessment order passed u/s 144 on that date, does not disclose that the demand has arisen from out of a protective assessment and hence was not to be enforced. On the contrary the Assistant Commissioner of Income- tax, Central Circle-47 vide his letter dated 10-08-2005 stated that this is a regular demand for the assessment year 2002-03 and has warned the assessee that in case it fails to make the payment of the demand immediately, coersive measures will be taken to recover the dues. Thereafter coercive measures were initiated and the issue has been referred to the Tax Recovery Officer by treating the assessee as a defaulter. The Tax Recovery Officer, Range-2, Panji had issued a notice of demand to the defaulter in Form No. 1, Notice No. TR.1/06-07/8-2 dated 9th Nov., 2006, wherein the Tax Recovery Officer had initiated corrosive measures. We also find that the AO has passed a penalty order u/s 271(1)(c) on 30-09-2005, levying a penalty of Rs.28,82,100/-. In this order of penalty, there is no mention that the addition in question was made on a protective basis. It is also seen that the order in the regular assessment was passed on 18-03-2005 and order in the block assessment was passed on 26-04-2006 i.e. after approximately one year one month. A notice u/s 158BD was issued to the assessee on 12-08-2005, which is after passing of order u/s 143(3) on 18-03-2005. The earlier notice dated 20-04-2004 was not served on the assessee. In this case the addition in the regular assessment has preceded the addition on the same issue in the block assessment.`
20. We now examine the legal position. The Hon'ble Supreme Court in the case of Lalji Haridas (supra) at page 392 held as follows :
15" In cases where it appears to the income-tax authorities that certain income has been received during the relevant 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 & B."
By this judgment the Hon'ble Supreme Court permitted protective assessment, when in doubt.
In the case of Dilip Kumar Jain 5 ITD 552, the Tribunal at para 9, stated as follows :
"9. The learned counsel for the assessee contended that the income-tax authorities have no right to call the present assessments as protective because till this date they have not started any proceedings against the alleged real owner of such income. In my opinion, the contention of the assessee has substance. No doubt, the income-tax authorities has the right to make the assessments on protective basis, but while doing so they are supposed to point out the name of the real owner of such income. At least some proceedings should be [commenced] against such assessee. Under the circumstances, in my opinion, the present assessment orders cannot be called the protective assessments." (Emphasis supplied) In the case of M.P. Ramchandran vs. DCIT 129 TTJ 190, the ITAT, Mumbai Bench held as follows :
"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 16 substantive assessment. In simple words there has to be some substantive assessment/addition first which 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 done so and with a view to protect the interest of the Revenue, if the AO is not sure that the person in whose hands he had made the substantive addition rightly, he embarks upon the protective assessment. Thus the protective assessment is basically based on the doubt of the AO as distinct from his belief which is there is the substantive assessment.
21. In the case of Suresh K. Jaju (2010) 39 SOT 414 (Mum.), E-Bench of the Tribunal at page 532 to 533 held as follows :
" The Assessing Officer made the following observations :
"As the assessee has already offered this income in assessment year 2001-02, the same is assessed in this year to protect the interest of the revenue"
Whether the above observations are enough to conclude that the assessment of the capital gains as long-term capital gain in assessment year 2001-02 by the Assessing Officer was only a protective assessment? We have already seen the ratio laid down by the Hon'ble Supreme Court in the case of Lalji Haridas (supra) wherein the Hon'ble Supreme Court while recognizing the concept of protective assessment has very clearly laid down that there mut 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 whether as long-term capital gain in assessment year 2001-02 or short term capital gain in assessment year 2000-01) should be determined after hearing objections. He should determine the question in the case of one person (in this case of the other person (in this case in 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 present case, we are of the view that the observations of the Assessing Officer while completing assessment for assessment year 2001-02 which we have extracted above cannot be said to be an expression of his 17 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. Thirdly, there has been a demand (without any limitation that it should not been recovered) raised pursuant to the above assessment which also shows that the said assessment is not a protective assessment. The decision of the Mumbai Bench of the Tribunal in the case of M.P. Ramchandran (supra) clearly applies to the facts of the present case. " (Emphasis ours) In the case of ITO vs. Mrs. Vasudha Balodia, the Calcutta D-Bench of the Tribunal held that levy of penalty on protective assessment was not sustainable at all, because it tentamounted to levy of protective penalties. It held that under the provisions of the Act, protective penalties cannot be levied.
In the case of CIT-Patiyala-II vs. Behari Lal Pyare Lal 141 ITR 32, the Hon'ble Court held that under the law a protective order of assessment can be passed but not a protective order of penalty.
The case of CIT vs. K. Kesava Reddiar 178 ITR 457 relied upon by the assessee is not relevant to this case as it deals with effect of initiation of reassessment proceedings when appeal is pending before the Tribunal.
22. From a perusal of all the above case laws, it can be gathered that in a protective assessment order the AO should give reasons for making a protective addition/assessment and also state where the substantive addition/assessment has been made. The demand arising out of a protective assessment should not be enforced and this fact should be made clear in the assessment order, and demand notice.. It has also been laid down that, a substantive assessment must precede a protective assessment. Penalties cannot be levied u/s 271(1)(c) on a protective 18 assessment. In the case on hand the so called substantive assessment has not preceded the so called protective assessment made for the assessment year 2002-
03. The demands arising out of the protective assessment were enforced and coersive measures were taken against the assessee. Penalties u/s 271(1)(c) were levied. There is no mention anywhere in the assessment order as to where the substantive assessment has been made. There is no mention in the demand notice or in the penalty order that this is a protective assessment. In the assessment order the basis of addition is a survey conducted and evidence gathered during the course of survey as well as investigation during the course of assessment. On this factual matrix, we have to necessarily hold that the assessment for the assessment year 2002-03 is not a protective assessment as stated by the AO in his order but is only a substantive assessment. The assessee has taken this argument before the CIT(Appeals) in the block assessment proceedings and hence it is not correct to argue that this is a new point raised for the first time. As the claim of the assessee is that this is a substantive assessment, there was no requirement for him to agitate this point in the statement of facts before the CIT(Appeals) during the course of regular assessment. The argument of the learned DR that the AO has the right to make the assessment in the right hands and in the right proceedings, is true, but in this case, as the assessment order is based on statement made in the survey and also on investigation in the assessment proceedings for the assessment year 2002- 03 where a letter dated 02-04-2003 was received from the Director, Doordershan. The addition was not based solely on seized material. Thus even on merits it cannot be said that rightfully the addition cannot be made on a substantive basis during the proceedings u/s 143(3) for the assessment year 2002-03. Thus for all these reasons, we uphold the arguments of the assessee and hold that the addition in question was made on a substantive basis for the assessment year 2002-03.
1923. Coming to the merits of the case law mandates that the right to cross examine has to be given to the assessee. The learned DR while submitting that he has no objection to grant of opportunity for cross examination, has pointed out that the assessee had not sought for the same during the assessment proceedings. We find that the cross examination was sought by the assessee before the CIT(Appeals), but was not granted.
24. Though this is the legal position, Mr. Vijay Mehta, during the course of his submission has stated that, he would not dispute the addition in the regular assessment if his plea of deletion is accepted in the block assessment proceedings. The learned DR submitted that it is trite law, that the same amount cannot be taxed twice. Hence in view of this, we would decide this issue after examining the contentions of both the parties in the block assessment proceedings.
25. We now take IT(SS)A.No. 24/Mum/2009. The learned counsel for the assessee drew the attention of the Bench to section 158BA sub-section (2) to Explanation (b) and submitted that the undisclosed income relevant to block period cannot include income assessed in any regular assessment.
26. He pleads that this is a well settled position of law and as this amount has been included in the regular assessment for the assessment year 2002-03, the same should be deleted from the block assessment.
27. The learned DR, on the other hand, disputed this submission and submitted that as long as the material has been found as a result of search, the addition can be made in the block assessment order.
28. We have heard both the parties. Explanation (b) below sub-section (2) of Section 158BA reads as follows :
20" The total undisclosed income relevant to the block period shall not include the income assessed in any regular assessment as income of such block period. (Emphasis ours) The argument of the assessee was rejected by the CIT(Appeals) on the ground that the addition in the assessment year 2002-03 was made on a protective assessment and hence the bar in Explanation (b) to sub-section (2) of section 58BA does not arise. At para 1.4 at page 5 he held as follows :
"1.4 Therefore, as facts stand today, there is no illegality in the assessment made u/s 158BD of the Act. The appellant firm has relied on the judgment of the Kolkata High Court in the case of Caltradeco Steel Sales (P) Ltd. & Ors. Vs. DCIT (158 CTR 369) for the proposition that if any income is assessed u/s 143(3) it cannot be assessed under chapter XIV-B, in pursuance of the notice u/s 158BC. However, in that case, substantive addition was made u/s. 143(3) and in the present case the addition has only been made on protective basis. Therefore, the fact are clearly distinguishable in the two cases. Hence, it is clear that the AO has rightly made the assessment u/s 158BD. That being so, this ground of appeal is dismissed."
In our opinion, on a plain reading of clause (b) of sub-section (2) of section 158BA, it is clear that any income assessed in the regular assessment, cannot be brought to tax once again in the block assessment. We have already held that the addition in the regular assessment cannot be called a protective addition. When once an amount is assessed in a regular assessment u/s 143(3)/144, no addition can be made of the same amount in the block assessment. Thus we agree with the contention of the assessee and delete the addition made, on the issue of accommodation bills of advertisements, in the block assessment.
29. In the result, the appeal of the assessee in IT(SS)A.No. 24/Mum/2009 is allowed.
2130. Now coming to ITA No. 5102/Mum/2006 which is a regular assessment for the assessment year 2002-03, in view of the statement made by the assessee's counsel at the bar, we confirm the addition of R.80,73,120/- in the regular assessment for the assessment year 2002-03 and dismiss this appeal.
31. In the result, IT(SS)A.No. 24/Mum/2009 is allowed and ITA No. 5102/Mum/2006 stands dismissed.
Order pronounced in the open court on 7th Jan., 2011.
Sd/- Sd/-
(Vijay Pal Rao) (J. Sudhakar Reddy)
Judicial Member. Accountant Member
Mumbai,
Dated: 7th Jan., 2011.
Wakode
Copy to :
1. Appellant
2. Respondent
3. C.I.T.
4. CIT(A)
5. DR, G-Bench
(True copy)
By Order
Asstt. Registrar,
ITAT, Mumbai Benches,
Mumbai.