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Facts
A search and seizure operation against Shri Praveen Kumar Jain led the AO to make a protective assessment on Vanguard Jewels Ltd, alleging accommodation entries and disallowing losses, believing Shri Praveen Kumar Jain controlled the company. The Ld. CIT(A) deleted this protective assessment, stating that substantive assessments on Shri Praveen Kumar Jain for the relevant assessment years had already been upheld in appellate proceedings, thereby preventing double taxation. The revenue appealed this decision.
Held
The ITAT upheld the CIT(A)'s decision to delete the protective assessment. It noted that protective assessments are permitted to protect revenue interest but cease to be effective once a substantive assessment for the same income is confirmed in the hands of another person. Since the substantive assessments on Shri Praveen Kumar Jain were upheld, the protective assessment on Vanguard Jewels Ltd was correctly deleted.
Key Issues
Whether a protective assessment made on an assessee is sustainable when the substantive assessment for the same income in the hands of another person has been upheld in appellate proceedings.
Sections Cited
250, 132, 10(38)
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Income Tax Appellate Tribunal, “K (SMC
BEFORE SHRI OM PRAKASH KANT, ACCOUNTANT MEMBER & SHRI RAJ KUMAR CHAUHAN, JUDICIAL MEMBER ITO Ward-13(3)(1) Vs. Vanguard Jewels R. No. 227, Aayakar Ltd, Bhavan, M. K. Road, Office No. 501, Churchgate, Mumbai- Adibaba Apartment, 400 020 Gazdar Scheme, 16 th Road, Rajesh Khanna Garden, Santacruz(W), Mumbai-400 054 PAN/GIR No. AAACV3480A (Applicant) (Respondent) Revenue by Shri Bhagirath Ramawat, Ld. DR Assessee by None Date of Hearing 14.08.2025 Date of Pronouncement 13.10.2025 आदेश / ORDER PER RAJ KUMAR CHAUHAN, JM:
This appeal by revenue is directed against the order dated 20.03.2025 passed by the Ld. Commissioner of Income Tax (Appeal)-47, Mumbai (herein after referred as “Ld. CIT(A)” u/s 250 of the Income-tax Act, 1961 (herein after referred as “the Act”), wherein the protective assessment done by the AO was deleted and substantive assessments made in the hands of Shri Praveen Kumar Jain for the year under consideration was upheld in the appellate proceedings.
The facts in brief as culled out from the proceedings of authorities below are that a search and seizure operation u/s 132 of the Act was conducted by DDIT(Inv)-Unit 3(2), Mumbai in the case of Shri Praveen Kumar Jain on 01.10.2013. The assessee company is engaged in the business of buying, selling, sawing, cutting, polishing, preparing for market, manipulating, importing, exporting, trading and dealing in pearls, gems, diamonds, emeralds, rubles, industrial etc. The assessee company filed its return of income electronically on 27.09.2015 declaring total loss of Rs.(-) 69,02,725/-. The case of the assessee was selected for scrutiny under CASS. During the assessment proceedings, the AO treated the business activity of the assessee as accommodation entry and the AO heavily relied on the statement of Shri Praveen Kumar Jain which otherwise retracted by him. There was no documentary material show that Shri Praveen Kumar Jain is the director of the assessee company or was associated with any manner. Ld. AO noted that assessee has disallowed long term capital gain of Rs. 53,52,672/- while computing the income under the head „Profits & Gains from Business or Profession‟ and has also not claimed the carry forward of loss under the head „ Capital Gain‟ which being covered u/s 10(38) of the Act. This negative income on account of long term capital loss has no impact from the revenue point of view. However, the assessee has shown short term capital gain of Rs. 1,000/- which has been considered in the assessment order. Ld. AO further observed that since the assessee was not engaged in any business activities during the year under consideration, it was not entitled for any deduction on account of deduction or loss under Chapter IV-D of the Act. As a result loss of Rs.(-)89,58,646/- claimed by the assessee is not allowed. Ld. AO further observed that the ultimate beneficiary of the profit/income by way of commission on the turnover done through these conduit companies was Shri Praveen Kumar Jain and the assessee company was operated and controlled by Shri Praveen Kumar Jain as has been admitted by him in his statement recorded during the course of search action. It was further noted by AO that the income determined vide this Order is being included as income in the individual case of Shri Praveen Kumar Jain on substantive basis and the same is hereby assessed in this case as Protective Basis.
Aggrieved by the above order, assessee preferred the appeal before the Ld. CIT(A) which was allowed without affording any opportunity of hearing to the assessee and observed as under:- “8.7 Since, in the present case at hand, the substantive assessments made in the hands of Shri Praveen Kumar Jain for the A.Y. 2008-09 to A.Y. 2014-15 and AY 2015-16 has been upheld in the appellate proceedings, the protective assessments in the hands of the appellant needs to be deleted, so that there is no double taxation of income. However, in case the addition made in the hands of Shri Parveen Kumar Jain is deleted in any of the appellate proceedings, then the addition made by the AO in the hands of the Appellant Company shall revive.”
Aggrieved by the order of Ld. CIT(A) the present appeal 4. has been filed by the revenue and has raised the following grounds before us:-
On the facts and in circumstances of the case, the Ld. CIT(A) has erred by allowing the Appeal of the assessee.
2. On the facts and in circumstances of the case the Ld. CIT(A) has erred by allowing the Appeal by simply mentioning that the substantive assessments made in the hands of Shri Praveen kumar Jain have been upheld in appellate proceedings.
3. The Ld. CIT(A) has erred in not mentioning/quoting the appellate proceedings in which the substantive additions have been/were upheld.
The Ld. CIT(A) has erred in mentioning about double taxation without referring to order of any Appellate Authority who has confirmed the addition in the hand of Shri Pravin kumar Jain.
The appellant prays that the order of the CIT(A) on the grounds be set aside and confirm the order of the AO.
6. The appellant craves leave to add, amend or alter all or any of the grounds of appeal. We have heard the Ld. DR and the Ld. AR and 5. examined the record. It was pointed out by the Ld. AR of the assessee that there was no protective assessment /addition against the assessee because the substantive assessment /addition has already been made in the case of Shri Praveen Kumar Jain. It is further stated that Shri Praveen Kumar Jain is not the director of the assessee company or was not associated with any manner. It is therefore argued that the protective addition made by the AO has been rightly deleted by Ld. CIT(A) and submitted that the appeal of the revenue is liable to be dismissed.
On the other hand, Ld. DR on behalf of the revenue submitted that there were allowed to call a record from the jurisdictional AO with regard to seeking requisite information regarding current status of the proceedings if any arising from the substantial assessment in case of Shri Praveen Kumar Jain in AY 2015-16 and whether the matter was pending before any authority and had attained finality. Further the information was sought whether any request for protective assessment may be required in the hands of the assessee in case of any substantive relief granted to Shri Praveen Kumar Jain. Ld. DR submitted that 3 reminders were sent, but no response was received from the jurisdictional AO, hence on 11.09.2025, it was informed to the Bench that the hearing was already concluded on 14.08.2025 and the time was granted to file the requisite information if any in the interest of justice. Ld. DR submitted that despite repeated reminders, the requisite information has not yet been received from the AO. Therefore, Ld. DR relied on the arguments made in the course of the hearing on 14.08.2025 and the order of the AO.
We have considered the rival submissions and examined the record. We have noticed that there is no specific provision in the Act for the purpose of making a protective assessment. However, now it is well-settled by judicial precedent that in order to protect the interest of the revenue, protective assessment can be made. However, no recovery can be made on the basis of the protective assessment. A protective assessment comes to an end when the substantive assessment is made in the case of a different person. There is various case laws on the point of where substantive assessment was made or confirmed, the protective addition in the hands of other assessee did not survive. Reliance can be placed on the following case laws:- i) CIT v. Teachers Housing Co-operative Society [2014] 41 taxmann.com 90. ii) Dy. CIT v. Smt. Mala Kalsi [2018] 90 taxmann.com 175 (Delhi - Trib.) iii) CIT v. Sobhrajmal [2014] 51 taxmann.com 506 (Raj.) 8. In view of the above facts and judicial pronouncements, we do not find any infirmity in the order of the Ld. CIT(E) wherein Ld. CIT(A) concluded that the substantive assessments made in the hands of Shri Praveen Kumar Jain for the A.Y. 2008-09 to A.Y. 2014-15 and AY 2015-16 has been upheld in the appellate proceedings, the protective assessments in the hands of the appellant needs to be deleted, so that there is no double taxation of income. The said finding of the Ld. CIT(E) is accordingly confirmed and grounds raised by the revenue are dismissed.
In the result, the appeal is dismissed in above terms.
Order pronounced in the open court on 13.10.2025. (OM PRAKASH KANT) ACCOUNTATN MEMBER Mumbai, Dated 13/10/2025 Dhananjay, SPS