PAWAN MECHU,JHUNJHUNU vs. DCIT CEN CIR 1, JAIPUR

In the case of the assessee information was forwarded by the JCIT(OSD), Central Circle-2(2), Ahmedabad along with satisfaction note recorded. Satisfaction Note was also recorded by the ITO, Ward-1, Jhunjhunu. Notice u/s 153C of the Act was issued on 31.03.2021 by the ITO, Ward-1, Jhunjhunu. In compliance to notice u/s 153C of the Act, the assessee filed his return of income on 15.04.2021 declaring total income of Rs. 26,21,200/-, which is the same as declared in the original return of income filed u/s 139 of the Act on 23.07.2016. Accordingly, Notice u/s 143(2) of the Act dated 20.04.2021 was issued by the ITO, Ward-1, Jhunjhunu. Thereafter, the case of the assessee was centralised to this Circle by Principal Commissioner of Income-tax-2, Jaipur vide DIN & Order No. ITBA/COM/F/17/2021-22/1034902342(1) dated 16.08.2021.

Notice u/s 142(1) of the Act was issued on 13.09.2021 along with questionnaire. The assessee furnished the required details, which have been examined w.r.t. to claims made in the return of income.

During the year under consideration the assessee declared income from salary, business or profession as well as income from 6. As per information received, the assessee had purchased an immovable property for Rs. 1,77,51,000/- out of which Rs. 1,05,51,000/- were paid in cash and Rs. 72,00,000/- paid thorugh banking channel. Query was made in this regard. The reply filed by the assessee have been considered, but not found acceptable. The Digital data in the LAPTOP of the key persons of the said group found during the course of search is having a great evidentiary value and from the data so extracted it was revealed that the assessee has made cash payment of Rs. 1,05,51,000/- against the purchase of property. ………… 6.1 During the course of search and seizure action in the case of "Satyam Group" statement of Shri Viral K. Patel from whose possession, the above mentioned data is recovered, were recorded and in reply to the question he accepted that the said data contain in the excel sheet contain details of payment received through Cheque as well as in cash.”

Ld. AR for the appellant has submitted that no substantive addition could be made as regards the assessment year 2018-19, as section 69 of the Act clearly provides that where the assessee has made investment, which is not recorded in the books of accounts or in respect of which no explanation is furnished by the assessee, and the investment remains undisclosed, the value of the said investment shall be deemed to be the 74/JPR/2025 Sh. Pawan Mechu, Jhunjhunu income of the assessee of such financial year, during which the investment is found to have been made.

Ld. AR for the department has not disputed that as per case of the department from the very beginning , the above said transaction by way of investment of the above said amount was made by the assessee during the financial year 2015-16, corresponding to the assessment year 2015-16. But, the contention raised by the Ld. DR for the department is that in such like cases where undisclosed investment is made during one financial year, and the sale deed is registered in some other financial year, as per practice, in respect of the first mentioned year i.e. during which investment is made, protective addition is made u/s 69 of the Act, whereas, as regards subsequent year, in which sale deed is got registered, addition is made on “substantive basis”. Accordingly, Ld. DR has defended both the assessment orders and the impugned orders passed by Learned CIT(A).

Section 69 of the Act needs to be reproduced for ready reference. It reads as under:- “Unexplained investments.

Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee 74/JPR/2025 Sh. Pawan Mechu, Jhunjhunu offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year.”

As per above provision, the value of the unexplained investment, shall be deemed to be income of the assessee of the financial year “immediately preceding assessment year” during which the assessee made said unexplained investment. In the course of arguments, Ld. DR for the department has not disputed to the applicability of the provisions of section 69 of the Act in such circumstances/cases.

When from the very beginning, it is the case of the department that the unexplained investment was found to have been made by the assessee, in the financial year 2015-16, said investment is deemed to be the income of the assessee of the financial year 2015-16. Then, it remains unexplained as to how said addition could be made on “protective basis” as regards, the assessment year 2016-17? 18. As a result, the assessment order passed, while making addition as regards the assessee on protective basis deserved to be set aside. Interestingly, this very conclusion was arrived at by Learned CIT(A) himself 74/JPR/2025 Sh. Pawan Mechu, Jhunjhunu while dealing with the other appeal relating to the Assessment Year 2018- 19. In this regard, relevant portion of the impugned order relating to the assessment year 2018-19 reads as under:- “I agree with the ld. AO that as the purchase deed in the name of the assessee got registered on 11.10.2017 i.e. during the FY 2017-18, the substantive addition lies in AY 2018-19 and the same is accordingly upheld.

From the above, it can safely be said that Learned CIT(A) was also of the view, taken by the Assessing Officer, that the deed having been got registered in the name of the assessee on 11.10.2017, the substantive addition was to be made in the assessment year 2018-19, and with said observations he arrived at the conclusion that the protective addition for the assessment year 2016-17 did not survive. So, it can safely be said that the assessment order for the assessment year 2016-17, making protective basis of the same amount 74/JPR/2025 Sh. Pawan Mechu, Jhunjhunu was in fact set aside, the reason being that the same did not survive, as observed by Learned CIT(A) himself.

Surprisingly, in the subsequent paragraph of the impugned order relating to the Assessment Year 2018-19, Learned CIT(A) made certain unexpected observations which, according to him, were to give effect to the first mentioned appeal before him, even after disposal of any appeal expected to be filed before this Appellate Tribunal. Learned CIT(A) observed that in case this Appellate Tribunal arrives at the conclusion that the said income is not taxable in the assessment year 2018-19, the protective addition made in the assessment year 2016- 17, by the Assessing Officer, would revive on substantive basis. In this regard, we may observe that law does not provide for any such observation by CIT(A). The Appellate Tribunal is required to give decision taking into consideration the establish facts and applying the relevant law/provisions. Similarly, the Assessing Officer and CIT(A) are also required to make observations as regards the facts established in the assessment proceedings and while applying the relevant provisions of law. In other words, neither the Assessing Officer nor Learned CIT(A) is expected to make any such observation which may lead to the conclusion that those 74/JPR/2025 Sh. Pawan Mechu, Jhunjhunu authorities were in dilemma regarding the findings, and conclusion arrived at by them and as regards the application of relevant provisions of law. In this case, the authorities below can safely be said to be in dilemma. At this stage, it may be mentioned that as per settled law when there is a doubt as to which person amongst two is liable to be assessed, parallel proceedings may be taken against both and (alternative assessments may also be framed, while a protective assessment is permissible, it not open to the appellate authorities to make a protective order. Law does not permit assessment of the same income successively in different hands. In this regard, reference may be made to decisions in CIT vs. Durgawati, 234 ITR 249; CIT vs. Saraswati Devi 212 ITR 445; Jagannath Bawri v CIT, 234 ITR 664. This is not a case where there was doubt as to which of the two persons was liable to be assessed. Learned CIT(A) was to arrive at a definite conclusion as to which of the two assessment orders was to be upheld. In the given situation, having regard to the provisions of section 69 of the Act reproduced above, the addition as regards the said amount i.e. only unexplained investment, could have been made or upheld only on Result 22. In view of the above discussion and findings, when Learned CIT(A) observed in the appeal relating to the assessment year 2016-17 that the said order did not survive, the appeal challenging order, relating to the assessment year 2016-17 was deemed to have been allowed. Consequently, the appeal filed by the assessee relating to the assessment year 2016-17, and challenging said order passed by Learned CIT(A), actually passed in his favour, was not maintainable. It is so held. As regards relating to the assessment year 2018-19, in view of the above findings, since the substantive addition was required to be made for the assessment year 2016-17, the impugned order passed by Learned CIT(A) upholding the substantive addition made for the assessment year 2018-19 is set aside. In view of the above conclusion arrived at by us, the additional legal grounds sought to be raised are not being taken up for discussion.