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Facts
The assessee filed an appeal against the order of NFAC. The original assessment emanated from an order by the Ld.AO, which was based on a notice under section 148 for liquor business conducted in FY 2006-07. The substantive income from this business was assessed in the hands of Shri Basantilal Mewra, while it was assessed on a protective basis for the assessee.
Held
The Tribunal noted that a notice under section 148 cannot be validly issued to assess any case on a protective basis. Such assessments are considered hit and trial and go against the AO's duty to form a firm opinion. Therefore, the notice and subsequent assessment were deemed invalid.
Key Issues
Whether a notice under section 148 can be validly issued to assess income on a protective basis for the assessee when substantive assessment is made in another person's hands.
Sections Cited
143(3), 147, 148, 250, 254
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JODHPUR BENCH, JODHPUR
Before: DR. MITHA LAL MEENA & SHRI ANIKESH BANERJEE
The instant appeal of the assessee filed against the order of the National Faceless Appeal Centre (NFAC), Delhi [for brevity, ‘Ld.CIT(A)’] passed under section 250 of the Income-tax Act, 1961 (in shot, ‘the Act) for the Assessment Year 2007- 08, date of order 11/02/2023. The impugned order emanated from the order of the Learned Income-tax Officer, Ward 1(1), Udaipur (in short, ‘the Ld.AO’) passed u/s 143(3) / 254 / 147 of the Act, date of order 30/03/2015.
Shri Mithleh Suhalka 2. The brief facts of the case are that the assessee is a regular IT assessee. For the year he has Filed his ITR for the A.Y. 2007-08 on 30.03.2009 declaring a total income of Rs.99,108/-. The Id. AO has issued the notice u/s 148 on 28.09.2016(PB29). A notice under section 148 for the year under consideration was issued to the assessee on 05/05/2010, on the reason that " on perusal of the agreement dt. 24.02.2006 between Sh. Mithlesh Kumar Suwalka and Sh. Basanti lal Mewra it is seen that Sh. Mithlesh Kumar Suwalka has done business of liquor during the F.Y. 206-07the total purchase was Rs.48.87.087/-. As per record Sh. Mithlesh Kumar Suwalka has not filed a. Hence I have reason to believe that income arising out of above mentioned liquor business has escaped assessment in the meaning of Sec.
Hence issue the notice u/s 148. (P855). "In response thereto the assessee has submitted filed his return declaring income at Rs.1,59,110/- on dt. 25.05.2010. The original reassessment under section 148 was framed on protective basis on 30/08/2011 u/s 148 on dt. 30.08.2011 (PB26-29). The substantive income derived from liquor business was assessed in the hand of Shri Basantilal Mewara and such income was assessed on protective basis in the hands of the assessee.
2.1 The assessee has preferred appeal CIT(A) office against the order dated 30/08/2011 under section 148 on protective basis. The then CIT (A). Udaipur has deleted the protective assessment in the hands of the assessee vide his order dated 18/6/2013 P831-36). The department has preferred 2nd appeal before the Hon'ble ITAT. Jodhpur Bench. Jodhpur against the above referred order of CIT(A) Udaipur dated 18/6/2013. The Hon'ble ITAT, Jodhpur Bench Jodhpur has passed order in ITANo.436/Jodh/2013 on 21/11/2013 in the case of assessee and also decided the in dated 23/9/2013 in the case of Shri Basantilal Mewara Shri Mithleh Suhalka the person in whose hand the subjected income was assessed on substantive basis) The issue related to assessment of subjected income which was originally assessed on subjective basis in the hands of Shri Basantilal Mewara and on protective basis in the hands of the assessee has been set aside and restored to the file of Assessing Officer for fresh adjudication by the Hon'ble ITAT. Jodhpur Bench, Jodhpur vide order dated 21/9/2013 in (P531-36). Accordingly the issue relating to protective addition in the hands of the assessee was also set aside to the file of Assessing Officer for fresh adjudication alongwith the case of Shri Basantilal Mewara.
2.2 On second round that is in the set aside proceeding in the id, AO has issued the notice u/s 143(2) and 142(1) dt. 20.02.2015. the Id. AO has again passed order under section143(3)/254/147 dated 30/03/2015 the Ld. Assessing Officer has again assessed the subjected Income on substantive basis in the hands of Shri Basantilal Mewara and only the protective additions have been made in the hands of the assessee on the same grounds as stated by him in the original assessment.
2.3 Against the above said protective assessment under section 143(3)/254/147/vide order dated 30/3/2015, in the hands of the assessee in set aside proceeding also, the assessee is in appeal before CIT(A) and during the course physical hearing the A/R of the assessee has filed the WS (PB45-53) and details. Thereafter the appeal has been transferred in NFAC. However the Id. CIT(A) has not considered the WS and details and passed the order and confirmed the action of the Id. AO. Hence this appeal.
3. The Ld.AR argued and filed a paper book containing pages 1 to 54 which is placed on record. The Ld.AR argued that the protective assessment was carried out on the assessee and the substantive assessment was made in the case of Shri Basanti Lal Mewra. The assesse is a mere employee of Basanti Lal Mewra. Considering the order of co-ordinate bench of ITAT, Jodhpur in the case of ITO, Ward 2(2) vs Shri Deepak Makim and 8/Jodh/2015, date of pronouncement 11/03/2016 wherein it was held that a notice u/s 148 cannot be validly issued to assess any case on protective basis and the addition was accordingly quashed. The relevant part of the order of the co-ordinate bench is extracted below:-
Shri S. L. Mourya, learned DR represented on behalf of the Revenue. It was submitted by the learned DR that the main issue in the Revenue’s appeals was against the action of the leaned CIT (A) in holding that the notice u/s 148 of the IT Act cannot be validly issued to assess any case on protective basis by following the decision of the co-ordinate Bench of this Tribunal in the case of Shri Trayambaklal Pandya (HUF) in & 130/JU/2014 for assessment year 1985-86 & 1986-87 ignoring the fact that the said decision is challenged before the Hon'ble Jurisdictional High Court. The learned DR vehemently supported the order of the AO.
We have considered the submissions. It is noticed that the learned CIT (A) has followed judicial discipline by following the decision of the co-ordinate Bench of this Tribunal in the case of Shri Trayambaklal Pandya in & 130/JU/2014 dated 25-09-2014 wherein it has been categorically held in Para 4 of the order as under:-
Shri Mithleh Suhalka “4. After considering the rival submissions, we have found that a notice u/s 148 cannot be validly issued to assess any case on protective basis. The A.O. is bound to make his firm opinion regarding escapement of income of an assessee whereas the assessment on protective basis is only in the nature of hit and trial. The framing of a protective assessment is anti-theses of forming an opinion by the A. O. of escapement of income on an assessee, as such action is taken only to protect the interest of the Revenue. Thus, in view of the above we find that the notice (s) issued u/s 148 of the Act in both the years are invalid and resultantly the assumption of jurisdiction by the A. O u/s 148 is also invalid. Any order made on such a jurisdiction is bound to fall being illegal. Therefore, we quash the assessment order made in both the years and allow both the appeals. The decisions ld. A. R. has relied are not only directly applicable to the facts of these cases but also have a binding effect. Accordingly, both the allowed.”
As it is noticed that the learned CIT (A) has followed judicial discipline, we find no reason to interfere with the order of the learned CIT (A). Consequently, we uphold his order. 5. In the result, all the three appeals filed by the Revenue are dismissed.”
4. The Ld.DR argued and relied on the order of the revenue authorities, but was unable to rebut the assessee’s plea by submitting any contrary judgement.
We heard the rival submissions and considered the material available on record. We find that the issue is squarely covered by the order of co-ordinate bench of ITAT, Jodhpur. The substantive e assessment was framed in the case of Basanti Lal Mewra. So, issuance of notice u/s 148 and completion of assessment u/s 147 / 143(3) of the Act is unjustified, following the order of the co-ordinate bench of the Tribunal. The entire assessment is accordingly quashed. The assesse only argued the legal ground. The facts of the case was not pressed. Considering this, the appeal of the assessee bearing is allowed.
Order pronounced in the open court on 29th September, 2025.