SHRIAMIT AGRAWAL,INDORE vs. THE ITO WARD 1(3), INDORE

आदेश/O R D E R

Per B.M. Biyani, A.M.:

“1.That on the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in holding the re-opening of the case of the appellant under section 147 of the Income- tax Act, 1961 as valid without properly appreciating the facts of the case and submissions made before him even when the case of the appellant was reopened in absence of any tangible material and live link Page 1 of 8 Amit Agrawal Assessment year 2009-10 of concealment of income and merely on the basis of borrowed opinion without independent application of mind. 2.That on the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in maintaining the protective addition of Rs. 5,00,000/- as made by the Ld Assessing Officer to the total income of the appellant under section 68 of the Income-tax Act, 1961 on account of alleged investment in Plot No. 5A as made by the appellant without properly appreciating facts of the case.”

“8. During the assessment proceedings in the case of the Patrakar Sahakari Grah Nirman Sansthan Maryadit (PAN:AADP0706G) for AY 2008-09 addition was made of Rs. 40,89,000/- under provisions of section 68 holding that the credits shown as payment by the society not substantiated by suitable evidence. In the credits which have not been treated as genuine, there are entries appearing relating to assessee Shri Shailendra Agrawal, Rs.25,00,000/- and Shri Amit Agrawal, Rs.5,00,000/-. It was claimed that Amit Agrawal Assessment year 2009-10 these transactions were conducted in cash and cash was received by the Society from Shri Shri Shailendra Agrawal and Shri Amit Agrawal. However, the said contention of the society was not accepted in their assessment and the amount as claimed to be received from the assessee was added to the income of the society u/s 68 of the Income Tax Act 1961 on substantive basis.

[Emphasis supplied]

Hon’ble ITAT, Bangalore in DCIT Vs. Bullion Investment & Financial Services (P) Ltd. (2010) 123 ITD 568 (Bangalore): “2.5 We have heard both the parties. The fact of undisclosed investment in the share capital of the assessee- company was found during the course of search and material was collected during the course of search that such investment belonged to Shri G.P. Goyal If such income was to be assessed in the hands of a person other than Shri GP Goyal, then revenue should have taken recourse under section 158BD. If the revenue was not sure as on which hands the assessment is to be made, then the revenue could have initiated proceedings against both the assessees. In the instant case, assessment in the case of Shri G.P. Goyal was completed on 31-7-1997. Notice under section 148 had been issued to the assessee-company on 27-7-1998. Once the revenue had taken its stand that such investment in the share capital belong to Shri G.P. Goyal and the assessment order was passed, then it cannot be said that the Assessing Officer was having reason to believe that income has escaped in the hands of the assessee-company. Reassessment cannot be made on mere suspicion. The Assessing Officer has to form a belief that income has escaped assessment in the hands of the assessee. Once it has been held that such investment belonged to Shri G.P. Goyal, then there was no further material to come to the conclusion that such escaped income belonged to the assessee. 2.6 The Apex Court in the case of Lalji Haridas v. ITO19611 43 ITR 387 observed at page 392 as under: "In case where it appears to the income-tax authorities that certain income has been received during the relevant assessment 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 the assessee. But, in the instant case, the revenue held that such undisclosed income belonged to Shri GP. Goyal and assessment was made in the hands of Shri G.P. Goyal on substantive basis. The case of the assessee- company was not reopened during the pendency of proceedings in the case of Shri Goyal. Had the revenue made protective assessment in the case of Shri G.P. Goyal, then it could have taken action against the assessee-company. Thus the basic requirement for reopening the assessment is that the Assessing Officer should have reason to believe

Amit Agrawal Assessment year 2009-10 that income has escaped assessment, is not satisfied in this case. Hence, we are satisfied that the learned CIT(A) was justified in holding that assessment cannot be reopened for making protective addition” Hon'ble ITAT Lucknow Bench "B" in the case of Smt. Shobha Prajapati Vs. ITO-II, Faizabad [ITA No. 294 to 296/LUC/2010]: “16. In the present case also assessment has been made in the hands of the husband of the assessee on substantive basis and protective assessment was made in the hands of the assessee. Therefore assessment u/s. 147/143/3) of the Act deserves to be cancelled.”

Hon’ble Mumbai High Court in the case of DHFL Venture Capital Fund Vs. ITO, (2013) 34 Taxmann.com 300: “18. A protective assessment as the learned author indicates (Vol. 1 page 272) is regarded as being protective because it is an which is made ex abundant contela where the department has a "doubt as to the person who is or will be deemed to be in receipt of the income" A departmental practice, which has gained judicial recognition, has emerged where it appears to the Assessing Officer that income has been received during the relevant Assessment Year, but where it is not clear or unambiguous as to who has received the income. Such a protective assessment is carried out in order to ensure that income may not escape taxation altogether particularly in cases where the Revenue has to be protected against the bar of limitation. But equally while a protective assessment is permissible a protective recovery is not allowed. However, such an exercise which is permissible in the case of a regular assessment must necessarily yield to the discipline of the statute where recourse is sought to be taken to the provisions of Section 148. Protective assessments have emerged as a matter of departmental practice which has found judicial recognition. Any practice has to necessarily yield to the rigour of a statutory provision. Hence, when recourse is sought to be taken to the provisions of Section 148, there has necessarily to be the fulfillment of the jurisdictional requirement that the Assessing Officer must have reason to believe that income has escaped assessment. To accept the contention of the Revenue in the present case would be to allow a reopening of an assessment under Section 148 on the ground that the Assessing Officer is of the opinion that a contingency may arise in future resulting an escapement of income. That would, in our view, be wholly impermissible and would amount to a rewriting of the statutory provision. Moreover, the reliance which is sought to be placed on the provisions of Explanation 2(a) to Section 147 is misconceived. Explanation 2 provides a deeming definition of cases where income chargeable to tax has escaped Amit Agrawal Assessment year 2009-10 assessment and clause (a) includes a case where no return of income has been furnished by the assessee although his income or the income of any other person in respect of which he is assessable exceeds the maximum amount which is not chargeable to tax. As the reasons which have been disclosed to the assessee would indicate, this is not a case where an assessee has not filed a return of income simplicitor. The whole basis of the reopening is on the hypothesis that if the provisions of Sections 61 to 63 are attracted as has been claimed by the assessee, and the income of Rs 32.83 Crores which has been claimed by the assessee to be exempt is treated as exempt, in that event an alternate for taxing the income in the hands of the AOP of the contributories is sought to be set up. For the reasons already indicated, the entire exercise is only contingent on a future event and a consequence that may enure upon the decision of the Tribunal, that again if the Tribunal were to hold against the Revenue. A reopening of an assessment under Section 148 cannot be justified on such a basis. There has to be a reason to believe that income has escaped assessment. 'Has escaped assessment indicates an event which has taken place. Tax legislation cannot be rewritten by the Revenue or the Court by substituting the words 'may escape assessment in future Writing legislation is a constitutional function entrusted to the legislature.”

Amit Agrawal Assessment year 2009-10 147 in the present case is not valid and the same is unsustainable. We order accordingly.

9. Other pleadings made by both sides on the merits of addition are rendered infructuous since we have already declared the assessment as invalid.

Order pronounced as per Rule 34 of I.T.A.T. Rules, 1963 on 27/02/2023. Order pronounced in the open court on ….../……/2023.