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Income Tax Appellate Tribunal, DELHI BENCH “B”: NEW DELHI
Before: Shri C.M. Garg & Shri Pradip Kumar Kedia
O R D E R PER C. M. GARG, J. M.:
1. 1. These are the appeals filed by the revenue against the order of the ld CIT(A)-27, New Delhi dated 30.01.2020 for AY 2016-17 and 2017-18.
2. The assessee has raised the following grounds of appeal for AY 2016-17:-
1. The Ld. CIT(A) is erred in law or facts in deleting the addition merely on the facts that additions were on protective basis. The Ld CIT(A) has ignored the fact that addition on substantive basis was still not done and assessment proceedings in the case of Naman Madan is still in progress.
2. The Id CIT(A) is erred in law or facts in overlooking the facts that assessee has received income from betting and other illegal business and tax was not paid
3. That the order of Id. CIT(A) is erroneous and is not tenable on facts and in law as protective addition was adjudicated in isolation without considering substantive addition.
4. That the grounds of appeal are without prejudice to each other.”
ITA No. 1828/Del/2020 Gauri Madan 3. The ld DR drawing our attention towards written submission filed by his predecessor on 30.11.2022 and submitted that keeping in view the decision of the Hon’ble Gujarat High Court in the case of CIT Vs. Surendra Gulab Chand Modi reported as 140 ITR 517 the ld CIT(A) was not justified in deleting the addition made by the AO on protective basis in two assessment years under consideration without awaiting for the final outcome of the proceedings arising from substantive assessment of Shri Naman Madan which was finalized on 31.01.2022 by passing order u/s 153C read with section 143(3) of the Act by the AO for AY 2016-17 and 2017-18. The ld CIT DR also pointed out that the present case pertains to the case of assessee where protective addition has been made by the AO and the ld CIT(A) in the impugned order dated 30.01.2020 deleted the addition by holding that the decision of the AO that income on account of these activities had to be taxed in the hands of Shri Naman Madan is uphold and addition on protective addition is deleted.
The ld DR also drew our attention towards copy of the order of ITAT Kolkata C Bench in the case of DCIT Vs. M/s. Nalimbur Suppliers (Pvt) Ltd in 1860 & 1861/Kol/2013 for AY 2006-07 to 2008-09 and submitted that the first appellate order for both the years may kindly be set aside and matter may kindly be remitted back to the file of the ld CIT(A) to decide both the first appeals of assessee, along with appeals of Shri Naman Madan arising out of assessment order dated 31.01.2022 for AY 2016-17 and 2017-18.
Replying to the above the assessee’s representative vehemently supported the first appellate order and submitted that the appeals of Shri Naman Madan are now pending before the ld CIT(A), but at the time of passing first appellate order on 30.01.2020 in the appeal of present assessee there was no assessment order in the case of Shri Naman Madan and for AY 2016-17 and 2017-18. He further submitted that the AO passed the assessment order on 31.01.2022 in the case of Gauri Madan Shri Naman Madan for both the years. The ld AR submitted that there is no need of restoration of issue to the file of ld CIT(A) for re- adjudication along with appeal of Shri Naman Madan which pertains to substantive addition, therefore, ground of revenue may kindly be dismissed.
On careful consideration of the above submission, first of all, from the order of the ITAT Kolkata Bench in the case of DCIT Vs. M/s. Nalimbur Suppliers (Pvt) Ltd (supra) we note that under almost identical situation it was held that it is well settled that protective assessment is permissible in law and in case of a doubt or ambiguity about real entity in whose hands a particular income is to be assessed, the assessing authority is entitled to have recourse to make a protective assessment. The Hon’ble Gujarat High Court in the case of the CIT vs. Surendra Gulab Chand Modi (supra) directed the Tribunal keeping it alive and pending awaiting the decision of the Hon'ble Supreme Court till the outcome of the proceedings arising from the substantive assessment. In the present case, the ld CIT(A) did not wait the outcome of assessment proceedings arising from the substantive assessment and he proceeded to decide the appeals arising from protective assessment by passing the impugned orders and deleted the addition made on protective basis without awaiting the final outcome of the proceeding arising from the substantive assessment. We, thus, decline to agree with the manner in which the ld CIT(A) decided and allowed the appeals of assessee. From the last para 5.4 of first appellate order we note that the ld CIT(A) directed the AO to initiate proceedings in the case of Shri Naman Madan to do substantive assessment in his hands the income arising out of impugned transactions as per law, which are also devoid of merit.
We are in complete agreement with the contention of the ld CIT DR and thus, keeping in view this corollary between the substantive assessment and protective assessment, an appeal against the protective assessment should ordinarily await the outcome of the substantive Gauri Madan assessment so that the protective assessment can be inconformity wit hthe substantive assessment. In the case of CIT Vs. Surendra Gulab Chand Modi (Supra) the appeal arising out of the protective assessment was disposed of by the appellate authority i.e. Tribunal vacating the protective assessment without waiting for the final outcome of the proceedings arising from the substantive assessment, which matter was pending in the Hon'ble Supreme Court.
Our conclusion also gets strong support from the order of ITAT Kolkata Bench in the case of DCIT Vs. M/s. Nalimbur Suppliers (Pvt) Ltd (supra) wherein, under identical facts and circumstances the coordinate bench held that the issue of protective addition is consequential to the issue of relief to the addition made on substantive basis therefore, the Tribunal remitted back the issue to the file of ld CIT(A) for afresh adjudication along with relevant appeals wherein substantive addition has been made.
In view of foregoing discussion, the first appellate order is not found to be sustainable and even directions of the ld CIT(A) to the AO are not in accordance with the proposition rendered by the Gujarat High Court in CIT vs. Surendra Gulab Chand Modi (supra). Therefore, first appellate orders in both the appeals are set aside and matter is restored to the file of the ld CIT(A) for afresh adjudication of appeals along with appeals of Sh. Naman Madan after allowing due opportunity of hearing to the assessee and without being influenced with the earlier first appellate orders.
In the result, the appeals of the revenue are allowed for statistical purposes.
Order pronounced in the open court on 18/07/2023.