Income Tax Officer, Ward-1, Nagaon V. Keshava Nanda Kakoti, Nagaon

ITA 460/GTY/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 2672 (ITAT-GUWAHATI)
• Duration Of Justice: 1 year(s) 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2016-2017
• Appeal Filed On: 09-12-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Accommodation entries; Capital Gains
• Section: 147; 142(1); 201

Judgement Text

1 ITA NO. 460/GAU/2019 KESHAVA NANDA KAKATI, A.Y. 2016-17 IN THE INCOME TAX APPELLATE TRIBUNAL GAUHATI BENCH, VIRTUAL HEARING AT KOLKATA [BEFORE SHRI P.M. JAGTAP, VICE-PRESIDENT & SHRI A. T. VARKEY, JUDICIAL MEMBER] I.T.A. NO. 460/GAU/2019 ASSESSMENT YEAR: 2016-17 ITO, WARD 1, NAGAON VS. KESHAVA NANDA KAKATI (PAN: APCPK 9286 P) APPELLANT RESPONDENT DATE OF HEARING 18.10.2021 DATE OF PRONOUNCEMENT 28.10.2021 FOR THE APPELLANT SHRI N.T. SHERPA, JCIT, SR. DR FOR THE RESPONDENT SHRI RAHUL JAIN, AR ORDER PER A.T. VARKEY, JM: THIS IS AN APPEAL PREFERRED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A), GUWAHATI-2 DATED 30.09.2019 FOR ASSESSMENT YEAR 201 6-17. 2. THE SOLE GROUND RAISED BY THE REVENUE IS AS UNDE R: THAT IN THE FACT AND CIRCUMSTANCES OF THE CASE AND LAW IN MATTER, THE LD. CIT(APPEALS) IS NOT JUSTIFIED IN DELETING THE PROTECTIVE ADDITION MADE BY THE ASSESSING OFFICER OF RS. 1,51,56,830/- FOR THE A.Y. 2016-17. ' 3. FROM PERUSAL OF THE AFORESAID GROUND RAISED BY THE REVENUE, IT IS TAKEN NOTE THAT THE REVENUE IS AGGRIEVED BY THE ACTION OF THE LD. C IT(A) WHO DELETED THE PROTECTIVE ADDITION MADE BY THE AO OF RS. 1,51,56,830/-. 4. BRIEF FACT OF THE CASE AS NOTED BY THE AO IS THA T THE ASSESSEE HAS FILED THE RETURN OF INCOME ON 2.03.2018 SHOWING TOTAL INCOME OF THE ASS ESSEE AT RS. 4,62,800/-. THE AO NOTED THAT THE CASE WAS SELECTED FOR SCRUTINY THROU GH CASS AND REASON FOR SCRUTINY SELECTION SUBSTANTIAL CASH DEPOSIT IN THE BANK ACCOUNT . THE ASSESSEE PURSUANT TO THE NOTICE U/S 142(1) OF THE ACT, IN THIS REGARD BROUGH T TO THE NOTICE OF THE AO THAT THE SAVINGS BANK ACCOUNT NO. 33727278376 HAS BEEN OPENED FOR TH E PURPOSE OF JUNIOR COLLEGE AND 2 ITA NO. 460/GAU/2019 KESHAVA NANDA KAKATI, A.Y. 2016-17 DULY REFLECTED ABOUT THE SAME IN THE RETURN OF INCO ME OF THE SOCIETY OF EDUCATION (ALPHA BETA COLLEGE) FOR THE YEAR UNDER CONSIDERATION WHIC H RUNS THE JUNIOR COLLEGE ; AND THE SUMS DEPOSITED/WITHDRAWN IN THE BANK ACCOUNT ARE NO T PERTAINING TO HIM AND SO HE IS NOT MAINTAINING ANY DETAILS OF THE CASH DEPOSITS OR WIT HDRAWALS IN THE SAID BANK ACCOUNT. IT WAS BROUGHT TO THE NOTICE OF AO THAT THE DEPOSIT/WITHD RAWAL OF SUMS ARE REFLECTED IN THE BOOKS OF JUNIOR COLLEGE AND HE WAS NOT IN A POSITION TO P RODUCE THE BOOKS OF THE JUNIOR COLLEGE DURING HIS ASSESSMENT PROCEEDINGS BECAUSE THE JUNI OR COLLEGE IS MANAGED BY M/S SOCIETY OF EDUCATION AND, THEREFORE IT WAS SUBMITTED BEFORE THE AO THAT IT IS NOT JUST AND PROPER TO CONSIDER THE SUM CREDITED IN THE SAVINGS BANK ACCOU NT (SUPRA) AS HIS OWN. 5. AFTER RECEIPT OF THE REPLY FROM THE ASSESSEE, TH E AO NOTED THAT THERE WERE WITHDRAWALS AMOUNTING TO RS. 94,55,938/- BY THE MEM BERS ON VARIOUS DATES. ACCORDING TO HIM, THE ASSESSEE COULD NOT PROVE THAT THE SAID BAN K ACCOUNT WAS EXCLUSIVELY USED FOR THE PURPOSE OF COLLEGE AND THAT THE GROSS RECEIPT SHOWN BY THE ASSESSEE SOCIETY (A.Y. 2016-17) DOES NOT MATCH WITH THE CASH DEPOSITS AS CLAIMED BY THE ASSESSEE. THEREFORE, THE AO WAS OF THE OPINION THAT THE TOTAL CREDIT MADE IN THE SA ID BANK ACCOUNT AMOUNTING TO RS. 1,51,56,830/- NEED TO BE TREATED AS INCOME FROM OTHER SOURCES IN THE HANDS OF THE ASSESSEE AND ADDED TO THE TOTAL INCOME OF THE ASSES SEE ON PROTECTIVE BASIS TO SAFEGUARD THE INTEREST OF REVENUE AND HE ALSO OBSERVED IN THE ASS ESSMENT ORDER THAT THE SUBSTANTIVE ADDITION WOULD BE MADE BY THE RESPECTIVE AO OF M/S SOCIETY OF EDUCATION (ALPHA BETA COLLEGE) AND THAT THE INFORMATION REGARDING THIS IS BEING PASSED TO THE THAT AO OF THE COLLEGE AND THUS HE MADE PROTECTIVE ASSESSMENT IN T HE HANDS OF THE ASSESSEE TO THE TUNE OF RS.1,51,56,830/-. 6. AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEFOR E THE LD. CIT(A) WHO WAS PLEASED TO HOLD THAT IN THE ABSENCE OF ANY PRIOR SUBSTANTIV E ADDITION IN THE CASE OF M/S. SOCIETY OF EDUCATION, NO PROTECTIVE ASSESSMENT COULD HAVE BEEN MADE BY THE AO IN THE HANDS OF ASSESSEE AND, THEREFORE, THE ACTION OF THE AO IS BA D IN LAW AND, THEREFORE, HE DELETED THE SAME. 7. AGGRIEVED BY THE AFORESAID ACTION OF THE LD. CIT (A), THE REVENUE IS BEFORE US. 3 ITA NO. 460/GAU/2019 KESHAVA NANDA KAKATI, A.Y. 2016-17 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS. WE NOTE THAT THE LD. CIT(A) HAS MADE A CATEGORICAL FINDING OF FACT THAT THERE WAS NO SUBSTANTIAL ADDITION OF SUCH AN AMOUNT (RS. 1,51,56,830/-) MADE PRIOR IN THE CAS E OF M/S. SOCIETY OF EDUCATION AND THIS FINDING OF FACT HAS NOT BEEN REBUTTED/CONTROVERTED OR ASSAILED BY THE REVENUE BEFORE US BY FILING SPECIFIC GROUND TO THIS EFFECT IN THIS APPEA L. FROM A PERUSAL OF THE GROUNDS OF APPEAL RAISED BY THE REVENUE (SUPRA), IT IS CLEAR THAT THE REVENUE HAS ONLY ASSAILED THE DECISION OF THE LD. CIT(A) IN DELETING THE PROTECTIVE ADDITION MADE BY THE AO TO THE TUNE OF RS. 1,51,56,830/-. AND IT CAN BE VERY WELL SEEN THAT TH E BASIS FOR DELETION RESORTED BY LD CIT(A) TO DELETE THE PROTECTIVE ASSESSMENT IN THE H ANDS OF ASSESSEE WAS BECAUSE THERE WAS NO SUBSTANTIAL ADDITION IN THE HANDS OF M/S. SOCIET Y OF EDUCATION. THIS CRUCIAL FACT HAS NOT BEEN REBUTTED/CONTROVERED/ASSAILED BEFORE US. THERE FORE, THIS FINDING OF FACT OF LD CIT(A) CRYSTALLIZES ( I.E. NO SUBSTANTIVE ADDITION IN THE HANDS OF M/S. S OCIETY OF EDUCATION ) AND, THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDE R PASSED BY THE LD. CIT(A) ON THIS ISSUE ON DELETION OF PROTECTIVE ADDITION WITHOUT SUBSTANT IAL ADDITION. WE ALSO TAKE NOTE THAT THE LD. CIT(A) TO COME TO SUCH A DECISION HAS TAKEN NOT E OF RELEVANT DECISIONS OF THIS TRIBUNAL WHICH READS AS UNDER: IN THE CASE OF ITO VS. FUSSY FINANCIAL SERVICES PR IVATE LIMITED [I.T.A. NO.44/DEL/2014 DATED 05/06/2017, IT WAS HELD/AVERRED, AS FOLLOWS, BY THE HONBLE ITAT-DELHI: WE FURTHER NOTE THAT THE ANALYSIS OF THE INVESTMENT ACCOUNT REVEAL THAT THE COMPANY HAS MADE INVESTMENT OF RS.5,04,01,000/. THE STATEMENT GIVEN BY SH. PN JHA ASSUMES IMPORTANCE WHEREIN HE CATEGORICALLY ADMITTED THAT THE COMPANY WAS DOING T HE BUSINESS OF INVESTMENT AND FINANCE AND DURING THE YEAR THE BANK ACCOUNTS OF THE COMPANY HA VE BEEN USED TO PROVIDE THE ACCOMMODATION ENTRIES. THE ADDITION OF RS.3,17,67,951/- MADE BY T HE ASSESSING OFFICER ON PROTECTIVE BASIS, WHICH IS NOT SUSTAINABLE IN THE EYES OF LAW, BECAUSE IN T HIS CASE THE AO HIMSELF STATED IN THE ASSESSMENT ORDER THAT THE DEPARTMENT IS LOOKING AFTER THE CASE S OF BENEFICIARIES AND THE AMOUNTS CHANNELIZED THROUGH THIS GROUP WOULD BE TAXED IN THE HANDS OF T HE BENEFICIARIES , THE AMOUNT OF TOTAL CREDITS OF RS.3,17,67,951/- MADE IN ITS BANK ACCOUNT WITH KOTA K MAHINDRA BANK, KG MARG, NEW DELHI, DURING THE YEAR IS ADDED TO THE INCOME OF THE ASSES SEE ON PROTECTIVE BASIS. IN THIS CASE WE FIND THAT AO HAS NOT MADE ANY SUBSTANTIVE ASSESSMENT. THERE M AY BE SUBSTANTIVE ASSESSMENT WITHOUT ANY PROTECTIVE ASSESSMENT, BUT THERE CANNOT BE ANY PROT ECTIVE ASSESSMENT WITHOUT THERE BEING A SUBSTANTIVE ASSESSMENT. IN THE CASE OF M.P. RAMCHANDRAN VS. DCIT [129 TTJ 1 90 AT PAGE 195], IT WAS HELD/AVERRED, AS FOLLOWS, BY THE HONBLE ITAT: IN ORDER TO GIVE A DIFFERENT COLOUR, THE LD. DR CO NTENDED THAT THIS DISALLOWANCE WAS MADE ON PROTECTIVE BASIS ONLY AND HENCE CANNOT BE EQUATED W ITH THE SUBSTANTIVE DISALLOWANCE. WE HAVE NOTED ABOVE ABOUT THE VALIDITY AND PRESUMPTION OF T HE PROTECTIVE ASSESSMENT IN GENERAL. PROTECTIVE ASSESSMENT CANNOT BE INDEPENDENT OF SUBSTANTIVE ASS ESSMENT. THUS PROTECTIVE ASSESSMENT IS ALWAYS SUCCESSIVE TO THE SUBSTANTIVE ASSESSMENT. THERE MAY BE A SUBSTANTIVE ASSESSMENT WITHOUT ANY PROTECTIVE ASSESSMENT BUT THERE CANNOT BE ANY PROTECTIVE ASSESSMENT WITHOUT THERE BEING A SUBSTANTIVE ASSESSMENT. IN SIMPLE WORDS THERE HAS T O BE SOME SUBSTANTIVE ASSESSMENT/ADDITION FIRST WHICH ENABLES THE AO TO MAKE A PROTECTIVE ASSESSMEN T/ADDITION. SUBSTANTIVE ADDITION/ASSESSMENT IS 4 ITA NO. 460/GAU/2019 KESHAVA NANDA KAKATI, A.Y. 2016-17 MADE IN THE HANDS OF THE PERSON IN WHOSE HANDS THE AO PRIMA FACIE HOLDS THE OPINION THAT THE INCOME IS RIGHTLY TAXABLE. HAVING DONE SO AND WITH A VIEW TO PROTECT THE INTEREST OF THE REVENUE, IF THE AO IS NOT SURE THAT THE PERSON IN WHOSE HANDS H E HAD MADE THE SUBSTANTIVE ADDITION RIGHTLY, HE EMBARKS UPON THE PROTECTIVE ASSESSMENT. THUS THE PR OTECTIVE ASSESSMENT IS BASICALLY BASED ON THE DOUBT OF THE AO AS DISTINCT FROM HIS BELIEF WHICH I S THERE IS THE SUBSTANTIVE ASSESSMENT. IN THE CASE OF GREGORY & NICHOLAS VS. ACIT [I.T.A. NO.5102/MUM/2006 &IT(SS)A NO.24/MUM/2009 DATED 01/03/2007], IT WAS HELD/AVERR ED, AS FOLLOWS, BY THE HON'BLE ITAT (MUMBAI): 21. IN THE CASE OF SURESH K. JAJU (2010) 39 SOT 41 4(MUM), E-BENCH OF THE TRIBUNAL AT PAGE 532 TO 533 HELD AS FOLLOWS: THE AO MADE THE FOLLOWING OBSERVATIONS: 'AS THE ASSESSEE HAS ALREADY OFFERED THIS INCOME IN ASSESSMENT YEAR 2001-02, THE SAME IS ASSESSED IN THIS YEAR TO PROTECT THE INTEREST OF THE REVENUE ' WHETHER THE ABOVE OBSERVATIONS ARE ENOUGH TO CONCLU DE THAT THE ASSESSMENT OF THE CAPITAL GAINS AS LONG-TERM CAPITAL GAIN IN ASSESSMENT YEAR 2001-02 B Y THE ASSESSING OFFICER WAS ONLY A PROTECTIVE ASSESSMENT? WE HAVE ALREADY SEEN THE RATIO LAID DOW N BY THE HON'BLE SUPREME COURT IN THE CASE OF LALJI HARIDAS (SUPRA) WHEREIN THE HON'BLE SUPREME C OURT WHILE RECOGNIZING THE CONCEPT OF PROTECTIVE ASSESSMENT HAS VERY CLEARLY LAID DOWN TH AT THERE MUST BE AN EXHAUSTIVE ENQUIRY AND THE QUESTION AS TO WHO IS LIABLE TO PAY (IN THIS CASE W HICH YEAR THE CAPITAL GAIN IS TO BE ASSESSED AND WHETHER AS LONG-TERM CAPITAL GAIN IN ASSESSMENT YEA R 2001-02 OR SHORT TERM CAPITAL GAIN IN ASSESSMENT YEAR 2000-01) SHOULD BE DETERMINED AFTER HEARING OBJECTIONS. HE SHOULD DETERMINE THE QUESTION IN THE CASE OF ONE PERSON (IN THIS CASE OF THE OTHER PERSON (IN THIS CASE IN OTHER YEAR) IN WHOSE CASE ASSESSMENT HAS TO BE MADE PROTECTIVELY. THUS, PROTECTIVE ASSESSMENT HAS TO BE DONE ONLY AFTER SUBSTANTIVE ASSESSMENT IS DONE. AN ASSES SMENT CAN BE CONSIDERED AS PROTECTIVE ONLY WHEN THERE IS SUBSTANTIVE ASSESSMENT. THUS, SUBSTANTIVE ASSESSMENT HAS TO PRECEDE PROTECTIVE ASSESSMENT. ' IN THE CASE OF G.K. CONSULTANTS LTD. VS. ITO [ITA N O.1502/DEL/2013 DATED 27/06/2014], [UPHELD IN CIT VS. G.K. CONSULTANTS LTD., 2016 (6) TMI 136 DEL HI HIGH COURT], IT WAS HELD/AVERRED, AS FOLLOWS, BY THE HON'BLE ITAT DELHI: 19. ON CAREFUL CONSIDERATION OF ABOVE CONTENTION, WE ARE OF THE VIEW THAT THERE MAY BE A SUBSTANTIVE ASSESSMENT WITHOUT ANY PROTECTIVE ASSES SMENT BUT THERE CANNOT BE ANY PROTECTIVE ASSESSMENT/ADDITION WITHOUT SUBSTANTIVE ASSESSMENT/ ADDITION, MEANING THEREBY THERE HAS TO BE SOME SUBSTANTIVE ASSESSMENT/ADDITION FIRST WHICH ENABLES THE AO TO MAKE A PROTECTIVE ASSESSMENT/ADDITION. IN THE PRESENT CASE, THE AO PROCEEDED TO MAKE PROT ECTIVE ASSESSMENT BY WAY OF REOPENING OF ASSESSMENT OF THE ASSESSEE APPELLAN T COMPANY WITHOUT BEING A SUBSTANTIVE ASSESSMENT ON THE DATE OF ASSUMPTION OF JURISDICTIO N U/S 147 OF THE ACT WHICH IS NOT PERMISSIBLE AS PER DECISION OF ITAT, MUMBAI IN THE CASE OF M.P. RA MACHANDARAN VS. DCIT (SUPRA) AND SURESH K JAJO VS ACIT (SUPRA).' [EMPHASIS GIVEN BY US] 9. IN THE LIGHT OF THE AFORESAID DECISION OF THE TR IBUNAL AND BASED ON THE DISCUSSION, WE DO NOT FIND ANY INFIRMITY IN THE ACTION OF LD. CIT( A) TO HAVE DELETED THE PROTECTIVE ASSESSMENT IN THE HANDS OF THE ASSESSEE WHEN THE FA CT WAS THAT THERE WAS NO SUBSTANTIVE ADDITION IN THE HANDS OF M/S. SOCIETY OF EDUCATION OR OTHER ASSESSEES AND ERGO THE SAME IS CONFIRMED. 5 ITA NO. 460/GAU/2019 KESHAVA NANDA KAKATI, A.Y. 2016-17 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 28 TH OCTOBER, 2021. SD/- SD/- (P.M. JAGTAP) (ABY. T. VARKEY) VICE-PRESIDENT JUDICIAL MEMBER DATED: 28.10.2021 BISWAJIT, SR. PS COPY OF THE ORDER FORWARDED TO: 1. APPELLANT ITO, WD-1, NAGAON 2 RESPONDENT KESHAVA NANDA KAKATI, AMOLAPATTY, J. B. ROAD, NAGAON, ASSAM 782001. 3. 4. 5. CIT(A), GUWAHATI. CIT- DR, ITAT, GUWAHATI / TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY ITAT, KOLKATA BENCHES, KOLKATA