2011 (1) TMI 1510 - AT - Income Tax

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Nature of the assessment (protective vs. substantive).
3. Right to cross-examine witnesses.
4. Legality of additions in block assessment when already assessed in regular assessment.

Issue-Wise Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The assessee filed an appeal with a delay of 654 days, attributing the delay to the advice of a Chartered Accountant who mistakenly advised that only one appeal was necessary since the same amount was assessed in both regular and block assessments. The Tribunal noted that the assessee had been actively pursuing the matter and that the delay was due to a reasonable cause, i.e., incorrect legal advice. The Tribunal referenced several case laws, including Collector, Land Acquisition vs. Mst. Katji and Priyanka Chopra vs. ACIT, to support the condonation of delay due to reasonable cause. The Tribunal emphasized that justice should be preferred over technicalities and condoned the delay, allowing the appeal to be admitted.

2. Nature of the Assessment (Protective vs. Substantive):
The assessee argued that the assessment for the year 2002-03 was substantive, not protective, as the AO had raised a tax demand and initiated coercive measures for recovery. The Tribunal reviewed the guidelines for protective assessments, including the necessity for a substantive assessment to precede a protective one and the requirement to specify the substantive assessment in the protective order. The Tribunal found that the AO did not follow these guidelines and that the assessment for 2002-03 was indeed substantive. The Tribunal cited multiple case laws, including Lalji Haridas vs. ITO and M.P. Ramchandran vs. DCIT, to support the conclusion that the assessment was substantive.

3. Right to Cross-Examine Witnesses:
The assessee contended that the addition was based on statements from third parties without an opportunity for cross-examination. The Tribunal acknowledged the legal mandate for the right to cross-examine and noted that the assessee had requested this before the CIT(Appeals). The Tribunal indicated that the assessee should be granted the opportunity to cross-examine the witnesses, aligning with principles of natural justice.

4. Legality of Additions in Block Assessment:
The Tribunal examined whether the same amount could be taxed in both regular and block assessments. The Tribunal referred to Section 158BA(2) Explanation (b), which states that income assessed in regular assessment cannot be included in block assessment. The Tribunal found that the addition in the regular assessment for 2002-03 was substantive and thus could not be added again in the block assessment. The Tribunal cited the case of Caltradeco Steel Sales (P) Ltd. & Ors. vs. DCIT to support this conclusion. Consequently, the Tribunal deleted the addition in the block assessment.

Conclusion:
- The delay in filing the appeal was condoned due to reasonable cause.
- The assessment for the year 2002-03 was determined to be substantive, not protective.
- The assessee's right to cross-examine witnesses was upheld.
- The addition in the block assessment was deleted as it was already assessed in the regular assessment.

Final Orders:
- The appeal in IT(SS)A.No. 24/Mum/2009 was allowed.
- The appeal in ITA No. 5102/Mum/2006 was dismissed, confirming the addition in the regular assessment for the year 2002-03.