2017 (4) TMI 809 - AT - Income Tax

Validity of protective assessment passed by the AO with regard to immovable property sold - AO received specific information under CASS - Held that - In the case under consideration the AO had taxed the capital gains in the hands of the assessee as it was found that her husband had not filed return of income.In absence of a substantive order the AO was not justified in passing a protective order.Considering the above, we hold that the protective assessment passed by the AO was invalid and without the sanction of the law.So,reversing the order of the FAA,we decide first two grounds in favour of the assessee. Even on merits,the matter had to be adjudicated in favour of the assessee. The AO has gone only by the sale deed and has conveniently forgot the affidavit of the ex-husband of the assessee as well as the divorce decree.Tax liability has to determined by substance of a transaction and not by forum.DS had admitted that he was the sole owner of the part of flat F.1 and sale proceeds were received by him for selling the same.The AO/FAA had made no inquiry with DS. The assessee has discharged the burden cast upon her.It was the turn of the revenue authorities to make further inquiries in that regard. We find that they decided the issue without going to the substance and the surrounding circumstances. We are opinion that order of the FAA cannot be endorsed even on merits.Grounds decided in favour of the assessee

Summary

Issues Involved:
1. Validity of protective assessment by the Assessing Officer regarding the sale of immovable property.
2. Jurisdictional issue of protective assessment without a substantive assessment.

Issue 1: Validity of Protective Assessment:
The Assessee challenged the order of the Assessing Officer (AO) regarding the validity of the protective assessment passed concerning the sale of immovable property. The AO determined the Assessee's income at ?2.05 crores based on the sale of property. The First Appellate Authority (FAA) held that the capital gain from the sale of a part of the property should be taxed in the Assessee's hands. The Authorized Representative (AR) argued that the Assessee was not the owner of the property in question and had not received any sale proceeds. The Departmental Representative (DR) supported the AO's order. The Tribunal found that the AO made a protective assessment without a substantive assessment in the case of the Assessee. The Tribunal cited legal principles governing protective assessments and held that the protective assessment passed by the AO was invalid and not in accordance with the law. Consequently, the Tribunal decided in favor of the Assessee on this issue.

Issue 2: Jurisdictional Issue of Protective Assessment:
The Tribunal addressed the jurisdictional issue of a protective assessment without a substantive assessment. The FAA had not dealt with the jurisdictional issue of the nullity of the protective assessment in the absence of a substantive assessment. The Tribunal emphasized that jurisdictional issues must be adjudicated first, as an order without jurisdiction is not valid. Citing legal precedents, the Tribunal explained that a protective assessment cannot survive without a substantive assessment. The Tribunal held that the AO was not justified in passing a protective order without a substantive assessment. Therefore, the Tribunal reversed the FAA's decision and ruled in favor of the Assessee on this issue as well.

In conclusion, the Tribunal allowed the Assessee's appeal, finding in her favor on both the validity of the protective assessment and the jurisdictional issue of passing a protective assessment without a substantive assessment. The Tribunal emphasized the importance of following legal principles and ensuring that assessments are conducted in accordance with the law.