2018 (9) TMI 356 - HC - Income Tax

Protective assessment - tribunal quashed the order of protective assessment without considering hte deferment application of the revenue - assessment u/s 153C / 153A - It was the specific case of the petitioners before the Tribunal that a request was made to defer the hearing of the appeal on the ground that the assessment in appeal being protective basis and the order of assessment order on substantive basis in case of Gali Janardhan Reddy. The Appellate Commissioner has to decide the matter at the earliest. Therefore, a request was made to defer the appeal before the Tribunal till a decision is taken in the appeal filed by Janardhan Reddy which is a substantive appeal. Held that - It is not in dispute that in the protective assessment order at Annexure-A there is a reference to the case of Gali Janardhan Reddy which reads as under In the light of the above evidence, the assessee was required to show cause, vide letter dated 07.01.2013 why an amount of ₹ 194,82,50,000/- for the assessment year 2010-11 and ₹ 37,45,06,000/- for the assessment year 2011-12, should not be brought to tax as his undisclosed business income. Mr. Madhukumar Varma furnished his explanation vide letter dated 24.1.2012 by disassociating himself from the seized material and contradicting his own statements made during the time of search. Hence, his contention was rejected. In such circumstances, considering the evidence on record, the above sum of ₹ 194.82 crores is added protectively in the hands of the assessee and substantively in the hands of Mr.G.Janardhana Reddy as arising from undisclosed sources for the assessment year 2010-11. Though an attempt was made by learned counsel for the respondent, that the said order was set-aside by the Tribunal on 17.10.2016 and the same reached finality. The fact remains that a reassessment order came to be passed as per Annexure-D on 29.12.2017 and that is the subject matter of appeal pending before the Commissioner of Appeals. In all fairness, the Tribunal ought to have decided the application filed for deferment by the petitioners nor deferred the hearing as a decision is taken in the substantive appeals filed by the Janardhan Reddy. Therefore, the same has not been done by the Tribunal. When the application filed by the petitioners is pending before the Tribunal for deferment, it is appropriate for the Tribunal to decide the said application first on its merits and thereafter, can proceed in the appeal.

Summary

Issues:
1. Maintainability of writ petitions for mandamus.
2. Stay of further proceedings in ITA No.478/BANG/2017.
3. Dismissal of appeal by Appellate Authority on delay and laches.
4. Protective assessment and substantive assessment.
5. Request for deferment of hearing by petitioners.
6. Consideration of deferment application by Tribunal.

Issue 1: Maintainability of Writ Petitions for Mandamus
The respondent contended that the writ petitions were not maintainable as the question of granting stay did not arise. The respondent argued that there was a substantive assessment under Section 153-C of the Income Tax Act in the case of Gali Janardhan Reddy and a protective assessment under Section 153-A in the case of the respondent. The Appellate Tribunal had deleted the substantive addition in the case of Gali Janardhan Reddy, which had reached finality. The respondent's appeal was dismissed by the Appellate Authority on the grounds of delay and laches.

Issue 2: Stay of Further Proceedings in ITA No.478/BANG/2017
The petitioners sought a writ of mandamus to direct the Income Tax Appellate Tribunal to defer the hearing of the appeal in ITA No.478/BANG/2017 until the appeal against the substantive assessment in the case of Gali Janardhan Reddy for the assessment year 2010-11 was adjudicated by the Commissioner of Income Tax (Appeals). The Court granted a stay on further proceedings in ITA No.478/BANG/2017 until the next date of hearing.

Issue 3: Dismissal of Appeal by Appellate Authority on Delay and Laches
The appeal filed by the respondent before the Appellate Authority was dismissed on the grounds of delay and laches. The respondent then filed an appeal before the Income Tax Appellate Tribunal, Bengaluru, in ITA No.478/BANG/2017. The Tribunal directed the revenue to argue the matter on the merits of the appeal, leading to the filing of writ petitions seeking deferment of the hearing.

Issue 4: Protective Assessment and Substantive Assessment
The protective assessment order referred to the case of Gali Janardhan Reddy, where a sum was added protectively in the hands of the assessee and substantively in the hands of Gali Janardhan Reddy as undisclosed income. The Tribunal set aside the original assessment order on technicality, leading to a fresh assessment order being passed by the petitioners.

Issue 5: Request for Deferment of Hearing by Petitioners
The petitioners requested the Tribunal to defer the hearing of the appeal in ITA No.478/BANG/2017 until a decision was made in the substantive appeals filed by Gali Janardhan Reddy. The Tribunal did not consider the request for deferment, prompting the petitioners to file writ petitions seeking relief.

Issue 6: Consideration of Deferment Application by Tribunal
The Tribunal was directed to consider the application filed by the petitioners for deferment of the hearing in ITA No.478/BANG/2017. The Court emphasized that the Tribunal should decide the deferment application on its merits before proceeding with the appeal. The writ petitions were disposed of with this direction, leaving all contentions open for future consideration.