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TMI Blog2022 (9) TMI 1334X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessments on protective basis, the AO is supposed to point out the name of the assessee who may be the owner of such income. It is common ground that in the present case, till this date, the authorities below did not bring on record any material to show that the declared income in question really belongs to some other assessee. The ld. DR honestly conceded that till this date no proceedings in respect of the disputed income have been made against any other assessee and the same is also confirmed by the AO in the report presented before us. Not disputed the findings of the ld. AO that there is no addition on substantive basis. Thus, the protective addition cannot be survived as AR of the assessee explicitly proved that whatever interest that they have paid in the group cases is duly recorded in the books of accounts and wherever applicable TDS is also deducted. As an additional interest as allegedly demanded by the parties is not paid by the assessee, even those parties are not questioned on that 2.4% found recorded in the Excel-Sheet and same were also not taxed on substantive basis. There cannot be any protective addition without making the substantive addition and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 153A 2012-13 40/JP/2020 16.10.2019 28.12.2017 u/s. 143(3) r.w.s. 153A 2013-14 41/JP/2020 16.10.2019 27.12.2017 u/s. 143(3) r.w.s. 153A 2. As the issues involved in the present appeals are common and inextricably interlinked or in fact interwoven as it is evident from the following chart. A.Y Assessee s Appeal No Issue Amount Rs. AGOA No. 2010-11 38/JPR/2020 Interest Payment From Undisclosed Sources 69,449.00 1 to 1.2 2011-12 39/JPR/2020 Interest Payment From Undisclosed Sources 85,361.00 1 to 1.2 2012-13 40/JPR/2020 Interest Payment From Undisclosed Sources 27,912.00 1 to 1.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers. During the course of the above referred actions, cash jewellery, valuables, stock in trade, documents, books of account and / or loose papers found and or seized from the premises of the Maverick Group Jaipur of which one such member happens to be the assessee. In this case original return of income was filed on 29.09.2013 declaring total income at Rs. 98,59,810/-. On account of search jurisdiction over the cases was assigned to Central Circle -4, Jaipur vide order u/s. 127 of the Act. In compliance to the notice u/s. 153A of the Act, return of income e-filed on 28.11.2015 declaring total income at Rs. 98,59,810/-. After filling return u/s. 153A, the notices u/s. 143(2) along with the questionnaire were issued. The assessee filed the details and same was kept on record. The assessee engaged in the business of Share trading and earned income from business or profession and other sources during the year under consideration. 6. In the assessment order the ld. AO observed as under while making the addition which is disputed by the assessee: During the course of search operation in the Maverick Group, Jaipur a pen drive was found and seized from the possession of Shri Ka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as adjustment entry over and above the interest payment recorded in the books of accounts on which TDS was also deducted. From the details, it is seen that out of the total interest after considering the duplicate/ repeated entries noted in adjustment account, total of such entries comes to Rs 75,27,847/- out of which it has been claimed that an amount of Rs 35,15,548/- pertained to various individual concerns related to Maverick group and balance Rs. 40,12,299/- related to other persons. Necessary actions have been taken in the case of persons concerns related to the Maverick group where the addition on substantive bass has already been proposed in their respective pending assessments however, you have failed to establish that the amount appearing under adjustment account in the name of other persons was not paid by you or your group concerns/ persons. Since the pen drive was found from the possession of your one of the treated employer. you are show caused as to why not the provisions of section 132(44) are not invoked and by treating the payment of Rs. 40,12,199/- being made by you out of the undisclosed income and therefore it is proposed to make an addition of R 37,32,3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1961 for the year under consideration. 7. The assessee aggrieved from the said order of the assessment preferred an appeal before the ld. CIT(A). The ld. CIT(A) has not granted any relief on this issue and thus, the assessee has raised this appeal before us. Thus, the present appeals preferred on the issues raised in the grounds of appeal on which the ld. CIT(A) has not granted any relief to the assessee. The relevant findings of the ld. CIT(A) reiterated here in below: Ground no.2- Protective addition on pen drive Rs. 37,32,344/- 7. I have perused the written submissions submitted by the Ld. A/R and the order of AO. I have also gone through various judgments cited by the Ld. A/R. I have already held that the addition on the basis of entries in the Pen Drive found from the premises of the key employees are sustainable. On the facts and in the circumstances of the case, since the such addition are held to be sustainable the protective addition of Rs. 37,32,344/- is also confirmed. The ground raised is dismissed. 8. The ld. AR of the assessee in this appeal against the grounds raised has relied on the following written submission : The ground wise submissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be any penalty proceedings, unless a protective assessment is converted into a substantive assessment. In support of such proposition, reliance is placed on the following: i) Lalji Haridas vs. ITO and another 43 ITR 387 (SC). ii) Dilip Kumar Jain vs. ITO 5 ITD 552 (ITAT, Indore). iii) ITO vs. Miss Vasudha Bajoria 40 ITD 414 (Cal.) iv) M.P. Ramchandran vs. DCIT 129 TTJ 190 at page 195 (ITAT Mumbai). Hon ble Delhi ITAT in the case of G.K. Consultants Limited, vs Income Tax Officer, in ITA No. 1502/Del/2013 (Case Law PB-II APB 255-263) has held as under: (APB 262) 19. On careful consideration of above contention, we are of the view that there may be a substantive assessment without any protective assessment but there cannot be any protective assessment/addition without a 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 protective assessment by way of reopening of assessment of the assessee appellant company without being a substantive assessment on the date of assumption of jurisdic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in same specific case / cases. Hence protective addition so made is bad in law and deserves to be deleted. Without prejudice to our submission on the legal issue of protective addition, the submission on merits of the addition made is as under: Brief facts related to these grounds of appeal are that during the course of search, one pen drive was found from the possession of Sh. Kailash Khandelwal, one of the employee of Maverick Group, which contained excel sheets containing certain entries of loans taken and interest payment by various individuals/ firms/ companies. The printout of the said sheets is available at page 1 to 89 of the paper book. Last column in such excel sheets was Adjustment entries and sum total of such so called adjustment entries appearing in excel sheets was arrived at Rs.75,27,847/-. Ld. AO himself at page 3 of Assessment order has mentioned that out of Rs.75,27,847/-, an amount of Rs.35,15,548/- pertains to various individuals/ concerns related to Maverick group and balance Rs.40,12,299/- was related to other persons not related to Maverick group. It is stated that amount of Rs. 35,15,548/- is claimed to be pertaining to various individuals / con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person's handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested.] As stated above, that though such pen drive was found from the possession of employee of Maverick Group, at the same time the ld.AO himself has admitted that sum of Rs.37,32,344/- was not appearing in the name of assessee nor in the name of any members of Maverick Group and was in the name of parties totally unrelated to the assessee. However, he proceeded to make the addition in the hands of assessee company on protective basis without there being any addition in the hand of any persons on substantive basis to whom such entry are considered by ld. AO to be belonging to. Regarding the nature of entries contained therein it was explained to ld.AO that as per the Pen Drive (copy of which was supplied by the ld.AO during the course of assessment proceedings) is having total five files prepared under Excel format which are as under: File No. Name of the File APB A. Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is in Excel format, the other sheets were kept hidden by the broker, which were construed as unhide by the department. However it is incorrectly alleged by the ld. AO that as the pen drive was found from the possession of the employee of assessee company, all entries would pertain to the group; whereas same is actually not correct. As submitted above, parties other than of Maverick group are concerned (in whose name entries were found in excel sheets), it is once again submitted that none of the parties are related to the assessee company in any manner nor the assessee is aware about the transactions entered into by them. It is, therefore, submitted that as name of assessee is not mentioned in any of the sheets in pen drive, by no stretch of imagination presumption can be drawn u/s 132(4A) that pen drive constitutes undisclosed transaction related to assessee. In this scenario, it is submitted that no incriminating document whatsoever was found in the case of assessee for the year under appeal, thus it is requested that addition made in all the four assessment years under appeal by ld.AO on protective basis deserves to be deleted. It is further clarified that exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot challenged by the department in appeal before this hon ble bench. In the circumstances, it is humbly prayed that the addition made in various assessment years presumed as unexplained payment of interest based on the entries found noted in the computer Pen drive, which was found and seized from possession of an employee of the assessee company and do not contain the name of the assessee as the payer in any of such entry, deserves to be deleted more particularly when the ld. CIT(A) has accepted the contention that when no incriminating paper was found and seized as a result of search pertaining to any of these assessment years thus no addition could be made in the assessment completed u/s 153A and such findings are not challenged by the department before the hon ble bench. 9. The ld. AR of the assessee also filed a case law paper book relying on the various judicial pronouncement in respect of the contentions raised by him in the proceeding before us. 10. The ld. AR of the assessee relying on the written submission further submitted that the person from whom the pen drive is found is not at all relied upon at the time of search. It is also confirmed by both the par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he lower authorities and there is not dispute on this aspect. The revenue has made this addition in the hands of the assessee as protective addition only based on working made in this PEN drive. Therefore, the bench has directed revenue to call the factual information from the AO during the hearing of these appeals. The ld. AO categorically confirmed that the against that protective addition no substantive addition is made. The relevant report of AO vide letter No. ITO/Wd-1(2)/JPR/2022- 23/92 dated 02.05.2022, submitted his report and same is extracted here in below : Respected Sir, Sub: Supplying of documents/information in the case of M/s Maverick Group Cases-reg. ***** Kindly refer to your letter No 50 dated 27.04.2922 on the abovementioned subject. In this connection, the requisite information is reads as under: i. No further appeals before Hon'ble ITAT were recommended in all the four assessment years. ii. On perusal of the assessment records, it is noticed that the AO in assessment order has mentioned that a pen drive was found and seized from the possession of Shri Kailash Chand Khandelwal, one of trusted employee of the assessee. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Circle-4, Jaipur. If any further clarification is needed on this issue, the same may be obtained from that office. Case records for A.Ys. 2010-11, 2011-12, 201-13 and 2013-14 (One volume each) are enclosed herewith. 11. Based on the stated facts, the ld. AR of the assessee vehemently argued when in the report substantive addition is not made based on the findings of the ld. Assessing Officer how the protective addition can survive and therefore, he has submitted that the protective addition made in these cases are required to be deleted. To drive home to this contention the ld. AR of the assessee he has relied upon the findings of the SC in the case of Lalji Haridas Vs. ITO 43 ITR 387 where in the apex court observed that We would, however, like to add one direction in fairness to the appellants. The proceedings taken against both the appellants should continue and should be dealt with expeditiously having regard to the fact that the matter is fairly old. In the proceedings taken against Lalji the Income-tax Officer should make an exhaustive enquiry and determine the question as to whether Lalji is liable to pay the tax on the income in question. All objections w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the original order No. 71 of 1951, dated 17.1.1952]. In the said decision, his Lordships Harries, CJ., while deciding the controversy observed as under: The income-tax authorities also made an alternative assessment, assessing each of the firms separately and this was what is referred to as a protective assessment and is permissible in order to prevent assessment being barred by limitation. Reference may be made to the ratio of decision in the case of Jagannath Hanumanbux. TTO [1957] 31 ITR 603 (Cal). The Hon'ble Calcutta High Court, while deciding the said case made observations as under: ...It is also true that there cannot be any assessment excepting of an assessee and there can be no doubt that the income-tax authorities must confine themselves within the four corners of the statute and not invent new procedures outside the limits of the Indian Income-tax Act (p. 609) If we read those decisions carefully, it would be clear that before completing the assessments on protective basis, the ITO is supposed to point out the name of the assessee who may be the owner of such income. It is common ground that in the present cases, till this date, the authorities below ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded for the evidence of PEN drive he relied on the report of the AO. 15. We have heard the rival contentions, submission made and relied upon relevant judicial decisions by both the party. The bench has noted that when the PEN drive find during the search proceeding no questions are raised to the parties not only that the employee from this PEN drive found, his statement is not recorded. Thus, merely from that PEN when the veracity about that evidence is not recorded no addition either protective or substantive can be made. Not only that even on the merits the addition cannot be made on two counts, one is that there is no substantiative addition in those persons who claimed to have additional interest as duly confirmed before us by the AO and secondly when the substantive addition is not made protective addition cannot survive. The amount in dispute is nothing but the amount of the additional interest demanded and not paid by the assessee. Based on the decision relied upon by the ld. AR and on careful consideration of the facts in this case we hold that the ld. AO before completing the assessments on protective basis, the AO is supposed to point out the name of the assessee wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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