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TMI Blog2023 (9) TMI 508X X X X Extracts X X X X X X X X Extracts X X X X ..... addition. See case of Bhailal Manilal Patel [ 2014 (10) TMI 621 - GUJARAT HIGH COURT] . Penalty u/s 271(1)(b) - Once the foundation fails, the superstructure also fails i.e. the addition also is to be deleted. In this regard, I rely on the legal maxim Sublato fundamento cadit opus (meaning thereby that foundation being removed, structure /work falls). Hence the initial action of the Revenue itself is not in consonance with law, then all the subsequent and consequential proceedings would fall through for the reason that illegality strikes at the root of the order. Therefore delete the penalty imposed by the Assessing Officer under section 271(1)(b) - Assessee appeal allowed. - Shri Dr. A. L. Saini, Accountant Member For the Assessee : Shri P. M. Jagasheth, CA For the Respondent : Shri Vinod Kumar, Sr. DR ORDER PER DR. A. L. SAINI, AM: Captioned three appeals filed by the same assessee, pertaining to same Assessment Year (AY) 2009-10, are directed against the separate orders passed by the Learned Commissioner of Income Tax (Appeals), [in short the ld. CIT(A) ], National Faceless Appeal Centre (in short the NFAC ), which in turn arise out of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s 271(1)(c) of the Income Tax Act, 1961. I note that assessee has filed a separate appeal in ITA No.281/SRT/2022 for AY.2009-10, against the penalty u/s 271(1)(c) of the Income Tax Act, therefore, I dismiss ground No.3 raised by the assessee in quantum appeal. 7. Succinct facts qua ground No.2 of the assessee`s appeal, are that assessee before me is an Individual. The assessee has not filed her Return of income for the assessment year 2009-10. In assessee`s case information was received from ITO, Ward-1(2), Surat, that during Financial Year 2008-09 relevant to AY 2009-10, the assessee has made bogus transaction. The information contained in the report of the investigation wing, Surat, is mentioned by the assessing officer in page No.1 to 3 of the assessment order. The assessing officer has gone through the report of the investigation wing, and observed that the inquiry conducted by Investigating wing, led to the discovery of several other concerns operating from the office address at 5001, World Trade Centre, Ring Road, Surat, which belongs to the Fortune Creations group of Surat, wherein the assessee is proprietor of two concerns, namely: i) P.M Textile and ii) Mihir Fabris wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commission payment. In the instant case the appellant has not explained the veracity of the transactions. She is a family member of the promoter/owners of the group. In these circumstances, the addition made by the Assessing Officer amounting to Rs. 38,12,933/- is being upheld. The Assessing Officer had made the addition on protective basis, i.e. if the main group would have accepted this transaction as their income, then this was not required to be added as the appellant's income. However, as no such evidence has been provided, this amount is to be treated as the income of the appellant. 11. So far as the estimated business income of Rs. 2 lakh is concerned, since the assessee has not clarified before the ld CIT(A), as to how much income had been earned by her during the year, therefore, ld CIT(A) upheld the addition made by the assessing officer to the tune of Rs. 2 lakh. 12. Aggrieved by the order of ld CIT(A), the assessee is in further appeal before me. 13. Shri P. M. Jagasheth, Learned Counsel for the assessee, begins by pointing out that Assessing Officer has made protective addition of Rs. 38,12,933/-, stating that the assessee has made fictitious sale to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ince the substantive addition has been sustained by the ld. CIT(A) in the hands of M/s Fortune Creation Pvt. Ltd. for assessment year 2009-10, vide order dated 09.09.2014, in appeal No.CAS-I/243/13-14, hence there is no loss to the Revenue. I am of the view that main group has accepted the impugned transaction as their income, therefore, protective addition in the hands of the assessee needs to be deleted. Based on this factual position, I delete the protective addition of Rs. 38,12,933/-, in the hands of the assessee. 18. I also note that Assessing Officer has made estimated addition of Rs. 2,00,000/- in the hands of the assessee, without any base, hence the same is hereby deleted. 19. In the result, appeal filed by the assessee in ITA No.280/SRT/2022, is allowed. 20. Now, I shall take assessee s appeal in ITA No.281/SRT/2022, for A.Y.2009-10, wherein the grounds of appeal raised by the assessee, are as follows: 1. On the facts and in the circumstances of the case as well as law on the subject, the learned commissioner of the Income-Tax (Appeals) has erred in confirming the action of the assessing officer in levying penalty of Rs. 12,50,901/- u/s 271(1)(c) of the Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer was justified in imposing/levying penalty under Section 271(1) (c) of the Act? It is the case on behalf of the assessee that the assessment order passed by the Assessing Officer was a protective assessment order and, therefore, the Assessing Officer as such could not have passed an order to initiate the penalty proceedings under Section 271(1)(c) of the Act and the Assessing Officer could not have levied the penalty under Section 271(1)(c) of the Act on the basis of the protective assessment order. On the other hand, it is the case on behalf of the revenue that, as such and so held and observed by the tribunal that the assessment order passed by the Assessing Officer was in substance a substantive assessment order and not protective assessment order as contended by the assessee, the Assessing Officer was justified in levying/imposing the penalty under Section 271(1)(c) of the Act and, therefore, while considering the aforesaid question, it is required to be considered whether the assessment order passed by the Assessing Officer was in substance a substantive assessment order as held by the tribunal or a protective assessment order as contended by the assessee. Therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Jitendra R. Patel it will be accordingly excluded from the income of Shri Bhailal M. Patel 5.1 It is also required to be noted at this stage that while passing the order to initiate the penalty proceedings under Section 271(1)(c) of the Act the Assessing Officer specifically observed that the penalty under Section 271(1)(c) of the Act be initiated in respect of income of Rs. 5 lakhs, which has been assessed as protective measure. 5.2 Under the circumstances, we are of the view that the assessment order passed by the Assessing Officer was as such a protective assessment order and the same cannot be termed as substantive assessment order as observed and held by the tribunal. 5.3 The contention on behalf of the revenue that the assessee himself accepted that the seized promissory notes worth Rs. 37,65,000/- belonged to him and the same may be included in his income is neither here nor there. What is required to be considered is how the Assessing Officer has considered the same and whether he has accepted the case of the assessee or not and whether he has passed the substantive assessment order or not. As observed hereinabove, it appears that the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l the substantive assessment is made and final assessment order is passed in case of the assessee adding the income in the hands of the assessee, even the initiation of the penalty proceedings are not permissible. There cannot be any initiation of the penalty proceedings with respect to the protective assessment order. The aforesaid is supported by the decision of this Court in the case of Bankim J. Shah (Supra). In the said case also penalty was sought to be levied under Section 271(1) of the Act on the protective assessment and to that it is held that there cannot be any protective initiation of the penalty proceedings. It is further observed and held that in a given case a particular income belong to A or B and although the Income Tax Officer reaches to the conclusion that the said income belongs to one of them, he may make protective assessment on the other hearing regard to the fact that the matter was likely to be carried in appeal. It is observed that such a protective assessment may be permissible under the law but there cannot be protective initiation of the penalty proceedings. It is further observed that as such the basis or foundation for initiation of the penalty proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the addition made by the Assessing Officer was on protective basis and moreover it is on account of fictitious sale, therefore such type of bogus addition / protective addition are not sustainable in the eye of law, therefore penalty under section 271(1)(b) of the Act may be deleted. On the other hand, Ld. Sr. DR for the Revenue submitted that the penalty was imposed by the Assessing Officer on account of default committed by the assessee and therefore, the penalty of Rs. 10,000/- should be sustained. I have considered the submissions of the Ld. Counsel and ld. Sr. DR for the Revenue and I am of the view that since I have deleted the entire quantum addition made by the Assessing Officer and I have also deleted the penalty imposed by the assessing officer, (on quantum addition), under section 271(1) (c) of the Act. Therefore, the penalty under section 271(1)(b) of the Act, imposed by the assessing officer, does not have any leg to stand. Once the foundation fails, the superstructure also fails i.e. the addition also is to be deleted. In this regard, I rely on the legal maxim Sublato fundamento cadit opus (meaning thereby that foundation being removed, structure /work falls). Henc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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