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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 ..... easons given in the petition, I condone the delay and admit these three appeals for hearing. 3. Since, the issues involved in these three appeals, are common and identical; therefore, these appeals have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity. 4. Now, I shall take assessee`s appeal in ITA No.280/SRT/2022, for assessment year (AY) 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 re-opening the assessment u/s. 147 of the Act and notice u/s. 148 of the Act was issued. 2. 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 making addition of Rs. 38,12,933/- on account of alleged bogus sales on protective basis. 3. On the facts and in the circumstances of the case as well as law on the subject, the learned commissioner of the Income Tax (A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21.03.2014. In response to notice u/s 148 of the I.T. Act, neither anybody attended nor any reply was filed on behalf of the assessee. The assessing officer has also issued further notices under section 142(1) of the Act, however, assessee has not submitted reply before the assessing officer. Therefore, assessing officer proceeded to make addition under section 144 of the Act, based on best judgment. The assessing officer concluded that as the assessee is proprietor of two concerns, namely: i),P.M Textile and ii) Mihir Fabris and has made fictitious sale to the tune of Rs. 38,12,933/- to Fortune Creations Pvt. Ltd. Therefore Rs. 38,12,933/- was added in the income of the assessee on protective basis. 9. The assessing officer also estimated the assessee`s regular business income of Rs. 2,00,000/- in addition to income of Rs. 38,12,933/- in form of bogus sale as mentioned above. 10. Aggrieved by these two additions, the assessee carried the matter in appeal before the ld. CIT(A), who has confirmed the action of the Assessing Officer, observing as follows: "5.3.3 Clearly, the case involves bogus transactions and inflation of purchases by the main group, M/s Fortune Creations Group ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nds of the assessee under consideration should be deleted. 14. Shri Jagasheth, also submitted that the Assessing Officer has also made estimated addition of Rs. 2,00,000/- in the hands of the assessee, without any base, therefore such estimated addition should also be deleted. 15. On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which I have already noted in my earlier para and is not being repeated for the sake of brevity. 16. I have heard both the sides and gone through the relevant material on record. It is seen that the assessment in this case was completed u/s. 144 of the Act and assessing officer has made protective addition on account of fictitious sale to the tune of Rs. 38,12,933/- to M/s Fortune Creations Pvt. Ltd. On appeal by the assessee, the ld CIT(A) held as follows: "...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..." 17. I not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no penalty can be imposed on the fictitious sale, as the fictitious sale is not a real income of the assessee, therefore penalty needs to be deleted. 22. Shri Jagasheth, also stated that assessing officer made quantum addition on protective bases, therefore, penalty under section 271(1)(c) of the Act, should not be imposed on protective addition, for this, ld Counsel relied on the judgment of Hon`ble Jurisdictional Gujarat High Court in the case of Bhailal Manilal Patel vs. CIT, (2014) 49 taxmann.com 539 (Gujarat). 23. On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. 24. I have considered the submissions of Ld. Counsel for the assessee and Ld. Senior Departmental Representative (Ld. Sr. DR) for the Revenue. Since, I have deleted the quantum addition of assessee in ITA No.280/SRT/2022 for AY. 2009-10, vide para no.17 and 18 of this order, wherein I have deleted the entire addition made by the Assessing Officer. Since, I have deleted the entire addition made by the Assessing Officer, therefore the penalty imposed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notes to Shri Jitendra R. Patel but he had stated that the promissory notes belong to his father, mother, grandfather and uncles etc. The assessee, Shri Bhailal M. Patel had subsequently claimed that he was the individual owner of all the promissory notes worth Rs. 37,65,000/-. This version has also been amended and it has been claimed that M/s. J.B. Patel & Co. in which he has 1/8 interest and remaining promissory notes worth Rs. 35,65,000/- belong to him. Thus, there has been considerable inconsistency and constant variation in respect of ownership of unaccounted for and unexplained promissory notes. Proper verification regarding correct ownership is not possible because the promissory notes worth Rs. 35,65,000/- do not show who is the real owner. An order under Section 132(5) was passed in respect of above promissory notes in the case of Shri Jitendra R. Patel in which unexplained investment in promissory notes was held to be assessable as income of Shri Jitendra R. Patel. An order under Section 132(5) read with Section 132(7) has been passed in the case of Shri Bailal M. Patel on 15/07/1988 in which income under Section 69 of the Act by way of unexplained investment in promi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally excluded from the income of Shri Jitendra R., Patel and vice versa makes it very much clear that the assessment order passed by the Assessing Officer was a protective assessment order and the same cannot be termed and/or treated as substantive assessment order as observed by the tribunal. 5.4 Under the circumstances, we are of the opinion that the tribunal has materially erred in treating the assessment order as substantive assessment order without properly appreciating the order passed by the Assessing Officer and it is to be held that the assessment order as such was a protective assessment order. 5.5 Now in view of the aforesaid finding that the assessment order passed by the Assessing Officer was a protective assessment order, whether the Assessing Officer was justified in directing to initiate the penalty proceedings under Section 271(1)(c) of the Act and consequently was justified in levying the penalty under Section 271(1)(c) of the Act is concerned, there can be protective assessment but there cannot be protective penalty. It cannot be disputed that before any penalty can be levied the income has to be assessed as concealed income in the hands of the assessee. Wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order. 7. Now so far as the prayer to remand the matter to the tribunal to assess the factual aspects whether the promissory notes are to be included and/or excluded in the income of Shri Jitendra R. Patel or not, as per the assessment order passed by the Assessing Officer is concerned, the same is rejected and consequently the question referred to this Court is held in favour of the assessee and against the revenue." 26. As the issue is squarely covered by the judgment of Hon`ble Jurisdictional Gujarat High Court in the case of Bhailal Manilal Patel (Supra), hence respectfully following the binding precedent, I delete the penalty imposed by the Assessing Officer under section 271(1)(c) of the Act to the tune of Rs. 12,50,901/-. 27. In the result, appeal filed by assessee in ITA No. 281/SRT/2022 is allowed. 28. Now coming to assessee's appeal in ITA No.282/SRT/2022 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. 10,000/- u/s 271(1)( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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