VINODKUMAR KHANDWLWAL, MUMBAI v. ITO 13(2()2), MUMBAI

I.T.A NO.2785/ MUM/2010 VINODKUMAR KHANDELWAL 1 IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH MUMBAI. [ CORAM: PRAMOD KUMAR AM AND R.S.PADVEKAR JM ] I.T.A NO.2785/ MUM/2010 ASSESSMENT YEAR: 2006-07 VINODKUMAR KHANDELWAL .. APPELLANT 205 2 ND FLOOR GOKUL BLDG. BARODA STREET IRON MARKET MUMBAI-09 PA NO.AAMPK 2017 P VS INCOME TAX OFFICER 13(2)(2) . RESPONDENT MUMBAI. APPEARANCES: VIPUL JOSHI FOR THE APPELLANT A.P.SINGH FOR THE RESPONDENT O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL THE ASSESSEE APPELLANT HA S CALLED INTO QUESTION CORRECTNESS OF CIT (A)S ORDER DATED 15 TH JANUARY 2010 FOR THE ASSESSMENT YEAR 2006-07. 2. THE SHORT GRIEVANCE THAT WE ARE REQUIRED TO ADJU DICATE IN THIS APPEAL IS WHETHER OR NOT THE CIT (A) WAS JUSTIFIED IN UPHOLDING THE ADDITION OF RS.2 61 69 779 U/S.69 ON PROTECTIVE BAS IS. 3. THE MATERIAL FACTS ARE LIKE THIS. AS PER INFORM ATION GATHERED BY THE INCOME TAX AUTHORITIES THROUGH ANNUAL INFORMATION REPORTS THE ASSESSEE HAD INVESTED RS.2 61 69 779 IN TEMPLETON M UTUAL FUND DURING THE RELEVANT PREVIOUS YEAR. WHEN ASSESSEE WAS CONF RONTED WITH THIS INFORMATION AS ALSO THE FACT THAT THE SAME IS NOT R EFLECTED HIS RETURN OF HIS I.T.A NO.2785/ MUM/2010 VINODKUMAR KHANDELWAL 2 INCOME IT WAS POINTED OUT BY THE ASSESSEE THAT THE INVESTMENTS WERE MADE IN THE CAPACITY OF KARTA OF VINOD KUMAR KHANDE LWAL HUF PROPRIETOR OF KHANDELWAL ALAKALIES & CHEMICAL INDU STRIES. IT WAS ALSO POINTED OUT THAT THE INVESTMENT IN QUESTION WAS DUL Y REFLECTED IN HUFS INCOME TAX RETURN WHICH WAS ASSESSED BY ACIT CIRCL E 3 KALYAN (DIST: THANE). WHILE ASSESSING OFFICER TOOK NOTE OF THIS EXPLANATION HE ALSO NOTED THAT THE PAN WAS OF THE ASSESSEE AND ACCORDIN GLY INCOME WAS ALSO TAXED IN THE HANDS ON PROTECTIVE BASIS. WHILE DOIN G SO HE OBSERVED AS FOLLOWS: 6.1 THE ASSESSEE AS PER HIS LETTERS DATED 3.12.20 08 4.12.2008 & 12.12.2008 HAS TRIED TO POINT OUT THAT THE MUTUAL F UND TRANSACTIONS ARE ALREADY APPEARED IN THE RETURN OF HUF OF WHICH ASSESSEE IS KARTA BUT HAS NOT EXPLAINED AS WHY HIS PAN WAS US ED FOR THOSE INVESTMENTS. 7. HOWEVER SINCE THIS ASSESSMENT IS GETTING BARRED BY LIMITATION ON 31.12.2008 AND ALSO TO SAFEGUARD THE INTEREST OF REVENUE THE AMOUNT OF RS.2 61 69 779 SAID TO HAVE BEEN INVESTED BY THE VINDKUMAR KHANDELWAL HUF PROP. OF M/S. KHANDELWAL ALAKALIES & CHEMICALS INDUSTRIES BY USING INDIVIDUAL PA NO.AAMP K 2017P. IN VIEW OF THE ABOVE IT IS TREATED AS UNEXPLAINED INV ESTMENT U/S.69 OF THE I.T.ACT AND ADDED TO THE TOTAL INCOME OF THE AS SESSEE. SHRI VINODKUMAR KHANDELWAL (INDIVIDUAL) ON PROTECTIVE BA SIS. PENALTY PROCEEDINGS U/S.271(1)(C) OF THE I.T.ACT 1961 IS IN ITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME. 4. AGGRIEVED ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE CIT (A) BUT WITHOUT ANY SUCCESS. THE CIT (A) CONFIRMED THE ACT ION OF THE AO AND OBSERVED AS FOLLOWS: 2.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE LD CO UNSEL AND I AM UNABLE TO CONCEDE THE SAME BECAUSE OF THE FOLLOWING REASONS: I) THE AO IS WITHIN HIS RIGHTS TO FRAME A PROTECTIV E ASSESSMENT WHEN THERE IS A DOUBT AS TO WHICH PERSON AMONGST TW O IS LIABLE TO BE ASSESSED PARALLEL PROCEEDINGS CAN BE TAKEN AGAINST BOTH AND ALTERNATIVE ASSESSMENTS MAY ALSO B E FRAMED. (LALJI HARIDAS VS ITO 43 ITR 387 (SC) ITO VS BACHU LAL KAPOOR 60 ITR 74(SC) BANYAN & BERRY VS CIT 2 22 ITR 831 (GUJ). II) A PROTECTIVE ASSESSMENT HAS AS MUCH FINALITY AS ORDINARY ASSESSMENT. III) THE PLEA OF THE LD COUNSEL THAT SINCE SUBSTANT IVE ASSESSMENT HAS ALREADY BEEN FRAMED BY ACIT CIRCLE-3 KALYAN V IDE ORDER I.T.A NO.2785/ MUM/2010 VINODKUMAR KHANDELWAL 3 DT.30.12.2009 UPON SHRI VINODKUMAR KHANDELWAL INDL . AND THEREFORE THE SAME INCOME CANNOT BE ASSESSED PROTEC TIVELY IN THE HANDS OF SHRI VINODKUMAR KHANDELWAL HUF AND TH E PROTECTIVE ASSESSMENT SO FRAMED EARLIER ON DT.12.12 .2008 CANNOT SURVIVE CANNOT BE ACCEPTED BECAUSE THE PROT ECTIVE ASSESSMENT HAS ONLY BEEN FRAMED TO SAFEGUARD THE IN TERESTS OF REVENUE INASMUCH AS THE SUBSTANTIVE ASSESSMENT F RAMED ON 30.12.2009 IS NOW SUBJECT TO APPEAL AND TILL THE MATTER IS FINALLY DECIDED THE PROTECTIVE ASSESSMENT REMAINS A ND ONLY AFTER THE ISSUE IS FINALLY SETTLED AFTER APPELLATE DECISIONS DOES THE PROTECTIVE ASSESSMENT GET AFFECTED I.E. IF THE INCOME IS FINALLY ASSESSED AS PER THE SUBSTANTIVE ASSESSMENT THEN THE PROTECTIVE ASSESSMENT GETS RENDERED SUPERFLUOUS BUT TILL THE ISSUE IS FINALLY SETTLED BY HIGHER APPELLATE AUTHOR ITIES THE PROTECTIVE ASSESSMENT REMAINS VALID AND CANNOT BE A SSAILED MERELY ON THE GROUND THAT A SUBSTANTIVE ASSESSMENT HAS ALSO BEEN DONE. SINCE IN THIS CASE THE SUBSTANTIVE ASSESSMENT IS N OW THE SUBJECT MATTER OF APPEAL AND HAS NOT ATTAINED FINAL ITY AS OF DATE AND THEREFORE THE PROTECTIVE ASSESSMENT DONE B Y THE AO IN THE PRESENT CASE REMAINS VALID AND CAN ONLY BE A FFECTED BY SUBSEAQUENT DECISION IN THE CASE OF SHRI VINODKUMAR KHANDELWAL HUF (SUBSTANTIVE ASSESSMENT ) AND THERE FORE THIS APPEAL IS DISMISSED. 5. THE ASSESSEE IS AGGRIEVED AND IS IN FURTHER APPE AL BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED THE FACTUAL MATRIX OF TH E CASE AS ALSO THE APPLICABLE LEGAL POSITION. 7. WE FIND THAT THE SUBSTANTIVE ADDITION IN THE CAS E OF THE HUF IS DELETED BY THE CIT (A) AND WHILE DOING SO THE CIT (A) HAS OBSERVED AS FOLLOWS: 7.FROM THE PERUSAL OF COPY OF CURRENT ACCOUNT AND MUTUAL FUND ACCOUNT IT IS REVEALED THAT THE APPELLANT HAS ENJO YED THE FACILITY OF INVESTING IN MUTUAL FUND BY AUTOMATIC SWEEP FACILIT Y FROM THE CURRENT ACCOUNT. THE AO HAS FURTHER STATED THAT TH E AO NEVER CALLED FOR BOOKS OF ACCOUNT AND VERIFIED. 8. IN VIEW OF THE ABOVE DISCUSSION I CAME TO THE C ONCLUSION THAT THE FUNDS INVESTED IN MUTUAL FUND ARE THE FUNDS AVAILAB LE IN THE CURRENT ACCOUNT MAINTAINED BY THE APPELLANT IN THE NAME OF THE PROPRIETOR CONCERN AND THE INVESTMENT IN MUTUAL FUND THEREFOR E STANDS FULLY EXPLAINED. IN OTHER WORDS THE INVESTMENT IS NOT U NEXPLAINED. ACCORDINGLY I HOLD THAT THE ADDITION IS UNCALLED F OR AND UNJUSTIFIED. ACCORDINGLY I DIRECT THE AO TO DELETE THE ADDITION . I.T.A NO.2785/ MUM/2010 VINODKUMAR KHANDELWAL 4 8. IN VIEW OF THE FAT THAT THE ADDITION IS DELETED IN THE HANDS OF HUF AND SINCE ALL THE RELEVANT MATERIALS/DETAILS IN RES PECT OF THE INVESTMENTS WERE ALREADY FURNISHED AS FOUND BY THE CIT (A) TH E IMPUGNED ADDITION CANNOT SURVIVE AT ALL. IN ANY EVENT SO FAR AS THI S ASSESSEE IS CONCERNED THE ADDITION IS NOT MADE BECAUSE INVESTMENT WAS MAD E BY THE ASSESSEE. BUT BECAUSE PAN OF THE ASSESSEE WAS USED IN HUF AND BECAUSE THE ASSESSEE HAD ADMITTEDLY MADE INVESTMENT IN HIS CAPA CITY AS KARTA OF HUF BY NO STRETCH OF LOGIC THE IMPUGNED ADDITION CANNO T BE MADE IN THE HANDS OF THE ASSESSEE. MERELY BECAUSE PAN IS USED BY HUF IN WHICH HE IS KARTA AND EVEN THOUGH THE AMOUNT IS DULY EXPLAINED BY THE HUF THE QUESTION OF INVESTMENT BEING EXPLAINED CAN AT BEST ARISE IN THE HANDS OF HUF IN THE HANDS OF HUF. THE ONUS IS DISCHARGED BY THE HUF. WE ARE THEREFORE OF THE CONSIDERED VIEW THAT THE IMPUGNED ADDITION IS D EVOID OF ANY LEGAL SUSTAINABLE MERITS AND MUST BE DELETED. 9. IN THE RESULT THE APPEAL STANDS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 23 RD FEBRUARY 2011 SD/- (R.S.PADVEKAR ) (JUDICIAL MEMBER) SD/- (PRAMOD KUMAR) (ACCOUNTANT MEMBER) MUMBAI DATED 23 RD FEBRUARY 2011 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS) 24 MUMBAI 4. COMMISSIONER OF INCOME TAX 13 MUMBAI 5. DEPARTMENTAL REPRESENTATIVE BENCH F MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR ITAT MUMBAI I.T.A NO.2785/ MUM/2010 VINODKUMAR KHANDELWAL 5 I.T.A NO.2785/ MUM/2010 VINODKUMAR KHANDELWAL 6