ACIT Vs Biirat Chandra Dagara (ITAT Cuttack)
Conclusion: Addition made on protective basis without giving any finding as to whether the substantive assessment / addition in the other case had already been passed / made was bad in law. Accordingly the reassessment order passed in the hands of appellant by making addition on protective basis without any order in the hands of Shri Birat Chandra Dagara by making addition on substantive basis was illegal and bad in law.
Held: Assessee was a partnership firm engaged in the mining business. The case was reopened on the basis of Commission Report for illegal mining of iron-ore and manganese in the State of Odisha. As per AO, Shri Birat Chandra Dagara was one of the partner of the assessee firm and had owned the mining lease and submitted the details as per which the assessee was found indulged in the illegal production of iron ore. Thereafter AO held that the income from such illegal mining should be taxed in the hands of Shri Birat Chandra Dagara on substantive basis and addition on protective basis of the same income was made in the hands of the assessee firm. While making the addition AO had estimated the income of the assessee by applying 65% profit rate on the gross turnover/sales, which CIT(A) had reduced to 10%. Against such order, CIT(A), revenue and the assessee both were in appeals before the Tribunal. Assessee submitted that the reassessment proceedings u/s.147 were initiated in the hands of the assessee solely on the basis of Commissions Report. Besides this there was no material available with the AO for recording any satisfaction of escapement of income. It was held that there had to be some substantive assessment addition first, then only AO could proceed to make protective addition. AO had assumed jurisdiction u/s 147, however, there was no substantive assessment on the date when the jurisdiction was assumed in the case of partnership-firm. Therefore, the addition made on protective basis without giving any finding as to whether the substantive assessment / addition in the other case had already been passed / made was bad in law. Accordingly the reassessment order passed in the hands of appellant by making addition on protective basis without any order in the hands of Shri Birat Chandra Dagara by making addition on substantive basis was illegal and bad in law.
