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2023 (7) TMI 806 - HC - Income TaxCapital gain addition on protective basis or substantive basis - assessee/partner holding 5% share in a partnership firm - whether the act of the respondents of recovering the amount assessed as protective addition against the petitioner and charging interest thereon and subsequently recovering the same without framing any substantive assessment is illegal and not sustainable in the eyes of law? - HELD THAT:- On applying the legal proposition to the effect that without substantive assessment, no recovery can be effected to the instant case, it is observed that since at the time of passing of assessment order by respondent No.2 where the protective addition was made in the case of the petitioner, no substantive addition had been made in the hands of the firm, therefore, no substantive additions were infact in existence. Subsequent demand in the absence of substantive addition being specifically made in the hands of the petitioner, recovery could certainly not be effected from him. Though the Tribunal had made observation that protective assessment may become substantive, however, it had neither declared the impugned assessment as substantive assessment nor gave any direction to the assessing authorities to frame the same qua the petitioner assessee. It is also not the case of the respondents that at any stage thereafter, the authorities had framed substantive assessment in respect of the additions made in the income of the petitioner against him. When without framing any substantive assessment, the respondents sought to recover the amount assessed protectively rather recovered the same by issuing the impugned demand notice and recovery certificate, their action cannot be stated to be sustainable in law. Accordingly, the impugned demand notice and recovery certificate have become liable to be set aside and it is ordered accordingly. Recovery pursuant to the impugned notice and certificate has already been effected from the petitioner by the respondents and further keeping in view the interest of the revenue who might be entitled to recover the amount protected by way of protective assessment as made against the petitioner from him or from the firm or any other person, by making substantive assessment, we consider it proper to remit the case with a direction to the assessing officer to consider the question of making substantive assessment in the matter against the proper assessee and then to pass an order of recovery in this case. It is made clear that if the assessing officer/proper officer fails to make any substantive assessment against the petitioner within a period of three months from the date of passing of this order, then the revenue shall be liable to refund the amount so recovered from the petitioner.
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