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2017 (4) TMI 809 - ITAT MUMBAI

2017 (4) TMI 809 - ITAT MUMBAI - TMI - Validity of protective assessment passed by the AO with regard to immovable property sold - AO received specific information under CASS - Held that:- In the case under consideration the AO had taxed the capital gains in the hands of the assessee as it was found that her husband had not filed return of income.In absence of a substantive order the AO was not justified in passing a protective order.Considering the above, we hold that the protective assessment .....

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of the part of flat F.1 and sale proceeds were received by him for selling the same.The AO/FAA had made no inquiry with DS. The assessee has discharged the burden cast upon her.It was the turn of the revenue authorities to make further inquiries in that regard. We find that they decided the issue without going to the substance and the surrounding circumstances. We are opinion that order of the FAA cannot be endorsed even on merits.Grounds decided in favour of the assessee - I.T.A./1518/Mum/2015 .....

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laring total income at ₹ 38,180/-.The AO completed the assessment u/s.143(3) of the Act on 28.3. 2013,determining her income at ₹ 2.05 crores. 2. First two ground of appeal are about validity of protective assessment passed by the AO with regard to immovable property sold.During the assessment proceedings the AO received specific information under CASS that the assessee had sold property, on 22.2.2010, for ₹ 4.05 crores, that in the year 2001 the assessee alongwith her husband .....

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the assessee continued to stay in the portion consisting of 1497 sq.ft., that the Flat No.GF-2 was purchased by DS vide sale agreement,dated 05.07.2007,for a consideration of ₹ 1.40 crores, that the assessee had no right,title or interest in the Flat No.F- 2,that later on property consisting of F-2 and a part of Flat F-1(comprising area of 978 sq.ft. was sold for ₹ 4.05 crores),vide agreement,dated 22.2.2010. The AO further observed that the assessee and her husband were joint transf .....

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that in the worst case scenario she would be liable to capital gains in respect of sale of 50% of area of 978 sq.ft. The AO found that DS has not filed return of income for AY. 2010-11.He held that part of Flat F-1 and F-2 had been sold by one common sale deed, that the assessee and her husband were joint transferors that the receipt of sale consideration of ₹ 4.05 crores had been signed by both the persons,that on the sale of flats short term capital gain would arise, as the properties h .....

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lenging the assessment made on protective basis.After considering the submission of the assessee and the assessment order, the FAA held that from the purchase agreement it was clear that Flat No.F-2 was purchased by DS, that Flat No.2 and 978 Sq.ft. area of Flat-F-1 had been sold by the husband of the assessee, that AO had wrongly taxed the capital gain arising out of sale of Flate F-2 in the hands of the assessee, even on protective basis, that same would rightly be taxable in the hands of DS.W .....

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, same would attract liability to capital gains.Finally, he held that STCG of ₹ 53.96 lakhs on the sale of 978 sqft. of Flat F-1 would be assessable in the hands of the assessee. 4. Befors us,the Authorised Representative(AR)argued that the assessee was not owner of the part of the flat F.1,that she had not received any sale proceeds,that DS had in his affidavit stated that sale proceeds were received by him only,that protective assessment in the case of the assessee was invalid,that the F .....

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problems led to divorce of the assessee and DS,that the assessee got possession of 1478 Sq.ft.of flats and DS became owner of the rest of the flats,that he sold F.2 and part of flat F.1 for a sale consideration of ₹ 4.05 crores,that he did not file return of income for the transaction in question,that the assessee and DS had signed the sale deed for selling part of F.1,that DS in his affidavit stated that the assessee had not received any thing on account of sale of flat F.1,that the AO ma .....

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es have to be adjudicated first.An order without jurisdiction in no order.Therefore,whenever a question of legality of an assessment is challenged with regard to jurisdiction it has to addressed before deciding the merits of the case.As per the settled principles of taxation,governing the protective assessment(also termed as paper assessment/alternate assessment/parallel assessment/cold storage assessment),a protective assessment will not survive without a substantive assessment.The existence of .....

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finally found to be liable may become barred by time. It has now become an established practice that in the case of doubt as to the person who will be and deemed to be in receipt of the income, it is open to the Department to make protective or alternative assessment. In Lalji Haridas v. ITO [1961] 43 ITR 387, the Supreme Court observed at page 392 as follows : In cases where it appears to the income-tax authorities that certain income has been received during the relevant assessment year but it .....

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taxation proceeding, a question might arise as to whether an income said to have been earned by B is really earned by him or it is an income of A. The I.T. Dept. has to make an assessment within the prescribed period of limitation and, hence, it would not delay long the making of an assessment on B, simply because the enquiry as to whether the income of B should be treated to be that of A is pending. There could not be an assessment of the said income as of both A and B. The very purpose of such .....

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taxed. To avoid such a contingency, the protective assessment is to be made even against B. But the recovery on the basis of such protective assessment would depend upon the ultimate decision as to whether the income shown to have been earned by B belonged to A. If the finding is in the affirmative, the protective assessment will cease to be operative as the income covered by that assessment would be included in the income of A. In the matter of Suresh K.Jajoo, (supra),the Tribunal had held that .....

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