BHAILAL MANILAL PATEL Vs. COMMISSIONER OF INCOME-TAX

JUDGEMENT

(1.) THE present Reference, at the instance of the assessee, has been referred by Income Tax Appellate Tribunal (hereinafter referred to as 'the tribunal') to consider the following substantial question of law;

(2.) THAT for the Assessment Year 1987 -88 the assessee filed the return declaring the income at Rs.78,790/ - on dated 15/07/1987 and the same was accepted by the Department in the assessment order dated 18/03/1988. It appears that the Directorate of the Revenue (Intelligence) conducted the search in the premises of one Shri Jitendra R. Patel on 21/03/1988 and during the course of the search a briefcase containing promissory notes of Rs.37,65,000/ - was found.

(3.) MS . Gargie Vyas, learned advocate appearing on behalf of the assessee has vehemently submitted that the tribunal has materially erred in treating the order passed by the Assessing Officer as substantive assessment order. It is further submitted that as such in the assessment order itself the Assessing Officer has specifically mentioned that the order of assessment is a protective assessment order. It is submitted that in fact in view of the different stand taken by different persons with respect to ownership of the promissory notes worth Rs.37,65,000/ -, the Assessing Officer specifically observed that assessee is assessed by the protective assessment measure. It is further submitted that in the operative portion of the order, while passing the order to initiate the proceedings under Section 271(1)(c) of the Act, the Assessing Officer specifically observed that the penalty proceedings under Section 271(1)(c) of the Act are to be initiated in respect of the amount of Rs.5 lakhs, which has been assessed as protective measure. It is submitted that therefore when the assessment order was passed by the Assessing Officer as protective assessment, in that case, initiation of the proceedings under Section 271(1)(c) of the Act itself was bad in law and not permissible. It is submitted that therefore when the protective assessment order was passed by the Assessing Officer no order of penalty can be levied as it is not certain that the amount on which the penalty is sought to be levied would be in the hands of the assessee or not. It is submitted that therefore, on facts, the tribunal has materially erred and has committed a grave error of law in treating the assessment order as substantive assessment order and not treating it as protective assessment order.