Assessment

Others 334 views 4 replies

On the basis of AIR Information about heavy cash deposits in bank account, case of Mr A was ed for scrutiny. Mr. A filed affidavit that the account is operated by Mr B and Mr. B is fully responsible for all transactions in it.
Mr B also accepted this.
Now, ITO wants to assess Mr. A on protective basis and Mr B on substantive basis.
What is correct?
1. AOs action.
2. Drop proceeding against Mr A and continue against Mr. B.
(SC judgement says that Protective assessment can be done when there is income but its not clear whether it belongs to Mr. X or Mr. Y or both, but in this case Mr. B is accepting this as his income, and there is no loss to Revenue in agreeing on this)

Replies (4)
Mr. B is accepting that is fine but it is deposited in ur account so it may happen that Mr. B do not accept at a later date....So that is the reason AO is making protective assessment....untill AO could not gather any evidences to proove that cash deposited belongs to Mr. B AO won't drop the proceedings against Me. A.....once he get the evidence then AO will drop proceeding against Mr. A....
AO is correct in making protective assessment against Mr. A

In instant case AO wants to make substansive assessment of B which means that he has accepted the affidavit submitted by B regarding transactions and agreed that A has nothing to do with these transactions. This shows that he is quite clear about nature of transactions and its origins. However, protective assessment is made in such case where ownership of income is disputed and unclear. once ownership is clear he has to make substansive assessment of actual owner.

Further, the demand raised by a protective assessment cannot be recovered. It is required to be stayed by the AO. Similarly there cannot be any penalty on protective assessment. After recording the facts and circumstances of the case and the reason for making the assessment on protective basis in the assessment order, the AO may write that the demand that is attributable to the protective income is being stayed till substantive assessment is made. once substansive assessment is done, protective assessment stands null and void.

Yes Ao is ok in his act regards mr A


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