TMI Blog1994 (4) TMI 116X X X X Extracts X X X X X X X X Extracts X X X X ..... of the trust (of which Tenzing was the sole beneficiary) was being assessed to tax in the hands of the trustee in representative capacity upto and including the assessment for the assessment year 1979-80. 3. The said Tenzing married Tiruselvi on 26-8-1979, that is to say during the calendar year 1979. Thereupon, in relation to the assessment year 1980-81, the trustee filed two separate returns of income, one relating to the period 1-1-1979 to 26-8-1979 and the other relating to the period 27-8-1979 to 31-12-1979. The said two returns came to be filed on the basis that the share of the trust of the income of the aforesaid firm attributable to the former period belonged to Tenzing, and that the share of the trust of the income of the said firm attributable to the latter period belonged to Tiruselvi. For purposes of the said returns, the trustee had taken the trust's share of income of the said firm for the accounting year ending on 31-12-1979 as the starting point, and thereafter apportioned the said share income on a pro rata basis. It is a matter of record that both the above returns were accepted by the Assessing Officer and assessments made in the name of the trustee on a pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trust's share of income of the said firm being apportioned between the two periods as the trustee had done. 6. Predictably, the assessee took up the matter in appeal before the first appellate authority who declined to interfere in the matter and dismissed the assessee's appeal. 7. On the jurisdictional issue, he held that the Assessing Officer had rightly taken recourse to provisions of section 147(a) of the Act, inasmuch as in the return originally filed by her the assessee failed to disclose the fact that she was the sole beneficiary under the trust deed in question. In this regard, he referred to and relied on the decision of the ITAT in the case of Ashok Family Trust, in which in identical circumstances the Tribunal had held that the failure on the part of the assessee to disclose his beneficial interest in the trust was a failure to disclose a primary and material fact and that such a failure enabled the Assessing Officer to take recourse to section 147(a). One of the contentions that was urged on behalf of the assessee before the CIT (A) was that the Assessing Officer was not justified in making two protective assessments in the name of the trustee. In this regard reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he was prevented from bringing to charge the sum of Rs. 3,48,174 in the hands of the assessee. He, therefore, contended that the assessee is entitled to succeed. 11. On his part, Shri K. Argal, the learned Departmental Representative, strongly supported the impugned order of the CIT(A). In this connection he highlighted the fact that in the original return filed by her the assessee failed to disclose even the existence of her beneficial interest in the trust in question. What was more, in the original return she did not claim any exemption in any part of the return in relation to the trust's share of income of Meena Match Industries, of which she was the sole beneficiary as on 31-12-1979. Therefore, the Assessing Officer was justified in taking recourse to section 147(a) of the Act. On the other aspects of the matter too, the learned Departmental Representative strongly supported the impugned order of the CIT(A). 12. We have looked into the facts of the case. We have considered the rival submissions. 13. We may first deal with the jurisdictional issue. The original return in this case was filed by the assessee on 30-1-1981. In that return she had disclosed an aggregate inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grounds. 16. The second limb of Shri Devanathan's arguments, it may be recalled, was that the so-called protective assessments made in the hands of the trustee were in fact regular assessments and that having exercised his option to assess the trustee, the Assessing Officer could not have validly brought to tax in the hands of the assessee before us the sum of Rs. 3,48,174. In this regard, he relied on the Andhra Pradesh case of Khalid Mehdi. This contention requires close scrutiny. 17. To recapitulate the material facts under the trust deed dated 1-6-1974 Tenzing was the sole beneficiary of the trust's Income. Upto and including the assessment for the assessment year 1979-80, the trustee was filing returns of income in his representative capacity and the assessments were being made on that basis. On 26-8-1979, that is to say during the calendar year 1979 being the previous year relevant to the assessment year 1980-81, Tenzing married Tiruselvi. And under the terms of the trust deed on the marriage of Tenzing his wife, namely, the assessee before us becomes the sole beneficiary of the trust. Now Tenzing's marriage was the signal for the trustee to file two returns for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... different persons. Even so, the practice of making such an assessment in certain circumstances has gained judicial recognition. In Jagannath Hanumanbux v. ITO [1957] 31 ITR 603 the Calcutta High Court had occasion to consider the question whether it is possible to have such a thing as protective assessment under the Income-tax Act, and the nature of such an assessment. There, four firms including a firm styled Jagannath Hanumanbux were all treated as benami businesses of Ladhuram Taparia. While that issue was pending before the Supreme Court, the said firm of Jagannath Hanumanbux submitted a return for the year 1945-46. While dealing with the said return, the ITO observed that he had already held that the business of the firm belonged to the said Ladhuram Taparia and that as the firm had filed return disclosing profits, he decided to make an assessment on the firm on the basis of return submitted by it. In this regard he observed: "with a view to safeguard the interest of revenue against any adverse finding arising, if any, on appeal, I am accepting the assessee's contention here and form the assessment as below..." The matter reached the High Court, which, after noticing the leadi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In other words, the respondent's case clearly is that the notices issued against the two brothers by their respective Income-tax Officers are intended to determine who is responsible to pay tax for the income in question: now though Mr. Nambiar wanted to argue that protective or precautionary assessment of tax is not justified by any of the provisions of the Act, he did not seriously contest the position that at the initial stage it would be open to the income-tax authorities to determine by proper proceedings who is in fact responsible for the payment of tax, and that is all that is being done at the present stage. In cases where it appears to the income-tax authorities that certain income has been received during the relevant assessment year but it is not clear who has received that income and prima facie it appears that the income may have been received either by A or B or by both together, it would be open to the relevant income-tax authorities to determine the said question by taking appropriate proceedings both against A and B. That being so, we do not think that Mr. Nambiar would be justified in resisting the enquiry which is proposed to be held by respondent No. 1 in pursu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case and according to him in the said case of Lalji Haridas the Supreme Court had held that when there was a doubt as to which person among two was liable to be assessed, parallel proceedings might be started against both...' In the case of CIT v. Cochin Company (P.) Ltd. [1976] 104 ITR 655 Kerala High Court judicially recognised the practice of making protective assessment. The Madhya Pradesh case of Smt. Dayabai v. CIT [1985] 154 ITR 248 may be noticed next. In that case a firm, Vinit Talkies, claimed that the income from the matinee shows conducted in the premises of Vinit Talkies did not belong to it but to one Smt. Dayabai. Dayabai filed her separate return of income in which income from matinee shows conducted at the premises of the said talkies was disclosed. The ITO recorded a finding that the income from the matinee shows must be assessed in the hands of the said firm of vinit Talkies because the income belonged to it and not to Daya Bai, who was merely a name lender. He, therefore, included the said income in the total income of the firm. However, he made a protective assessment of the same income in the hands of Daya Bai. By the time Daya Bai's case reached the Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e hands of the sole beneficiary, namely, Tiruselvi. It was in that process that the lower authorities took the concomitant and equally conscious decision to make two protective assessments in the name of the trust on the basis of the two returns filed by him for the assessment year 1980-81. We, therefore, hold that the lower authorities could not be faulted in negativing the assessee's claim on this issue. 21. For the same reasons we reject Shri Devanathan's third limb of arguments, which is based on the two Board's circulars stated above. 22. In view of the foregoing therefore we decline to interfere in the matter. 23. Before taking leave of the case, we may add that we are unable, with respect, to persuade ourselves to follow the line taken by the Andhra Pradesh High Court in the case of Khalid Mehdi referred to and relied upon by the counsel for the assessee. On page 691 of the Report, P.A. Choudhary J. observed: "... In the absence of any statutory provision authorising the Income-tax Officer to make the so-called protective assessment, we are compelled to hold that in law a protective assessment is a final determination of the tax payable by the assessee and is incap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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