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TMI Blog2008 (6) TMI 576X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred Tax Appeal by raising following questions of law. A. "Whether, when the order under the Kar Vivad Samadhan Scheme (KVSS) did not decide any judicial issue, the Tribunal was right in law and on facts in holding that when the tax arrears of the main trust were settled under KVSS, the assessee beneficiary Trust could not be assessed in respect of the share income from the main trust?" B. "Whether the Appellate Tribunal is right in law and on facts in holding that when the main Trust settled its arrears under the KVSS, the share income cannot again be assessed in the hands of the assessee beneficiary?" C. "Whether the Appellate Tribunal is right in law and on facts in holding that the Department had exercised the option to `assess' the main trust under the KVSS and, therefore, the same income would not be again taxable in the hands of the assessee beneficiary on distribution?" D. "Whether, when the main Trust avails the benefit under the KVSS, it tantamounts to `assessment' under the Act?" E. "Whether the Appellate Tribunal is right in law and on facts in canceling the order passed by the CIT u/S.263 of the Act, when declaration was filed by the main Trust and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that Main Trust is a specific trust and reversed the revision order passed by CIT u/s.263 of I.T. Act. Revenue filed reference which was allowed by tribunal vide order dt. 30495. This reference was settled under KVSS. The necessary payment was made under KVSS. The certificate for full and final settlement of tax arrears u/S.90(2) rws 91 of the Finance (No.2) Act, 1998 in respect of KVSS was issued in Form No.4 by CIT on 2799. Hence, the stand of the department was accepted by Main Trust. Income was finally assessed in the case of Main Trust. ITAT while disposing of cross appeals of the beneficiary trusts passed order dt. 03.04.00 and found that beneficiaries were taxed on a protective basis. Tribunal directed not to tax again. Income tax Officer passed order u/s.154(1)/155(2) of I.T. Act dt.22.8.00 and excluded income which was assessed in the case of Main Trust and settled under KVSS. The resultant refund was issued with interest. This order dt. 22.8.00 was revised u/s.263 of I.T. Act by CIT vide order dt.12.03.03. Special Bench of ITAT passed order on 772006 and reversed the order u/s.263. Revenue preferred Tax Appeals before this court. Mr. Manish Bhatt argued that the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings of the decision of this court dt.30.07.01. He submitted that once the assessment of the Main Trust has become final where substantive assessment is made, protective assessment in the hands of beneficiaries would go, the same income cannot be taxed twice. He submitted that it was department case that income belongs to Main Trust which was accepted by Main Trust and due taxes were paid under KVSS. On the same income when beneficiaries were assessed on a protective basis, the same income cannot be assessed again. He referred to the circulars issued by the board under KVSS and also on protective assessment. He submitted that the decisions relied upon by the revenue were not applicable to the facts of the case. He has also submitted that CIT passed order which was in contravention to the directions of ITAT vide order dt.03.04.00. The order of Tribunal dt.03.04.00 was not challenged before this court and hence became final. If CIT is again directing to assess income in the case of beneficiaries, it is contrary to the decision of Tribunal. He has also challenged the jurisdiction of the CIT to revise the assessment on the ground that though this was only view, it is, at least, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . On this reasoning, Tax Appeals filed by the revenue were dismissed at the admission stage. This court has held in case of CIT Vs Nirma Industries Ltd - TA No.632 of 2005 regarding implication of dismissal of Tax Appeals which is binding on the lower authorities. Hon'ble Supreme Court dismissed S.L.P. No.557 of 2007 vide order dt.54.2007. The issue was also amply clear by the question and answer which was issued by CBDT while explaining the provisions of KVSS. Question and Answer No.32 given in circular reads as under: Question No.32 Where certain income has been charged to tax in the hands of two different persons or where it has been charged to tax in the case of same person in two different assessment years, one on substantive basis and the other on the protective basis, will the declarant or the other person get advantage in respect of additions made both substantively and protectively. Answer The assessees are advised to make declaration in cases or for assessment years where the additions are made on substantive basis. The protective demand is not subject to recovery unless it is finally upheld. Once the declaration in a substantive case or year is accepted, the ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt at page 382 also specified some instances, wherein refund can be granted on tax paid on returned income. This is neither a case of annulment nor on account of failure on the part of revenue to pass assessment. In this case, refund arose on account of the assessments and further appellate proceedings. Hence, the refund should be granted, may be on account of taxes on the returned income, if the refund arose on exclusion of income from the beneficiaries case, where incomes were substantively assessed in the case of Main Trust. Mr. Bhatt referred to the decisions of Supreme Court in the case of ITO V/s. C.H. Atchaiah 218 ITR 239 S.P. Jaiswal V/s. CIT 224 ITR 619. We find that facts of these two decisions are not applicable to the present case. In the present case, issue is of protective assessments and substantive assessments. Protective assessments cannot be continued in the appellate proceedings once substantive assessments become final. In the present case, revenue assessed income in the case of Main Trust on a substantive basis, which was accepted. The finding of CIT is contrary to the decision of Tribunal dated 03042000 which is not permitted. CIT being subordinate authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts of the case, in brief, are that these are the beneficiaries of Ambica Trust. Ambica Trust filed its return of income showing income of Rs. 6,57,620. The income was allocated amongst beneficiaries, assessable u/s.161 of I.T. Act. Ambica Trust revised return of income declaring the same income but offered for tax at maximum marginal rate u/s.164 of I.T. Act with the disclosure in the return of income. Assessing Officer passed assessment order u/s.143(3) of I.T. Act and assessed the income at Rs. 22,82,700. The income was assessed at maximum marginal rate treating the trust as discretionary trust assessable u/s.164 of I.T. Act. CIT(A) held that trust is a discretionary trust and tax should be charged at maximum marginal rate. Ambica Trust settled the arrear demand of Rs. 1,18,267 under Kar Vivad Samadhan Scheme, 1998 (KVSS) introduced by Finance (No.2) Act, 1998. Appeal to the Tribunal was dismissed as withdrawn vide order dt.08.07.99 in ITA No.1217/Ahd/94. In the case of beneficiary trusts being respondents, income from Ambica Trust was originally not offered for tax with the disclosure in the return of income. Income from Ambica Trust was assessed to tax on a protective bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of which he is a representative assessee, shall be subject to the same duties, responsibilities and liabilities as if the income were income received by or accruing to or in favour of him beneficially, and shall be liable to assessment in his own name in respect of that income; but any such assessment shall be deemed to be made upon him in his representative capacity only, and the tax shall subject to the other provisions contained in this Chapter, be levied upon and recovered from him in like manner and to the same extent as it would be leviable upon and recoverable from the person represented by him." Hence, tax can be levied upon and recoverable from the person only in the like manner and to the same extent as it would be leviable upon and recoverable from a person represented by him. This was held by Supreme Court in the case of CWT Vs. Trustees of H.E.H. Nizzam's Family (Remainder Wealth) Trust 108 ITR 555 and in the case of CIT Vs. Kamalini Khatau 209 ITR 101. In this case, revenue assessed Ambica Trust and recovered due taxes including arrear demand through KVSS. Revenue has, therefore, exercised option and assessed income in the case of Ambica Trust. In the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind that view taken by A.O. was correct and hence CIT has no jurisdiction to revise the assessment. Mr. Soparkar has also submitted that questions raised before this court were pertaining to KVSS which do not arise from the order of Tribunal. Tribunal has allowed the appeal on the first principle about taxation on representative assessees and not on implications of KVSS. We agree that Tribunal has allowed the appeal on first principle and not of KVSS. In the result, we confirm the order of Tribunal and dismiss the appeal filed by the revenue. MALIK DISC. FAMILY TRUST & OTHERS SCA NOS.1073 OF 2008 AND 1236 TO 1824 OF 2008 590 writs were filed against combined order passed by Tribunal dt.31.07.07. The facts of the case are that these are beneficiaries of Main Trusts. The dispute is for different Asst. Years: 198485, 1989-90 and 1990-91. The facts of the lead case Malik Discretionary Family Trust for Asst. Year: 89-90 were discussed. Appellant trust is beneficiary of Harsiddh Specific Family Trust (hereinafter referred to as Main Trust). In the return of income, total income of Rs. 1,62,580 was declared. Assessment order u/s.143(3) was passed on 28.09.89 wherein income from ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He has submitted that order was recalled on the ground that appeals have been admitted by the High Court against decision of Special bench of Tribunal dt.772006. He has submitted that mere admission of Tax Appeal cannot be the ground for recalling the earlier order. He strongly objected the same. According to him this amounts to mockery of law. We have heard arguments of both the parties. We admit writ. On perusal of facts, we find that order of Tribunal is erroneous in recalling its earlier order. Section 254(2) of I.T. Act provides as under: "The Appellate Tribunal may, at any time within four years from the date of the order, with a view to rectifying any mistake apparent from the record, amend any order passed by it under sub section (1), and shall make such amendment if the mistake is brought to its notice by the assessee of the Assessing Officer." Tribunal can amend order us.254(2) with a view to rectifying any mistake apparent on record. But there should exist mistake apparent on record. We find that in the impugned order dt.31.07.07, Tribunal has not found mistake apparent on record in the earlier order of Tribunal dt.24.05.02 which is rectifiable u/s.254(2) of I.T. Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the group cases. (vi) Matter squarely applicable by the Decision of Special Bench of ITAT where also identical arguments raised. (vii) Squarely covered by the CBDT Circular which is binding on the revenue. (See pages nos.359-360). (d) Interest paid by the Main Trust was income of the beneficiary irrespective of whether it is allowable expenditure in the case of Main Trust. (i) No such contentions have been made in the impugned order passed u/s. 263 of I.T. Act. (ii) No such finding given by the ITAT in the appellate order because no such controversy raised by either party. (iii) Matter squarely covered by the decision of Gujarat High Court in the group cases. (iv) Matter squarely applicable by the decision of Special Bench of ITAT where also identical arguments raised. (v) Squarely covered by the CBDT circular which is binding on the revenue. (See Pages No.359-360). (e) Ahmedabad Bench of ITAT in two cases have taken different view. (a) Both these decisions were rendered in ignorance of the direct decision of the High Court. Judgement of High Court is preferred over the tribunal order. (b) In any case, it is for this reason that the Special Bench wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of law, arises in these appeals. It is a settled principle that one particular income cannot be taxed in the hands of different assessees. In the instant case, as the income has been substantively assessed in the hands of the main trust, the same income cannot be again assessed in the hands of the beneficiary trusts. For the sake of abundant caution, it has been directed by the Tribunal that the revenue should look into the facts and see whether the income which has been assessed on protective basis in the hands of the respondent trusts was, in fact, assessed in the hands of the main trust." Now on this reasoning, Tax Appeals filed by the revenue were dismissed at the admission stage. This court has held in case of CIT Vs Nirma Industries Ltd. - T.A. No.632 of 2005 regarding implication of dismissal of Tax Appeals which is binding on the lower authorities. Hon'ble Supreme Court dismissed S.L.P. No.557 of 2007 vide order dt.542007. On the ground of interest on refund, we find that revenue has withdrawn its earlier application unconditionally. Having withdrawn the same, revenue cannot file rectification application on this issue. It is held by M.P. High Court in the case of CIT V ..... X X X X Extracts X X X X X X X X Extracts X X X X
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