TMI Blog2006 (7) TMI 239X X X X Extracts X X X X X X X X Extracts X X X X ..... ting to different factual matrix. The main controversy arising in all these appeals is whether income of a Main Trust assessed on substantive basis and the liability finally settled under Kar Vivad Samadhan Scheme, 1998 (hereinafter referred to as 'KVSS') could be again assessed in the' hands of the corresponding beneficiaries who have been assessed on a protective basis. The grounds raised in all these appeals relate to the merits of the case as well as on the jurisdiction exercised by the Commissioner under section 263 of the Income-tax Act, 1961. 3. On this issue there are two conflicting views of the Tribunal, one in favour of the assessee by holding that as the Main Trusts have availed the benefit of KVSS with regard to the beneficiary's share income and the interest payment, the benefit should be given to the beneficiary trusts as otherwise it would amount to double taxation. These cases are - Shantaben Karsanbhai Patel OSDFT Others in ITA Nos. 213, 236/Ahd./1987 and others dated 3-4-2000. The other view is that the main trust and beneficiary trust are two different assessees and if the main trust has settled its dispute under KVSS, there is no question of giving any cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome- tax Act, 1961, recording the income of the Main Trust as Nil and accepting the distribution of income among the beneficiaries. But subsequently, the assessment order was revised by the Commissioner of Income-tax under section 263 on the ground that 51 per cent of the income needs to be assessed in the hands of the trustees for and on behalf of the beneficiaries listed in Schedule II of the Trust Deed. Maximum marginal rate of tax was also to be levied on the said income. The impugned representative assessee is a beneficiary listed under Schedule II of the Trust Deed. When the revision order was carried in appeal before the Income-tax Appellate Tribunal, Ahmedabad Bench, the revision order of the Commissioner of Income-tax was vacated through its order passed in ITA Nos. 1135 to 1138/Ahd/1985. The Tribunal restored the order of the Assessing Officer that the income should be assessed in the hands of the beneficiaries as originally done by the assessing authority. The revenue thereafter filed a reference application before the Tribunal in R.A. Nos. 85 to 88/Ahd/1995. Allowing the Reference Application filed by the revenue, the Tribunal referred the following question for the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estion of the genuineness of the said trust. In view of this fact, the income of the trust is taken as per the return of income furnished on protective basis." 8. As the assessment was protective in nature, the demand arising out of the assessment was kept in abeyance. This assessment was taken in first appeal and the order was passed on 10-11-1986. Against the order of the first appellate authority, cross appeals were filed before the Tribunal, one by the revenue and the other by the assessee. The Tribunal passed a common order to dispose of the cross appeals in ITA No. 213/Ahd/87 and others on 3-4-2000. Appraising the facts of the case relating to the Main Trust as well as the assessee, the Tribunal held as under: "In view of the circumstances, I set aside the impugned orders and remit the issue back to the Assessing Officer for fresh consideration and while doing so, the Assessing Officer shall consider the fact that the Main Trust had already paid the tax to the department by way of Kar Vivad Samadhan Scheme. Therefore, the same additions cannot be made in the hands of the present beneficiaries otherwise that will amount to double taxation." 9. Subsequent to the above o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest. 11. Now the second stage of the case begins. Once the Assessing Officer has passed the order under section 154(1)/155(2) of the Act and granted refund to the assessee, who is a beneficiary trust, the CIT invoked his powers under section 263 and revised the orders. In all the cases involved in the impugned bunch of 284 appeals, the CIT has passed such revision orders. The revision orders have been passed by the CIT on the following premises: (i) The Assessing Officer has failed to take cognizance of the legal implication of the Kar Vivad Samadhan Scheme, 1998, which confine the benefits, as per section 94 of the Kar Vivad Samadhan Scheme, 1998 only to the declarant with reference to the Kar Vivad Samadhan Scheme, 1998, that too, in relation to tax arrears of the declarant, as on 31-3-1998. (ii) The benefit of another declarant of Kar Vivad Samadhan Scheme, 1998 was erroneously extended by the Assessing Officer in violation of the provisions contained in section 94 of Kar Vivad Samadhan Scheme, 1998. Therefore, the order of the Assessing Officer suffered from serious errors of law and thereby causing prejudice to the interest of the revenue. (iii) The Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that it was paid to self. The share of profits and interests attributable to the beneficiaries have been again protectively assessed in their hands. These disputes that whether to be assessed in the hands of the Main Trusts or in the hands of the beneficiaries continued and existed till the final settlement arrived at under KVSS. (2) That it is not proper to argue for the revenue that the dispute was not continuing and prevailing at the relevant point of time. The Reference Applications made by the revenue against the orders passed in the case of Main Trusts were pending before the jurisdictional High Court for adjudication. The Assessing Officer has mentioned in the order that the orders of the Tribunal and jurisdictional High Court have not been accepted by the revenue. That the Special Leave Petition filed by the revenue before the Hon'ble Supreme Court in the case of Harsiddh Specific Family Trust was dismissed on 28-1-2003. That, therefore, it is necessarily to be held that the controversy was continuing and prevailing. (3) That the Commissioner had no jurisdiction to revise the orders as the subject-matter of the orders have already been settled before higher/competent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bench of the High Court has not reversed the decision of the Division Bench of the Gujarat High Court rendered on 30-7-2001, the decision of the Hon'ble High Court rendered in judgment dated 30-7-2001 is binding on all lower authorities. The court has held therein that once income assessed in the hands of the Main Trusts on substantive basis, the same income cannot be assessed in the hands of the beneficial trusts. Therefore, as the said judgment of the High Court is surviving and prevailing, the Commissioner of Income-tax had no jurisdiction to revise the orders passed by the assessing authority in accordance with the ratio of the said judgment of the Gujarat High Court rendered on 30-7-2001. (6) As the said judgment of the High Court is binding on the Commissioner, he had no authority at all to pass revision orders after commenting on the decision of the High Court. (7) That the revision orders passed by the Commissioner under section 263 are not correct. That the reliance placed by the Commissioner of Income-tax on the decision of the Supreme Court in the case of ITO v. C.H. Atchaiah [1996] 218 ITR 239 to hold that the income should be assessed in the hands of the right pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Berry's case C.R. Nagappas case and Jagannath Hanumanbux it is crystal clear that the decision in the case of Shankerlal Nebhumal Uttamchandani is not relevant in the context of present cases. (12) That the CBDT has dealt with protective assessments in its Circular No. 71 dated 20-12-1971. The direction issued by the Board under section 119(2)(b) in the said circular deals with the scope of protective assessments. The circular reads: "Order under section 119(2)(b) of the Income-tax Act, 1961 - The Board's authorization for taking action under section 154 beyond the time-limit fixed under section 154(7) in cases of protective assessments requiring to be cancelled. Where the same income was assessed, as a protective measure, in the hands of more than one assessee or as the income of more than one assessment year, and one or more of these protective assessments needs to be cancelled as a result of some of the relevant assessments having become final and conclusive, it has been the practice of the Income-tax Department to cancel the redundant assessment under section 154 of the Income-tax Act, 1961, treating these as involving mistakes apparent from the records. This is being done ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a case of annulled assessment. The court held therein that in the absence of an assessment, income would be escaped and assessee cannot be granted refund in respect of such income which is offered in the return itself. He explained that in the present case, the assessments were made in both cases, i.e. in the case of Main Trusts on substantive basis and in the case of beneficiary trusts on a protective basis. He, therefore, submitted that when protective assessment is neutralized as far as the income assessed in the hands of the Main Trusts is concerned, that much of the refund is essentially to be made. 15. The learned counsel further submitted that the CIT has gone wrong in holding that no interest should also be paid on the refund made to the beneficial trusts. He submitted that the delay was not attributable to the assessee in the matter of assessment and refund. There is no question of delay on the part of the assessees in these cases. The matters came to be settled once the KVSS was pronounced. When an amount is rightfully to be refunded to an assessee and if there is a delay in such refund, as stated in law, interest is to be paid especially when interest is compensator ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the settlement under the KVSS. The tax was paid. Certificates were issued. The matter ended there. The said settlement arrived under KVSS is not a ground to defend the contention of an assessee in another case. 20. The learned standing counsel explained that the returns were suo motu filed by the beneficiary trusts wherein the income from the Main Trusts, interest received from the Main Trusts have been returned along with other independent income of the beneficiary trusts. Even though assessments were completed on protective basis in those cases, the returns were filed by the beneficiary trusts in their independent capacities and those returns stand by themselves. The settlement of the dispute of the Main Trust under KVSS cannot be agitated as a res judicata as far as the assessments of the individual beneficiary trusts are concerned. They are quite different entities. The KVSS is in respect of the income disputed with respect to the demand disputed in the case of a particular assessee. The individual beneficiary trusts were not a party to any settlement under KVSS. Their cases stand or die on their own merits. Therefore, there is no legal justification for the beneficiary tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claration in a substantive case or year is accepted, the tax arrear in protective case/ year would no longer be valid and will be rectified by suitable orders in the normal course. This position is not peculiar to Samadhan Scheme. 26. The learned counsel submitted that in the light of the above circular, there is not even a shadow of doubt that the same income cannot be assessed on protective basis once substantive assessment has been settled under KVSS. He submitted that the Board itself clarifies that the settlement under KVSS has to be made with reference to the substantive assessments and if such settlement is acted upon by the department, that substantive assessment stands concluded as final as a result of which the protective assessment would automatically disappear subject to procedural formalities. The learned counsel submitted that the circular itself is the best ground to allow appeals filed by the assessee in these cases. 27. We heard both sides in detail and considered the matter in the light of the earlier orders of the different Benches of the Tribunal on the subject and the plethora of materials placed before us along with assessment, appeal and revision orders. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, obviously, the Assessing Officer is justified in following the consequential procedure and, making refund to the assessees. 30. One of the basic principles of taxation is that the income shall not be taxed twice. In the present case, the income under dispute is the same considered in the hands of the Main Trusts and also considered in the hands of the beneficial trusts. Kar Vivad Samadhan Scheme, 1998 was introduced by Government of India to settle the pending litigations at different levels and collect the tax once for all and reach finalities in the matters connected thereto. Even though KVSS was a special scheme, the KVSS did not propose to tax any income twice. Whether under the regular provisions of the Income-tax Act or under the scheme of KVSS what is to be assessed and subjected to tax is the real income once for all. KVSS does not create any artificiality. A case of double taxation of the same income cannot be endorsed under the KVSS. In other words, the Kar Vivad Samadhan Scheme, 1998 does not empower the Income-tax department to tax the same income more than once. This must be made very clear. 31. What are the simple facts available in these cases? The income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eady been assessed in the hands of the Main Trusts. Therefore, nothing remains thereafter to be assessed in the hands of the beneficiary trusts, as far as the income of Main Trust is concerned. Moreover, a case of assessment can be contemplated in the present cases because the stand taken by the assessees is that the income of the Main Trusts has to be assessed in the hands of the individual beneficiary trusts. It is on the basis of that proposition that the returns were filed by the beneficiary trusts. While returns were filed by the beneficiary trusts in their individual capacities, they are in fact offering income for taxation. Section 140A provides that when an assessee files a return of income and where tax is due as per the said return, the tax shall be paid by the assessee before filing the return of income and the proof of such payment of tax shall be accompanied along with the return of income. This is called self-assessment. When an assessee files a return with positive income and remits tax thereon under section 140A, in fact, an assessment is being contemplated even though it is a "self-assessment". Later on, when it is found that the income covered by the said return i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese matters were pending before the different authorities that the Kar Vivad Samadhan Scheme was promulgated and the assessee got an occasion to settle the dispute by accepting the impugned income to be assessed in the hands of the Main Trusts on substantive basis. The Main Trusts paid the taxes as per the Kar Vivad Samadhan Scheme and certificates were issued by the concerned authorities in compliance thereof. The beneficiary trusts having already been assessed on protective basis, rectification petition under section 154 was filed before the Assessing Officer to exclude the impugned income from the assessments of the beneficiaries. The Assessing Officer, on the basis of the Kar Vivad Samadhan Scheme orders and relevant records, passed orders under section 154 excluding the income from the hands of the beneficiary trusts which resulted in the refund of tax along with interest. The Gujarat High Court has already in one of the group cases of the assessees has passed an order dated 30-7-2001 in which the court has held that one and the same income cannot be taxed in the hands of different assessees. In the present case, when the dispute regarding the assessment of income has already ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Oswal v. Laxmibai R. Tarte AIR 1975 SC 1297, that the State authorities should not raise technical pleas if the citizens have a lawful right and the lawful right is being denied to them merely on technical grounds. The State authorities cannot adopt the attitude which private litigants might adopt'." 39. In view of the above, we find that the orders passed by the assessing authority were not erroneous; but, on the other hand, were just and proper. As we find no error in the orders of the assessing authority we find that the Commissioner of Income-tax had no jurisdiction to invoke section 263 and pass the revision orders contested herein. 40. Now we conclude here. For the reasons stated above, both on merit as well as in law, we find that the revision orders passed by the Commissioner of Income-tax in these cases are not sustainable in law. Accordingly we quash the revision orders and restore the orders of the assessing authority issuing refund with interest due thereon. 41. Certain other contentions are raised in respect of certain assessees before us. But all those contentions related to orders passed before the revision action taken by the CIT. Therefore, all those issues a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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