1985 (1) TMI 39 - HC - Income Tax

Court rules against protective assessment due to impermissible double assessment, citing Supreme Court and High Court precedents.

The court held that the protective assessment against Smt. Dayabai was unwarranted as the income had already been assessed in the firm's hands, leading to ... Protective assessment - prevention of double assessment - inclusion of income - name-lender - operative effect of a finally held assessmentProtective assessment - prevention of double assessment - operative effect of a finally held assessment - Whether the Tribunal was right in confirming the protective assessment made in the name of Smt. Dayabai for the assessment years 1967-68 to 1969-70 - HELD THAT: - The protective assessment in the name of Smt. Dayabai was framed to preserve the revenue's claim in the contingency that the income from matinee shows might not be held assessable to the firm. The Tribunal and lower authorities found that the matinee-show income belonged to the firm, Messrs. Vinit Talkies, and included that income in the firm's assessments. Once the same income has been finally assessed in the hands of the firm, the protective assessment in the name of the assessee cannot be maintained so as to result in the same income being taxed twice. The Court relied on the principle applied in Lalji Haridas v. ITO and similar authority that where one assessment is finally held to be the operative assessment, a protective assessment against another person should not be allowed to stand so as to cause double taxation; instead, orders against the other person would be necessary only if the primary assessment failed or if joint liability were found. Applying this principle, the Court held that the Tribunal erred in confirming the protective assessment after the income had already been finally assessed as the income of the firm.Protective assessment confirmed by the Tribunal was not justified and cannot be sustained where the identical income has been finally assessed in the hands of the firm for the same years.Final Conclusion: The Tribunal's confirmation of the protective assessments against Smt. Dayabai for the assessment years 1967-68 to 1969-70 is set aside because the identical income has been finally assessed in the hands of Messrs. Vinit Talkies; each party to bear their own costs. Issues involved: Protective assessment, Double assessmentThe judgment of the court was delivered by OZA C.J. The reference was made by the Income-tax Appellate Tribunal regarding the confirmation of the protective assessment in the case of Messrs. Vinit Talkies, Jabalpur, where a claim was made that income from matinee shows belonged to Smt. Dayabai. The Income Tax Officer (ITO) included the income in the total income of the firm but also made a protective assessment in the hands of Smt. Dayabai. The Tribunal upheld the findings of the ITO, leading to double assessment of the same income.The Tribunal confirmed the protective assessment made by the ITO in the hands of Smt. Dayabai, which was upheld by the Appellate Authority Commissioner (AAC). The Tribunal dismissed the appeal filed by Smt. Dayabai, stating that she was merely a name-lender and the income rightfully belonged to the firm, Messrs. Vinit Talkies. However, after subsequent proceedings, it was found that the same income was assessed in the hands of both the firm and Smt. Dayabai, resulting in impermissible double assessment.The Court referred to a similar case decided by the Supreme Court and the Allahabad High Court, emphasizing that double assessment is not permissible in law. The protective assessment against Smt. Dayabai was deemed unnecessary as the income had already been assessed in the hands of the firm. Therefore, the Tribunal was not justified in confirming the protective assessment, and the parties were directed to bear their own costs.