Ita/122/2007 Of K.p.varkey v. Dy.commissioner Of Income Tax, Aluva

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT:- THE HONOURABLE THE CHIEF JUSTICE MR.H.L.DATTU & THE HONOURABLE MR. JUSTICE K.T.SANKARAN THURSDAY, THE 1ST NOVEMBER 2007 / 10TH KARTHIKA 1929 I.T.Appeal No.122 of 2007 --------------------------------------------------- ORDER DATED 18.5.2007 IN I.T.A.NO.406(COCH)/2005 OF THE INCOME TAX APPELLANTE TRIBUNAL, COCHIN BENCH, COCHIN .................... APPELLANT/RESPONDENT IN I.T.A:- ---------------------------------------------------- K.P. VARKEY, PROPRIETOR, TOLIN RUBBERS, MATTOOR, KALADY. BY ADVS. SRI.A.M.SHAFFIQUE SRI.A.K.JAYASANKAR NAMBIAR RESPONDENT/APPELLANT IN I.T.A.:- ----------------------------------------------------- DY. COMMISSIONER OF INCOME TAX, K.A.P.COMMERCIAL COMPLEX, R.S.ROAD, ALUVA. BY ADV. SRI. GEORGE K.GEORGE , STANDING COUNSEL FOR GOVERNMENT OF INDIA (TAXES). THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 01/11/2007, ALONG WITH I.T.A.NO.124 OF 2007 & CONNECTED CASES THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:- H.L.Dattu,C.J. & K.T. Sankaran,J. ---------------------------------------------------------------------------------------- I.T.Appeal Nos.122 of 2007, 124 of 2007, 123 of2007131 of 2007, 132 of 2007, 125 of 2007, 96 of 2007, 116 of 2007, 113 of 2007, 114 of 2007, 112 of 2007, 115 of 2007, 121 of 2007, 126 of 2007, 127 of 2007, 128 of 2007, 129 of 2007 and 130 of 2007. --------------------------------------------------------------------------------------- Dated, this the 1[st] day of November, 2007 JUDGMENT H.L.Dattu,C.J. Since the issues involved in all these appeals are common,they are clubbed, heard and disposed of by this common order. (2) I.T.A.Nos.122 of 2007, 124 of 2007, 123 of 2007, 131 of2007, 132 of 2007 and 125 of 2007 are filed by K.P.Varkey, Proprietor,M/s.Tolin Rubbers. These appeals pertains to the assessment years1996-97 to 2001-02. They are filed against the orders passed by theIncome Tax Appellate Tribunal, Cochin Bench, Cochin in I.T.A.Nos.406(Coch)/2005 to 411(Coch)/2005. (3) K.V.Tolin, Proprietor, M/s.Tolin Pre-Treads has filedI.T.A.Nos.96 of 2007, 116 of 2007, 113 of 2007, 114 of 2007, 112 of 2007and 115 of 2007 and they also relate to the assessment years 1996-97 to2001-02. They arise out of an order passed by the Income Tax AppellateTribunal in I.T.A.Nos.412(Coch)/2005 to 417(Coch)/2005. (4) Smt.Annie Varkey, Proprietor, M/s.Toshima RubberProducts has filed I.T.A.Nos.121 of 2007 to 130 of 2007 and they arise outof an order passed by the Income Tax Appellate Tribunal in I.T.A.Nos.418(Coch)/2005 to 423 (Coch)/2007. They relate to the assessment years1996-97 to 2001-02. (5) Tolin Rubbers Private Limited is a Company incorporatedunder the provisions of the Companies Act. (6) The Central Excise authorities had conducted an inspection inthe business premises of Tolin Rubbers Private Limited. After such inspection,they had found certain amounts deposited in the benami accounts. They haveinitiated further proceedings pursuant to such an inspection. We are notconcerned with the proceedings initiated by the Central Excise authorities inthese appeals. (7) The assessing authority had completed the assessmentproceedings against Tolin Rubbers Private Limited and had quantified the taxliability under the provisions of the Income Tax Act (hereinafter for the sake ofbrevity referred to as “the Act”). After receipt of the information from the CentralExcise authorities, the assessments in the case of Tolin Rubbers Private Limitedand also in the case of K.P.Varkey, Proprietor, M/s.Tolin Rubbers; K.V.Tolin,Proprietor, M/s.Tolin Pre-Treads and Smt.Annie Varkey, Proprietor, M/s.ToshimaRubber Products were taken up for reassessment proceedings under Section 148of the Act. (7) The assessing authority had completed the assessmentproceedings against Tolin Rubbers Private Limited and had quantified the taxliability under the provisions of the Income Tax Act (hereinafter for the sake ofbrevity referred to as “the Act”). After receipt of the information from the CentralExcise authorities, the assessments in the case of Tolin Rubbers Private Limitedand also in the case of K.P.Varkey, Proprietor, M/s.Tolin Rubbers; K.V.Tolin,Proprietor, M/s.Tolin Pre-Treads and Smt.Annie Varkey, Proprietor, M/s.ToshimaRubber Products were taken up for reassessment proceedings under Section 148of the Act. (8) The parties had questioned the initiation of proceedings beforethe various forums. Thereafter the assessing authority has completed thesubstantive assessments in the case of Tolin Rubbers Private Limited andprecautionary assessments/protective assessments in the case of K.P.Varkey,Proprietor, M/s.Tolin Rubbers; K.V.Tolin, Proprietor, M/s.Tolin Pre-Treads andSmt.Annie Varkey, Proprietor, M/s.Toshima Rubber Products. (9) Tolin Rubbers Private Limited had called in question the saidreassessment proceedings before this Court in O.P.No.12888 of 2003. This Court had rejected the said writ petition by its order dated 21.05.2003. Thereafter TolinRubbers Private Limited had filed W.A.No.953 of 2003 before this Court. ThisCourt by order dated 4.8.2003 was pleased to allow the Writ Appeal and waspleased to pass the following order:- “8. In view of the order we are proposing to pass, we donot consider it appropriate to make any observation on the meritsof the controversy. We shall only say that even if it were to beassumed that the appellant is a bad company, it appears that ithas a just cause. Admittedly, the documents and the evidencewhich had been used against the assessee, had not been put to it.The copies had not been supplied. In this situation, we consider itappropriate to quash the impugned orders of assessment and thenotices of demand. 9. It is true that normally a party should exhaust thealternative remedy before it approaches this court. However, inthe present case, it does not appear to be fair to do so. Basically,the assessee was to be given a due and reasonable opportunity bythe Assessing Officer. This was not done. The opportunity, evenif given by the appellate authority shall not be a fair substitute. Inany event, the requirement of deposit of the amount of tax (unlesswaived) would cause further burden. The whole process is likelyto cause delay and defeat justice. Thus, we quash the impugnedorders and notices. 10. In view of the above, we remit the matter to theassessing authority for a fresh decision in accordance with law. Itis clarified that the quashing of the orders shall not entitle theappellant to the immediate refund of Rs.25 lakhs that it haddeposited. However, the appellant's entitlement shall bedetermined in the light of the final order. In case it is found that notax was due from the appellant, it shall be entitled to the refundwith interest. Otherwise, the amount deposited shall be adjustedagainst the demand. At this stage, we do not consider itappropriate to make any observation on the merits of thecontroversy”. (10) By the aforesaid order, this Court has set aside thesubstantive assessments passed against Tolin Rubbers Private Limited and thematter is remanded to the assessing authority to redo the matter in accordance with law and in the light of the observations made by this Court while disposing ofthe Writ Appeal. (10) By the aforesaid order, this Court has set aside thesubstantive assessments passed against Tolin Rubbers Private Limited and thematter is remanded to the assessing authority to redo the matter in accordance with law and in the light of the observations made by this Court while disposing ofthe Writ Appeal. (11) K.P.Varkey, Proprietor, M/s.Tolin Rubbers; K.V.Tolin,Proprietor, M/s.Tolin Pre-Treads and Smt.Annie Varkey, Proprietor, M/s.ToshimaRubber Products, aggrieved by the orders passed by the assessing authorityunder Section 148 of the Act, had called in question the same before the firstappellate authority. The first appellate authority, after considering the issuesraised by the appellants and after hearing the departmental representative, hasallowed the appeals filed by the aforesaid persons. (12) The Department, being aggrieved by the orders so passed bythe first appellate authority/Commissioner of Income Tax (Appeals)-V, Kochi forthe assessment years 1996-97 to 2001-02, had filed 18 appeals before theIncome Tax Appellate Tribunal. (13) The Tribunal by its order dated 18.05.2007 has allowed theDepartment's appeals and has remanded the matter to the assessing authority topass fresh orders in accordance with law. The basis or foundation for passing theimpugned order without going into the merits of the appeal is, the orders passedby this Court in W.A.No.953 of 2003. According to them, since the substantiveassessments in the case of Tolin Rubbers Private Limited has been set aside bythis Court, it would be in the interest of all the parties that the appeals filed by theDepartment against the orders passed by the Commissioner of Income Tax(Appeals) also require to be set aside and an opportunity should be given to theassessing authority to redo the matter in accordance with law. (14) Aggrieved by the conclusions so reached by the Tribunal,K.P.Varkey, Proprietor, M/s.Tolin Rubbers; K.V.Tolin, Proprietor, M/s.Tolin Pre- Treads and Smt.Annie Varkey, Proprietor, M/s.Toshima Rubber Products are before us in these batch of appeals. (15) The appellants have raised the following substantial questions of law for our consideration and decision. They are as under: “(i)Whether the tribunal was right in law and on facts in settingaside the order of the CIT (Appeals) which clearly held that in viewof the Central Excise authorities confirming that no case had beenregistered against the appellant, there was no basis for thecontinuation of protective assessments against the appellant; (ii)Whether the Tribunal was right in law and on facts indirecting the assessing officer to decide the matter afreshespecially when the substantive assessment of Tolin Rubbers (P)Limited was set aside by the High Court and further, the very basisfor the protective assessment initiated against the appellant hadbeen taken away by the letter dated 27.10.2004 (Annexure H) ofthe Central Excise authorities; (iii) Whether the Tribunal was right in law and on facts indirecting the assessing officer to decide the protectiveassessments afresh especially when the issue of initiation of aprotective assessment is a matter which has to be decided by theassessing officer at the time of conducting a regular assessmentagainst the main assessee (in this case Tolin Rubbers (P) Limited)and not prior to it. (iv) Whether the Tribunal was right in law and on facts indirecting the assessing officer to decide the protectiveassessments afresh especially when the decision of the Hon'ble-Supreme Court in the case of Lalji Haridas Vs. ITO 1961 (43)ITR 387 (SC)- clearly indicates that the finalization of protectiveassessments must await the outcome of the substantiveassessment”. (iii) Whether the Tribunal was right in law and on facts indirecting the assessing officer to decide the protectiveassessments afresh especially when the issue of initiation of aprotective assessment is a matter which has to be decided by theassessing officer at the time of conducting a regular assessmentagainst the main assessee (in this case Tolin Rubbers (P) Limited)and not prior to it. (iv) Whether the Tribunal was right in law and on facts indirecting the assessing officer to decide the protectiveassessments afresh especially when the decision of the Hon'ble-Supreme Court in the case of Lalji Haridas Vs. ITO 1961 (43)ITR 387 (SC)- clearly indicates that the finalization of protectiveassessments must await the outcome of the substantiveassessment”. (16) Sri.Jayasankar.A.K., learned counsel appearing for theappellants would contend that the Tribunal was not justified in allowing theDepartment's appeals, primarily on the ground that the substantive assessmentsin the case of Tolin Rubbers Private Limited have been set aside by this Court.He is of the view, that, since the assessees have succeeded before the first appellate authority/Commissioner of Income Tax (Appeals) and the Department isbefore the Tribunal in the appeals filed, the Tribunal ought to have decided theappeals filed by the Department on its merit, instead of remanding the matter tothe assessing authority to redo the matter in accordance with law. In support ofthis submission, the learned counsel relies upon the observations made by theapex Court in the case of Lalji Haridas v. Income Tax Officer and another [(1961)38 ITR 387] and the observations made by the Allahabad High Court in the caseof Smt.Hemlata Agarwal v. Commissioner of Income-tax, U.P. [1967) 64 ITR428]. (17) Per contra, Sri.George K.George, learned counsel appearingfor the Department tries to justify the impugned order passed by the Tribunal insetting aside the orders passed by the first appellate authority/Commissioner ofIncome Tax (Appeals). The learned counsel in support of his submission wouldrely upon the observations made by the Calcutta High Court in JagannathHanumanbux v. Income-tax Officer [(1957) 31 ITR 603] and the observationsmade by the apex Court in the case of Income-tax Officer, “A” Ward, Lucknow v.Bachu Lal Kapoor [(1966) 60 ITR 74]. (18) The facts are not in dispute. The assessing authority/IncomeTax Officer has passed the substantive assessments in the case of Tolin RubbersPrivate Limited for the assessment years 1996-97 to 2001-02 and protectiveassessments in the case of K.P.Varkey, Proprietor, M/s.Tolin Rubbers;K.V.Tolin, Proprietor, M/s.Tolin Pre-Treads and Smt.Annie Varkey, Proprietor,M/s.Toshima Rubber Products. Tolin Rubbers Private Limited, who had sufferedan order of substantive assessment, had called in question the orders ofreassessment so passed by the Income Tax Officer in exercise of his powers under Section 148 of the Act, before this Court. This Court, accepting thecontention of the assessee that the orders so passed by assessing authority arein violation of the principles of natural justice, has thought it fit to remand thematter to the assessing authority to redo the matter in accordance with law. Thatonly means that the substantive assessments made in the case of Tolin RubbersPrivate Limited are now set aside by a Bench of this Court reserving liberty to theassessing authority to redo the matter. (19) However, in the case of K.P.Varkey, Proprietor, M/s.TolinRubbers; K.V.Tolin, Proprietor, M/s.Tolin Pre-Treads and Smt.Annie Varkey,Proprietor, M/s.Toshima Rubber Products, the assessing authority had passedprotective assessments/precautionary assessments and those assessments wereset aside by the first appellate authority. That is how the Department is in appealsbefore the Income Tax Appellate Tribunal. (19) However, in the case of K.P.Varkey, Proprietor, M/s.TolinRubbers; K.V.Tolin, Proprietor, M/s.Tolin Pre-Treads and Smt.Annie Varkey,Proprietor, M/s.Toshima Rubber Products, the assessing authority had passedprotective assessments/precautionary assessments and those assessments wereset aside by the first appellate authority. That is how the Department is in appealsbefore the Income Tax Appellate Tribunal. (20) The Appellate Tribunal, without going into the merits of theappeals filed by the Department, merely on the ground that the substantiveassessments in the case of Tolin Rubbers Private Limited has been set aside bya Bench of this Court, has allowed the appeals filed by the Department andremanded the matter to the assessing authority to redo the matter in accordancewith law. The observations made by the Tribunal in this regard is at paragraph 7of the orders passed by the Tribunal. The same is as under: “It is not disputed that substantive assessments are made inthe case of Tolin Rubbers Pvt. Ltd and those assessments weresubject matter of Writ Petition being WA No.No.953 of 2003 (A). Itis also not disputed that the Hon'ble High Court was pleased toremit all the substantive assessments to the file of the assessingauthority for re-doing or fresh decision as the Hon'ble High Courtwas of the opinion that the documents and evidence which hadbeen used by the said authority have not been put to it and, therefore, the Hon'ble High Court quashed the impugned orders inthe case of Tolin Rubbers Pvt. Ltd and remitted the matter back tothe assessing authority. Hence, in the case of Tolin Rubbers Pvt.Ltd., the matters have been restored to the file of the AO as therewas gross violation of the principles of natural justice. Moreover,though the Hon'ble High court was pleased to quash theassessments, all the assessments were restored to the file of theAO for fresh decision. In the cases of these three assessees,though protective assessments are made it is not correct to say thatmerely because the substantive assessments have been quashedand restored to the file of the assessing authority, theseassessments do not survive. As the substantive assessments havebeen restored to the file of the AO, we consider it fit to restore theissue before us taken by the revenue to the file of the AO to decidethem afresh after framing substantive assessments in the case ofTolin Rubbers Pvt. Ltd. as per the directions of the Hon'ble Highcourt of Kerala in WA No.953 of 2003 (A) vide judgment dated4.8.2003. We, therefore, set aside the orders of the CIT (Appeals)on this issue which are arising out of the grounds taken by therevenue and restore the matters to the file of the AO to decide themafresh. We make it clear that the CIT (Appeals) has given acategorical finding on merits that the Central Excise Departmenthas given letter dated 27-10-2004 in the case of these threeassessees wherein it is mentioned that no case has been registeredagainst these assessees and AO should take into consideration thesaid aspect of the case also”. (21) The concept of the protective assessments/precautionaryassessments is well explained by the Calcutta High Court in the case ofJagannath Haumanbux v. Income-tax Officer [(1957) 31 ITR 603]. A learnedJudge, after referring to the observations made by Rowlatt, J. in the case ofAttorney-General v. Aramayo & Others [(1925) 1 K.B. 86 = 9 Tax Cas.445],has observed as under:- “Thus, I must hold that under the Indian law it is permissibleto take a protective assessment. I do not think that the principlesof law put forward by Mr.Roy are in any way wrong. There can beno doubt that taxing statutes must be strictly construed in favour ofthe assessee. It is also true that there cannot be any assessmentexcepting of an assessee, and there can be no doubt that theIncome-tax authorities must confine themselves within the four “Thus, I must hold that under the Indian law it is permissibleto take a protective assessment. I do not think that the principlesof law put forward by Mr.Roy are in any way wrong. There can beno doubt that taxing statutes must be strictly construed in favour ofthe assessee. It is also true that there cannot be any assessmentexcepting of an assessee, and there can be no doubt that theIncome-tax authorities must confine themselves within the four corners of the statute and not invent new procedures outside thelimits of the Indian Income-tax Act. But let us see what they havereally done. It is not as if they have made the assessment outsidethe Indian Income-tax Act. The trouble is that owing to the variouslitigations mentioned above, it is not established finally as to who isthe proper assessee. It is not permissible to assess a fictitiousperson, but I do not see that there is anything to preventassessment of a person of whom it is not finally known whether heis fictitious or not. What is the most important thing to consider isthe running of time. If the Income-tax authorities are precludedfrom making an alternative assessment, then, by the time thedisputes are over, the real assessment would be barred.Therefore, I cannot see why an alternative assessment, that it tosay, protective assessment, should be declared to be illegal. Butwhile a protective assessment is permissible, I do not see that aprotective recovery is to be allowed. It is one thing to say that theauthorities are merely making an assessment and leaving it as apaper assessment until the matter is decided one way or the other,and another thing to say that at one and the same time they couldnot only make two assessments in respect of one set of dues butproceed to realise both. Mr.Meyer argues that if in the case ofprotective assessment the principle is followed, namely, that therevenue has to be protected against the bar of limitation, equally,protective recovery should be allowed because recovery also maybe barred. I cannot agree. If the Income-tax authorities decidedthat the present assessment was the valid assessment and keptanother alternative assessment in cold storage, then I couldunderstand the force of the argument that the present assessmentshould proceed to the stage of recovery. But having once statedthat the present assessment was not correct, because accordingto the authorities the firm was a mere benamidar of another firm, itwould be entirely against the spirit and tenor of the Income-tax Actto proceed to recover the tax on the basis of the professedly wrongassessment. From this point of view, the notices given to thevarious parties to pay money appear to be defective. Thequestion, therefore, is as to whether on the facts andcircumstances of the case as I have stated above, the petitioner isentitled to any relief in this application. The position is that themonies in the hands of these various parties are prima facie due toMessrs.Jagannath Hanumanbux. If that firm consists of thepartners Ganpatrai and Hanumanbux, then the Income-taxauthorities will be entitled to receive these sums direct. Butsupposing that they are not the partners and that LadhuramTaparia is the real assessee and that Jagannath Hanumanbux isthe benamidar of Ladhuram Taparia, then also the monies in thehands of these parties will be payable to the Income-taxauthorities, because taxes are payable by Ladhuram Taparia andnotices under section 46 (5A) have also been served, in respect oftaxes due from that firm. If that is the position, then should this Court come to the aid of the petitioner, which will only mean that itwill be enabled to take away the monies and defeat the claim ofthe income-tax authorities. Mr.Meyer on behalf of the Income-taxauthorities agreed to give an undertaking that they will take thismoney and keep it in a suspense account until the Supreme Courthas decided the rights of the parties one way or the other, andfurther that the Income-tax authorities will not execute or enforcethe taxes twice over, that is to say, once against JagannathHanumanbux and a second time against Ladhuram Taparia. Thepetitioners, however, are not agreeable to this course. It is quiteevident that they are anxious to take away the money. After all,relief under article 226 is discretionary and it ought not to beexercised so as to defeat a lawful claim, particularly that of theState's revenue. So far as these debtors are concerned, I do notthink that they can with any safety to themselves pay the monies toMessrs.Jagannath Hanumanbux. Under the circumstances, I donot see why I am compelled to make an order which will confuseall these debtors and be instrumental in aiding the immediatepetitioner before me to realise monies and take it beyond the reachof the Income-tax authorities. While I cannot hold that a protectiverecovery is permissible in law, I do hold that on the facts andcircumstances of the case, this Court ought not to come to the aidof the petitioner under article 226 of the Constitution. If they haveany other relief and remedies, it is open to them”. (22) Reference to aforesaid judgment is made by the SupremeCourt in Lalji Haridas case (supra) also. The Court while holding that theprotective assessments can be made by the Income Tax authorities, though thesame is not provided under the provisions of the Income Tax Act, has stated asunder: “In cases where it appears to the income-tax authorities thatcertain income has been received during the relevant year but it isnot clear who has received that income and, prima facie, itappears that the income may have been received either by A orby B or by both together, it would be open to the income-taxauthorities to determine the question who is responsible to pay taxby taking assessment proceedings both against A and B”. (23) Having said so, the apex Court in Lalji Haridas case (supra) directed the assessing authority first to complete the substantive assessmentsand it is only thereafter to proceed against Chhotalal against whom the protectiveassessments were passed by the assessing authority. The observations made by the apex Court is as under: “In other words, the respondent's case clearly is that the noticesissued against the two brothers by their respective Income-taxOfficers are intended to determine who is responsible to pay taxfor the income in question; now though Mr.Nambiar wanted toargue that protective or precautionary assessment of tax is notjustified by any of the provisions of the Act he did not seriouslycontest the position that at the initial stage it would be open to theincome-tax authorities to determine by proper proceedings who isin fact responsible for the payment of tax, and that is all that isbeing done at the present stage. In case where it appears to theincome-tax authorities that certain income has been receivedduring the relevant assessment year but it is not clear who hasreceived that income and prima facie it appears that the incomemay have been received either by A or B or by both together, itwould be open to the relevant income-tax authorities to determinethe said question by taking appropriate proceedings both againstA and B. That being so, we do not think that Mr.Nambiar wouldbe justified in resisting the enquiry which is proposed to be heldby respondent No.I in pursuance of the impugned notice issuedby him against the appellant. Under these circumstances we donot propose to deal with the point of law sought to be raised byMr.Nambiar.” We would, however, like to add one direction in fairness tothe appellants. The proceedings taken against both theappellants should continue and should be dealt with expeditiouslyhaving regard to the fact that the matter is fairly old. In theproceedings taken against Lalji the Income-tax Officer shouldmake an exhaustive enquiry and determine the question as towhether Lalji is liable to pay the tax on the income in question. Allobjections which Lalji may have to raise against his allegedliability would undoubtedly have to be considered in the saidproceedings. Proceedings against Chhotalal may also be takenby the Income-tax Officer and continued and concluded, but untilthe proceedings against Lalji are finally determined noassessment order should be passed in the proceedings takenagainst Chhotalal. If in the proceedings taken against Lalji it isfinally decided that it is Lalji who is responsible to pay tax for theincome in question it may not become necessary to make anyorder against Chhotalal. If, however, in the said proceedings Lalji is not held to be liable to pay tax or it is found that Lalji is liable topay tax along with Chhotalal it may become necessary to passappropriate orders against Chhotalal. When we suggested to thelearned counsel that we propose to make an order on these linesthey all agreed that this would be a fair and reasonable order tomake in the present proceedings.” (24) The view expressed by the apex Court in the case of Lalji Haridas is reiterated by the apex Court in the case of Income-tax Officer, “A” Ward, Lucknow v. Bachu Lal Kapoor [(1966) 60 ITR 74). The same is asunder: “Some argument was advanced on the question of the validity ofwhat are called “protective or precautional assessments”.Reference was made to Jagannath Hanumanbux v. Income-taxOfficer and to the decision of this court in Lalji Haridas v. Income-tax Officer. In the former, the validity of protective assessmentwas approved; and in the latter, this court, though the question ofassessment was raised, did not express its final opinion thereon.This court held that when there was a doubt as to which personamong two was liable to be assessed, parallel proceedings mightbe started against both; and it also laid down an equitableprocedure to be followed in that situation. In this case, thequestion of protective assessment does not call for our decisionand we do not express our opinion thereon. We, therefore, hold that the High Court went wrong inholding that the Income-tax Officer had no jurisdiction to initiateproceedings under section 34 of the Act against the respondent asthe karta of a Hindu undivided family”. (25) The law on the point is now well settled in so far as protectiveassessments and substantive assessments that can be passed by the IncomeTax Officers. Reiteration of the principles enunciated by the apex Court in thisjudgment may not be necessary. (26) The question now to be answered by us is, merely because asubstantive assessment passed by the Income Tax Officer/assessing authority is set aside by the superior forum, whether the appeals filed against the protectiveassessments require to be allowed without going into the merits or demerits ofthe appeals. (27) We once again reiterate that the Tribunal, in the appeals filedby the Department, has not decided the matter on merits. It has only allowed theappeals merely on the ground that the substantive assessments made in thecase of Tolin Rubbers Private Limited have been set aside by a Division Bench ofthis Court. (26) The question now to be answered by us is, merely because asubstantive assessment passed by the Income Tax Officer/assessing authority is set aside by the superior forum, whether the appeals filed against the protectiveassessments require to be allowed without going into the merits or demerits ofthe appeals. (27) We once again reiterate that the Tribunal, in the appeals filedby the Department, has not decided the matter on merits. It has only allowed theappeals merely on the ground that the substantive assessments made in thecase of Tolin Rubbers Private Limited have been set aside by a Division Bench ofthis Court. (28) In our opinion, in a situation of this nature, an equitableconsideration requires to have been adopted by the Tribunal. It could have keptthe appeals filed by the Department pending till a substantive assessment ispassed by the Income Tax Officer as directed by this Court while disposing of theWrit Appeal or in the alternative, it could have decided the appeals filed by theDepartment on merits, since the assessees have succeeded before the firstappellate authority. Merely because a substantive assessment has been setaside by a Bench of this Court, it is not permissible for the Tribunal to haveallowed the Department's appeals by setting aside the orders passed by the firstappellate authority. (29) In view of the above, we are of the opinion, we cannot sustainthe conclusion reached by the Tribunal while allowing the Department's appeals.Therefore, we pass the following: Order (i) The appeals are allowed. (ii) The matter is now remanded back to the Tribunal either to wait till theIncome Tax Officer completes the substantive assessments in the case of Tolin Rubbers Private Limited as directed by a Division Bench of this Court or in thealternative, to dispose of the appeals filed by the Department against the orderspassed by the first appellate authority for the assessment years 1996-97 to2001-02 on merits. (iii) In our opinion, the Tribunal, if it chooses the first alternative which wehave suggested, it would be in the interest of both the Department as well as theassessees, viz., K.P.Varkey, Proprietor, M/s.Tolin Rubbers; K.V.Tolin, Proprietor,M/s.Tolin Pre-Treads and Smt.Annie Varkey, Proprietor, M/s.Toshima RubberProducts. (30) With the above observations and directions, these appeals are disposed of. Ordered accordingly. H.L. Dattu Chief Justice vku/DK. K.T. Sankaran Judge