Ita/201/2000 Of The Commissioner Of Incometax, Tvm v. Rosamma Philiphose, Alappuzha

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE P.R.RAMAN & THE HONOURABLE MR. JUSTICE K.P.BALACHANDRAN MONDAY, THE 4TH DECEMBER 2006 / 13TH AGRAHAYANA 1928 ITA.No. 201 of 2000() --------------------- AGAINST THE ORDER DATED 30/06/2000 IN ITA.360/1996 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/RESPONDENT/ ----------------- THE COMMISSIONER OF INCOME TAX, TRIVANDRUM. BY ADV. SRI.P.K.R.MENON(SR.),SR.COUNSEL FOR IT RESPONDENT:APPELLANT/APPELLANT/ASSESSEE ----------------- SMT.ROSAMMA PHILIPOSE,C/O.A.J.PHILIPOSE & CO.AZHAKANAKUZHIYIL, AYOOR SOUTH 689 611 BY ADV. SRI.JOHN RAMESH K.I.JOHN THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON04/12/2006, THE COURT ON THE SAME DAY DELIVERED THEFOLLOWING: P.R.RAMAN & K.P.BALACHANDRAN,JJ. ----------------------------------------I.T.APPEAL.NO.201 OF 2000 ----------------------------------------Dated this the day of November, 2006 JUDGMENT Raman,J. This is an appeal filed by theCommissioner of Income Tax, Thiruvananthapuram challenging the order passed by the Tribunal, Cochin Bench in I.T.A.No.360/Coch/96. Thebrief facts are as follows: 2. There was a seizure and search of the premises of the assessee and the firm in which the assessee is a partner. Notice under Section 142 was issued to the assessee on 4/8/1992. Pursuant to the notice, the assessee filed a return showing the income of Rs.35,000/-. One of the partners of the firm is her husband Sri A.J. Philipose. From the seized documents it was found that the I.T.APPEAL NO.201/2000 -2- assessee has taken certain fixed depositsreceipts and purchased immovables. Theseinvestments however could not be satisfactorilyexplained, according to the Income Tax Officer.After discussing various issues, the AssessingOfficer considered that an amount ofRs.2,31,000/- as unexplained investment in thehands of the assessee and made a protectiveassessment with the following observations: "Obviously, the source forRs.2,31,000/- still remains to beexplained out of Rs.3,65,250/-invested during the year. This willbe assessed in the hands of theassessee protectively u/s. 69 with afindingthat the various investmentsmade by the assessee have to beconsidered in the hands of herhusband in the respective years andthe deficiency as worked out above,will also be assessed in his hands onsubstantive basis during the yearunderconsideration."(Emphasisgiven). 3. The assessee appealed to theCommissioner of Income Tax. It was the I.T.APPEAL NO.201/2000 contention of the assessee that the protectiveassessment is not sustainable in law and thatonly when the assessing authority has any doubtas to the person who is or will be deemed to bein receipt of the income, such procedure iscontemplated. No protective or precautionaryassessment can be visualised in respect of oneof and the same income on two differentpersons. Reliance was also placed on thedecision of the Apex Court in (43 ITR 387). Itis also contended that the practice of makingprotective assessment has been judiciallyrecognised in certain circumstances where itappears to the Assessing Authority that certainincome has been generated during the relevantperiod, but it is not clear to show that whohas received that income with prima facieevidence appearing to show that the incomemight have been received by one or the other orby both together. In such circumstances it will I.T.APPEAL NO.201/2000 -4- be open to the assessing authority concerned totake appropriate proceedings against both the individuals. Here, the assessment of the assessee's husband has of not been done andhence there is no question of any protectiveassessment. In such circumstances, no parallelproceedings can be completed in this case. Itwas pointed out that some of the wealth tax I.T.APPEAL NO.201/2000 -4- be open to the assessing authority concerned totake appropriate proceedings against both the individuals. Here, the assessment of the assessee's husband has of not been done andhence there is no question of any protectiveassessment. In such circumstances, no parallelproceedings can be completed in this case. Itwas pointed out that some of the wealth tax statement and the letters filed by theappellant were also placed reliance on tocontend that letters and the wealth statementevidenced deposits from 1974-75 onwards withthe State Bank of Travancore and the IndianOverseas Bank and if these deposits have beenaccepted as correct as shown in the wealthstatement, there is no basis for for rejectingthe explanation. The first Appellate Authorityafter referring to the contentions raised bythe parties, found that the matter is to berestored to the Assessing Authority for fresh I.T.APPEAL NO.201/2000 -5- consideration, after taking into account thewealth tax explanation offered by the assessee.Dissatisfied with the order passed by theAppellate Authority the assessee preferred afurther appeal to the Tribunal. Before theTribunal it was contended by the assessee bythe assessee that in the instant case theassessment of the husband was completed fallingthe benefit under the Kar Vivad Samadhan Scheme. Since the substantive assessment hasbecome final and the tax paid. There was noreason to proceed against the assessee when theassessment on the assessee was on protectivebasis. The representative of the department onthe other contended that only the assess canraise this contention before the appropriateAuthority at the time when the consequentialorder is appealed against. As a matter of fact,at the time when the Tribunal passed the order,the consequential order has already been passed I.T.APPEAL NO.201/2000 -6- and on that basis it was also contended by thedepartment that the appeal before the Tribunalhas become infructuous. After considering therival submissions of the parties, the Tribunalheld that there cannot be assessment of the income in two things; either it should be inthe hands of the person whose assessment was made on substantive basis or in the hands ofthe assessee, whose assessment was made on protective basis. In the instant case, theTribunal noted that "in the instant case it isnot disputed that the substantive additionswere made in the hands of the assessee'shusband and the matter has not has now beensettled under the Kar Vivad Samadhan Scheme."The stand of the department that theCommissioner (Appeals) had only set aside the assessment in the case of the assessee and theconsequential order has been passed and as suchthe assessee is at liberty to agitate the I.T.APPEAL NO.201/2000 -7- matter at appropriate time before theAppropriate Authority. This right cannot beaccepted. The question that is challenged inappeal being an additions made in the hands ofthe assessee on protective basis. Theassessment made in the hands of the assessee'shusband on substantive basis has become finaland the tax demanded paid under the Kar VivadSamadhan Scheme. As such further proceedings inthe case of the assessee where the assessmentis made on protective basis goes against thespirit of the scheme envisaged. It was in thatview that the Tribunal allowed the appeal bythe assessee, against which the present appealis preferred by the Department. The learnedcounsel Sri George K. George appearing onbehalf of the appellant contended as follows;(i) that since the consequential orders havebeen passed by the Income Tax Officer pursuantto the remand order by the first Appellate I.T.APPEAL NO.201/2000 I.T.APPEAL NO.201/2000 Authority, the appeal itself became infructuousand hence the Tribunal ought not to have setaside the order of the Income Tax Officer and(ii) In this case what was done by the IncomeTax Officer was in order to make the assessmentof the assessee pursuant to the remand order,the Income Tax Officer has passed a fresh orderpaying an amount of Rs.57,250/- and the balanceamount has been included as assessee's incomeand substantive assessment has already beencompleted. It is also contended that thefinding of the Income Tax Officer in the ordercannot be understood as a substantive order ofassessment in the case of assessee's husbandand as a matter of fact only the protectiveassessment made against the assessee. Itimplies that only after considering whether theincome so added could be included in the caseof the assessee's husband, a substantiveassessment could be made. As such some amount I.T.APPEAL NO.201/2000 -9- will not be included in the hands of twoassessees. It is also contended that both thesubstantiveassessmentandprotective assessment can simultaneously be made and placed reliance on the decision of the Apex Court in (43 ITR 387). On the other hand, thelearned counsel for the assessee-respondent would contend that there cannot be anassessment of the same income in the hands ofboth the husband as well as the assessee andthe finding of the Income Tax Officer wascristal clear that the income which was said tobe added in the hands of the assessee weretreated as the income of the husband and it isclearly stated that the said income will be assessed in the hands of the assessee's husband. Once such finding was made by the Income Tax Officer, thereafter the question ofmaking any protective assessment on the assessee did not arise which has been correctly I.T.APPEAL NO.201/2000 -10- appreciated by the Tribunal and as such nointerference is called for by this Court inthis appeal. P.R.RAMAN, Judge. K.P.BALACHANDRAN, Judge. kcv.