Income-tax---

----Assessment---Protective assessment---Doubt as to which person amongst 'two to be assessed---Parallel proceedings may be taken against both and alternative assessments framed---Protective assessment permissible but Appellate Authorities cannot make protective order-Assessment in respect of disputed income upheld in hands of assessee's husband by High Court-- Tribunal justified in cancelling assessment made on assessee.

It is settled that when there is a doubt as to which person amongst the two was liable to be assesseed, parallel proceedings may be taken against both and alternative assessments may also be framed. It is, also equally true that while a protective assessment is permissible, it is not open to the income-tax appellate authorities constituted under the Act to make a protective order. The law does not permit assessment of the same income successively in different hands. The tax can only be levied and collected in the hands of the person who has really earned the income and is liable to pay tax thereon.

The assessee in respect of the assessment year 1973-74 filed her return of income in the status of an individual showing an income of Rs.1,792 from a proprietary business for the period April 1, 1972 to May 27, 1972. She also returned an amount of Rs.32,854 as share income from a partnership business carried on in the name of a firm, F.A. The business that was carried on by the firm was the proprietary business of the assessee before May 27, 1972. During the course of the assessment proceedings for the aforesaid assessment year, the Income-tax Officer found that the assessee was only a benamidar of her husband who was the real owner of the business, F.A, so long as it was the proprietary business of the assessee and thereafter, it was he who actually was a partner in the firm through his wife, namely, the assessee. Consequently, the Income-tax Officer held that the entire determined share income of the assessee in the registered firm as well as the income for the period the business was a proprietary concern during the previous year relevant to the assessment year had to be clubbed with the income of her husband and assessed in his hands. However, since the return of income had been filed by the assessee voluntarily, an assessment in her hands was also completed on protective basis. On appeal, the Appellate Assistant Commissioner of Income-tax cancelled the protective assessment on the finding that since the income had already been assessed on substantive basis in the hands of the assessee's husband, the same could not be allowed to stand. On further appeal to the Tribunal, the order of the Appellate Assistant Commissioner was upheld. On a reference:

Held, that in view of the fact that the assessment in respect of the disputed income had already been upheld in the hands of the assessee's husband by the High Court in (1998) 232.ITR 934 the Tribunal was justified in cancelling the assessment made on the assessee on the basis of the return filed by her.

Vijay Bahadur Singh v. CIT (1998) 232 ITR 934 (All.) ref

JUDGMENT

R. K. GULATI, J.---At the instance of the Commissioner of Income-tax, Allahabad, the Income-tax Appellate Tribunal has referred under section 256 of the Income Tax Act, 1961, the following question of law for the opinion of this Court:

"Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in agreeing with the Appellate Assistant Commissioner in cancelling the assessment made in the case of Sint. Durgawati Singh, on the basis of the return filed by her?"

The respondent-assessee in respect of the assessment year 1973-74 filed her return of income in the status of an individual showing an income of Rs.1,792 from a proprietary business for the period April 1, 1972 to May 27, 1972. She also returned an amount of Rs.32,854 as share income from the partnership business carried on ~ in the name of Friends Automobiles. It may be observed, the business that was carried on by the firm, was the proprietary business of the assessee before May 27,1972.

During the course of the assessment proceedings for the assessment year aforesaid, the Income-tax Officer found that the assessee was only a benamidar of her husband Sri Vijay Singh, who was the real owner of the business. Friends Automobiles, so long as it was a proprietary business and thereafter, it was he who actually was a partner in the firm through his wife, namely, the assessee in this reference- Consequently, the Income-tax Officer held that the entire determined chare income of the assessee in the registered firm-as well as the income for the period the said business was a proprietary concern during the previous year relevant to the assessment year in dispute, would be clubbed with the income of Vijay Singh and assessed in his hands. However, since a return of income had been filed by the assessee voluntarily, and assessment in her hands was also completed on protective basis.

The assessee appealed to the Appellate Assistant Commissioner of Income-tax, where the protective assessment was cancelled on the findings that as the income in dispute had already been assessed on substantive basis in the hands of the assessee's husband. Sri Vijay Singh, the same cannot be allowed to stand. On further appeal to the Income-tax Appellate Tribunal, at the instance of the Revenue, the order of the Appellate Assistant Commissioner was upheld. Hence, this reference to this Court at the instance of the Revenue.

It may be observed that the husband of the assessee had also contested the matter unsuccessfully against the assessment made in his hands, and in due course, the matter was referred to this Court under section 256(2) of the Income-tax Act, being I.T.R. No.224 of 1981.

Both the references were heard together. By a separate judgment of even date we have upheld that clubbing of the disputed income in the hands of the assessee's husband (see Vijay Bhadur Singh v. CIT (1998) 232 ITR 934 (All)).

We have heard learned counsel for the parties.

It is settled that when there is a doubt as to which person amongst the two was liable to be assessed, parallel proceedings may be taken against both and alternative assessments may also be framed. It is also equally true that while a protective assessment is permissible, it is not open to the Income-tax Appellate Authority constituted under the Act to make a protective order. The law does not permit assessment of the same income successively in different hands. The tax can only be levied and collected in the hands of the person who has really earned the income and is liable to pay tax thereon.

It was the common contention of learned counsel for the parties that if the substantive assessment is maintained in the hands of the assessee's husband in I.T.R. No. 22 of 1981---Vijay Bahadur Singh v. CIT (1998) 232 ITR 934 (All), the income in dispute could not be upheld in the hands of the assessee. In our opinion, no exception can be taken to the stand taken by learned counsel for the parties.

In view of the fact that the assessment in respect of the disputed income has already been upheld in the hands of the assessee's husband and for what has been stated above, we answer the question referred to this Court in the affirmative, in favour of the assessee and against the Department.

There will be no order as to costs.

M.B.A./4000/FC Order accordingly