1996 (6) TMI 41 - HC - Income Tax

Summary

Issues:
1. Validity of trust and entitlement to be assessed as representative assessees.
2. Rectification of orders under the Income-tax Act, 1961.

Analysis:

Issue 1: Validity of trust and entitlement to be assessed as representative assessees:
The case involves eight references related to the affairs of a trust named Seematti Trust. The Income-tax References Nos. 19 to 22 of 1987 raised questions regarding the validity of the trust and the entitlement of the trustees to be assessed as representative assessees. The Income-tax References Nos. 23 to 26 of 1987 dealt with rectification orders dated January 8, 1985. The Income-tax Officer initially assessed the three assessees as a "body of individuals" due to violations of the Indian Trusts Act, 1882. However, the Appellate Assistant Commissioner held that the relief under section 161 could be available to the three persons as representative assessees. The Tribunal decided in favor of considering the trustees as representative assessees in accordance with the Income-tax Act, 1961. A previous judgment by the High Court concluded that there was no valid trust, leading to the trustees not being entitled to be assessed as representative trustees. The High Court emphasized the lack of authority to create a trust and the absence of valid trust assets. The Tribunal was justified in restoring the Income-tax Officer's order, treating the assessees as a "body of individuals," as the High Court's judgment had reached finality on the matter.

Issue 2: Rectification of orders under the Income-tax Act, 1961:
The question in Income-tax References Nos. 23 to 26 of 1987 revolved around whether there was a mistake apparent from the face of the records to be rectified in the orders dated January 8, 1985. The Tribunal, in line with the High Court's judgment, found no justification for setting aside the Appellate Assistant Commissioner's order. The Tribunal correctly interpreted the scope of rectification powers, requiring an obvious and patent mistake for rectification. Given the finality of the High Court's judgment on the validity of the trust and the consequent assessment as a "body of individuals," the restoration of the Income-tax Officer's order was deemed a legitimate consequence. Therefore, the question in these references was answered in the affirmative, in favor of the Revenue and against the assessee.

In conclusion, the High Court upheld the decisions regarding the validity of the trust, the entitlement to be assessed as representative assessees, and the rectification of orders under the Income-tax Act, 1961, based on the finality of its previous judgment. The matter was settled, and the consequential orders were to be passed by the Income-tax Appellate Tribunal, Cochin Bench.