1986 (8) TMI 23 - HC - Income Tax

Summary

Issues Involved:
1. Ownership and vesting of immovable properties.
2. Validity of protective assessment.
3. Maintainability of the appeal before the Appellate Assistant Commissioner.
4. Jurisdiction of the Appellate Assistant Commissioner to decide on the title of the properties.
5. Whether the Tribunal was correct in its decision regarding the appeal and protective assessment.

Detailed Analysis:

1. Ownership and Vesting of Immovable Properties:
Champabati Devi Chamaria purchased four immovable properties with her stridhan and later sold undivided 1% shares of these properties to ten close relatives. These properties were then claimed to have vested in M/s Champa Properties (P.) Ltd., the assessee, upon its incorporation under Part IX of the Companies Act, 1956. The assessee claimed ownership under section 575 of the Companies Act, asserting that the properties automatically vested in it upon incorporation. However, the Income-tax Officer concluded that without a deed of conveyance, the properties still stood in the name of Champabati.

2. Validity of Protective Assessment:
The Income-tax Officer treated the income from the said properties as the income of the assessee on a protective basis, despite concluding that the properties belonged to Champabati. The Tribunal supported this protective assessment, noting that no assessment had been made on any other person regarding the income from these properties.

3. Maintainability of the Appeal Before the Appellate Assistant Commissioner:
The assessee appealed against the protective assessment, contending that the properties were recorded in its name in the Calcutta Municipal Corporation records and cited relevant case law to support its claim. The Appellate Assistant Commissioner accepted the assessee's contention and held that the properties belonged to the assessee from the date of incorporation, thus nullifying the need for a protective assessment.

4. Jurisdiction of the Appellate Assistant Commissioner to Decide on the Title of the Properties:
The Tribunal held that the Appellate Assistant Commissioner was not justified in entertaining the appeal as the grievance did not fall under section 246(c) of the Income-tax Act, 1961. However, the High Court found that the Appellate Assistant Commissioner had the jurisdiction to decide on the title of the properties, as it was necessary for determining the income and tax amount. The High Court referenced several precedents affirming the authority of the Income-tax Officer and the Appellate Assistant Commissioner to decide on the title for assessment purposes.

5. Whether the Tribunal was Correct in its Decision Regarding the Appeal and Protective Assessment:
The High Court concluded that the Tribunal erred in holding that the appeal before the Appellate Assistant Commissioner was not maintainable. The High Court emphasized that the Appellate Assistant Commissioner had the power to decide on the title and that the protective assessment could not be justified if no other assessment had been made on any other person. The High Court directed the Tribunal to reassess the matter, considering whether the assessment had become substantive due to the lack of any other assessments on the same income.

Conclusion:
The High Court answered the referred question in the negative, favoring the assessee. The matter was remanded to the Tribunal to reassess the question of title and determine if the protective assessment had become substantive. The Tribunal was also instructed to consider the subsequent treatment of the properties in the assessee's tax assessments. There was no order as to costs.