1984 (1) TMI 117 - AT - Income Tax

Summary

Issues:
1. Assessment of lease rent in the hands of the assessee.
2. Validity of the Court decree and its impact on income tax proceedings.
3. Allegation of collusive nature of the Court decree.
4. Justification of the assessment made by the Income Tax Officer (ITO) as protective.
5. Interpretation of the Court decree and its binding force on the income tax assessment.

Analysis:
The appeal before the Appellate Tribunal ITAT Chandigarh involved the assessment of lease rent in the hands of the assessee for the assessment year 1977-78. The initial protective assessment by the ITO was based on the belief that the father of the assessee was the real owner of the property from which the lease rent was received. This assessment was challenged before the AAC, who set it aside for a de novo assessment. The subsequent assessment by the ITO questioned the ownership of the property, disregarding a consent decree as the basis for declaring income in earlier years. The AAC upheld the ITO's decision, considering the Court decree collusive and lacking evidence of the property belonging to the Hindu Undivided Family (HUF).

The assessee argued that previous assessments had accepted the Court decree's consequences, including the ownership of the property in question. The assessee contended that the Court decree was for mutation purposes only and not collusive. The Departmental Representative, however, cited a Supreme Court judgment to support the collusive nature of the decree. The Tribunal, after considering the arguments, found that the assessment should be made substantive due to the Revenue's consistent acceptance of the Court decree's implications in previous and subsequent assessments.

The Tribunal referenced judgments by the Punjab & Haryana High Court and emphasized that the Revenue's attempt to revive a settled issue without proper reasoning was unjustified. Citing legal precedent, the Tribunal held that the decree, whether collusive or not, had binding force on the income tax proceedings. The Tribunal concluded that the assessment of the lease rent should be treated as substantive in favor of the assessee, allowing the appeal.