1983 (1) TMI 146 - AT - Income Tax

Summary

Issues Involved:
1. Validity of protective assessments.
2. Requirement for evidence supporting protective assessments.
3. Appellants' grievance against protective assessments.
4. Jurisdiction and procedural requirements for protective assessments.

Issue-wise Detailed Analysis:

1. Validity of Protective Assessments:
The judgment addresses the validity of protective assessments made by the Income Tax Officer (ITO). The ITO completed the assessments on a protective basis for both Shri Vardhman Pukhraj and Shri Dilipkumar Jain for the assessment years 1978-79 and 1979-80. The ITO was not convinced that the income declared by the assessees genuinely belonged to them and thus assessed the income protectively, indicating that the income might belong to someone else.

2. Requirement for Evidence Supporting Protective Assessments:
The ITO required the assessees to produce evidence in support of their income claims. Despite the assessees providing letters and statements from various traders confirming their business activities, the ITO found the evidence insufficient and self-serving. The judgment emphasizes that for protective assessments to be valid, there must be some material or proceedings indicating that the income in question might belong to another individual. The Tribunal noted that the ITO did not bring any evidence or start proceedings against any other person who could be the real owner of the income. The Tribunal referenced several cases, including Lalji Haridas v. ITO and Jagannath Hanumanbux v. ITO, highlighting that the ITO must point out the potential real owner of the income before making protective assessments.

3. Appellants' Grievance Against Protective Assessments:
The appellants contended that the ITO and the Appellate Assistant Commissioner (AAC) erred in concluding that there was no cogent material to show the income was earned by the assessees. They argued that the authorities did not provide any evidence that the income belonged to someone else. The Tribunal agreed with the appellants, stating that the authorities did not produce any material or start proceedings against another person, making the protective assessments unjustified. The Tribunal also noted that the AAC incorrectly concluded that the assessees were not aggrieved by the protective assessments.

4. Jurisdiction and Procedural Requirements for Protective Assessments:
The Tribunal confirmed that the ITO has the jurisdiction to make protective assessments when there is uncertainty about the real owner of the income. However, it emphasized that the ITO must initiate proceedings against the suspected real owner of the income. The Tribunal found that the ITO failed to do so in this case. The judgment also referenced the decision in Smt. Hemlata Agarwal v. CIT, which supports the notion that the Tribunal must decide whether the income belongs to the assessees or someone else when appeals are pending.

Conclusion:
The Tribunal concluded that the assessments in question should be treated as substantive assessments since the ITO did not provide any evidence or initiate proceedings against another person. The Tribunal found that the assessees provided sufficient material to support their income claims and that the ITO did not gather any contrary evidence. The AAC's finding that the assessees were not aggrieved was deemed legally incorrect. Consequently, the Tribunal set aside the AAC's decision and directed the ITO to treat all the assessments as substantive assessments.

Result:
All the appeals were allowed, and the protective assessments were converted to substantive assessments.