2004 (2) TMI 318 - AT - Income Tax

Summary

Issues:
Protective assessment in block assessment for the period 1985-86 to 1994-95 and 1st April, 1995 to 7th Dec., 1995.

Analysis:
The appeal before the Appellate Tribunal ITAT MADRAS-A concerned a protective assessment made by the Assessing Officer (AO) on the assessee for a sum of Rs. 51,96,706 during the block assessment period. The assessee's counsel argued that since the substantive addition had been confirmed in the case of another individual, the protective assessment on the assessee could not be sustained. On the other hand, the Departmental Representative contended that the AO had the right to make protective assessments to safeguard the Revenue's interests. The Tribunal noted that while there was no specific provision in the Income Tax Act for protective assessments, judicial precedent allowed for their validity to protect Revenue interests. However, it was clarified that no recovery could be made based on a protective assessment, and it should be vacated once a substantive assessment is made on the same income for a particular individual. In this case, as the substantive addition had been made in the case of another individual for the same amount, the Tribunal held that the protective assessment on the assessee was untenable. Therefore, the Tribunal set aside the protective assessment, allowing the appeal filed by the assessee.

This judgment highlights the principle that protective assessments can be made to safeguard Revenue interests, although they cannot lead to recovery. Once a substantive assessment is made on the same income for a specific individual, the protective assessment should be vacated. The Tribunal emphasized that the Revenue cannot have two assessments on the same income, and the protective assessment loses validity once the substantive assessment is completed for a particular person. This decision provides clarity on the treatment of protective assessments in block assessment scenarios and underscores the importance of aligning assessments with substantive findings to avoid duplication and ensure fairness in tax proceedings.