1981 (8) TMI 157 - AT - Income Tax

Summary

Issues:
- Protective assessment made on a minor's income
- Rectification orders under section 154 and 139(8) of the Income-tax Act, 1961
- Jurisdiction of the Appellate Assistant Commissioner (AAC) to entertain an appeal
- Assessment of minor's income under section 64(1)(iii) in the hands of the guardian

Analysis:

The case involved the assessment of a minor's income from a partnership firm in which the minor was admitted to the benefits of partnership. The minor filed a nil return, claiming that the income was taxable under section 64(1)(iii) in the hands of the guardian. The Income Tax Officer (ITO) made a protective assessment on the minor's income, as the minor failed to provide details of the guardian's assessment. Subsequently, rectification orders were passed under section 154 and 139(8) of the Act. The Appellate Assistant Commissioner (AAC) annulled the assessment, citing changes in the law post-amendments to section 64, which required the minor's income to be included in the parents' total income. The department appealed the AAC's decision, arguing that the protective assessment was fair and necessary until the guardian's assessment details were provided.

The departmental representative contended that the AAC lacked jurisdiction to entertain the appeal against the ITO's order under section 143(3) after the passing of the rectification orders. The representative argued that the minor's income was assessable in the guardian's hands under section 64(1)(iii), but no details of the guardian's assessment were provided. The representative urged for the restoration of the assessment made by the ITO on a protective basis. On the other hand, the assessee's counsel argued that after the second rectification order, the original assessment merged with the rectified order, giving the right to appeal. The counsel maintained that the minor's income was assessable in the guardian's hands, and the guardian had been assessed in Calcutta, justifying the annulment of the assessment by the AAC.

The Appellate Tribunal held that the protective assessment on the minor's income was permissible under the law, especially when details of the guardian's assessment were not provided. Referring to legal precedents, the Tribunal emphasized that unless the ITO was certain that the minor's income had been taxed in the guardian's hands, a protective assessment was justified. The Tribunal set aside the AAC's order and maintained the protective assessment made by the ITO. Consequently, the departmental appeal was allowed, and the cross-objection of the assessee was dismissed.