Protective Assessment - Income Tax - Ready Reckoner - Income Tax

Protective Assessment Though there is no provision in the Income-tax Act authorizing the levy of Income-tax on a person other than by whom the Income-tax is payable, yet it is open to Income-tax authorities to make a protective or alternative assessment if it is not ascertainable who is really liable to pay the tax among a few possible persons. Examples of cases where Protective Assessment can be made are: Litigation between two parties concerned in Civil Courts. Possibility of Benami Transaction but still not totally clear Possibility of Diversion of Income to close Kith Kin but still not totally clear. It must, however be noted that while protective assessment is permissible, a protective order for recovery is not permissible. In making a protective assessment, the authorities are merely making an assessment and leaving it as a paper assessment until the matter is decided one way or another. Furthermore, a protective order of assessment can be passed but not a protective order of penalty. There is no provision anywhere in the Act stipulating that such protective assessment has also to be made along with the original assessment as per:- Bhatia Motor Stores Versus Commissioner of Income-Tax [ 2005 (12) TMI 81 - MADHYA PRADESH- High Court ], Lalji Haridas Versus Income-Tax Officer And Another, [1961 (7) TMI 8- Supreme Court] , G. Topi Saheb Versus Commissioner Of Income-Tax [ 1987 (1) TMI 23- ANDHRA PRADESH High Court] .