9911796707
TMI Blog1986 (1) TMI 166X X X X Extracts X X X X X X X X Extracts X X X X ..... ntimated the assessee of this. In closing of the assessment in this manner, he specifically noted the assessment made on the assessee-trust for the immediately preceding year (1979-80). A copy of the said assessment order which was passed on25th March, 1982, is available at page 59 of the paper book filed by the assessee before us. In that assessment, the ITO held as follows: (i) The beneficiaries were the daughter-in-law, the grandsons and the grand daughters of the settlors. (ii) In view of the above relationship, income accruing to the beneficiaries would be assessable in the hands of the settlors under s. 64(1)(vi) in respect of their respective contributions. (iii) However, since the assessee trust filed a return, assessment woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income of the settlors. (iii) In view of the above position, there was a Prima facie case for interference under s. 263. The CIT accordingly issue a show cause notice under s. 263 and after hearing the assessee on its objections, held that the assessment made on 1st Jan., 1983 was erroneous and prejudicial to the interest of revenue because (a) the word protective was not mentioned in the assessment order for this year and the approach of the ITO was also distinct for this year form that of the ITO for the asst. yr. 1979-80, (b) the fact that no action was taken in the hands of the settlors would not be a relevant circumstance for not taking action under s. 263 in the instant case and though the Tribunal dismissed the Department s a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s wife. The Tribunal found no substance in this contention. It held that such a contention was relevant in the assessment of the assessee-trust. It observed as under in this regard: "The question of assessability of the income in the hands of the settlors could be considered only when that assessment is made. In that case alone, the question of application of s. 64 could be considered. Here the assessee had filed a return and an assessment has been made. Thus we hold that ground No. 1 is redundant and not relevant for this appeal." 5. The second objection before the Tribunal was that without prejudice to the objection No. 1, the AAC had not been justified in holding that the trust income could not be charged to tax as an AOP but that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reason for interference is, however, on quite a different aspect. It has, in fact, nothing to do with the assessment of the assessee-trust. It has everything to do with the assessment of the settlors. Whether the ITO describes the assessment of the trust here as a protective assessment or not, the Department s freedom of action as regards the settlors is unfettered. Merely because the ITO failed to describe the assessment, here as a protective assessment, the CIT s hands will not be tied in the matter of taken appropriate action (if he is so advised) in the cases of the settlors. As the Tribunal observed for the asst. yr. 1979-80, this issue of assessing the settlors under s. 64(1) is totally irrelevant so far as the assessee-trust is conc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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