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TMI Blog2007 (11) TMI 264X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. They arise out of an order passed by the Income Tax Appellate Tribunal in I.T.A.Nos.412(Coch)/2005 to 417(Coch)/2005. 4. Smt.Annie Varkey, Proprietor, M/s.Toshima Rubber Products has filed I.T.A.Nos.121 of 2007 to 130 of 2007 and they arise out of an order passed by the Income Tax Appellate Tribunal in I.T.A.Nos.418 (Coch)/2005 to 423 (Coch)/2007. They relate to the assessment years 1996-97 to 2001-02. 5. Tolin Rubbers Private Limited is a Company incorporated under the provisions of the Companies Act. 6. The Central Excise authorities had conducted an inspection in the business premises of Tolin Rubbers Private Limited. After such inspection, they had found certain amounts deposited in the benami accounts. They have initiated further proceedings pursuant to such an inspection. We are not concerned with the proceedings initiated by the Central Excise authorities in these appeals. 7. The assessing authority had completed the assessment proceedings against Tolin Rubbers Private Limited and had quantified the tax liability under the provisions of the Income Tax Act (hereinafter for the sake of brevity referred to as "the Act"). After receipt of the information from the Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he above, we remit the matter to the assessing authority for a fresh decision in accordance with law. It is clarified that the quashing of the orders shall not entitle the appellant to the immediate refund of Rs.25 lakhs that it had deposited. However, the appellant's entitlement shall be determined in the light of the final order. In case it is found that no tax was due from the appellant, it shall be entitled to the refund with interest. Otherwise, the amount deposited shall be adjusted against the demand. At this stage, we do not consider it appropriate to make any observation on the merits of the controversy". 10. By the aforesaid order, this Court has set aside the substantive assessments passed against Tolin Rubbers Private Limited and the matter is remanded to the assessing authority to redo the matter in accordance with law and in the light of the observations made by this Court while disposing of the Writ Appeal. 11. K.P.Varkey, Proprietor, M/s.Tolin Rubbers; K.V. Tolin, Proprietor, M/s.Tolin Pre-Treads and Smt.Annie Varkey, Proprietor, M/s.Toshima Rubber Products, aggrieved by the orders passed by the assessing authority under Section 148 of the Act, had called in quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether the Tribunal was right in law and on facts in directing the assessing officer to decide the protect assessments afresh especially when the issue of initiation of a protective assessment is a matter which has to be decided by the assessing officer at the time of conducting a regular assessment against the main assessee (in this case Tolin Rubbers (P) Limited) and not prior to it. (iv) Whether the Tribunal was right in law and on facts in directing the assessing officer to decide the protective assessments afresh especially when the decision of the Hon'ble Supreme Court in the case of Lalji Haridas Vs. ITO - 1961 (43) ITR 387 (SC) - clearly indicates that the finalization of protective assessments must await the outcome of the substantive assessment". 16. Sri.Jayasankar.A.K., learned counsel appearing for the appellants would contend that the Tribunal was not justified in allowing the Department's appeals, primarily on the ground that the substantive assessments in the case of Tolin Rubbers Private Limited have been set aside by this Court. He is of the view, that, since the assessees have succeede ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s.Tolin Rubbers; K.V.Tolin, Proprietor, M/s.Tolin Pre-Treads and Smt.Annie Varkey, Proprietor, M/s.Toshima Rubber Products, the assessing authority had passed protective assessments/precautionary assessments and those assessments were set aside by the first appellate authority. That is how the Department is in appeals before the Income Tax Appellate Tribunal. 20. The Appellate Tribunal, without going into the merits of the appeals filed by the Department, merely on the ground that the substantive assessments in the case of Tolin Rubbers Private Limited has been set aside by a Bench of this Court, has allowed the appeals filed by the Department and remanded the matter to the assessing authority to redo the matter in accordance with law. The observations made by the Tribunal in this regard is at paragraph 7 of the orders passed by the Tribunal. The same is as under: "It is not disputed that substantive assessments are made in the case of Tolin Rubbers Pvt. Ltd and those assessments were subject matter of Writ Petition being WA No.No.953 of 2003 (A). It is also not disputed that the Hon'ble High Court was pleased to remit all the substantive assessments to the file of the assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oy are in any way wrong. There can be no doubt that taxing statutes must be strictly construed in favour of the assessee. It is also true that there cannot be any assessment excepting of an assessee, and there can be no doubt that the Income-tax authorities must confine themselves within the four corners of the statute and not invent new procedures outside the limits of the Indian Income-tax Act. But let us see what they have really done. It is not as if they have made the assessment outside the Indian Income-tax Act. The trouble is that owing to the various litigations mentioned above, it is not established finally as to who is the proper assessee. It is not permissible to assess a fictitious person, but I do not see that there is anything to prevent assessment of a person of whom it is not finally known whether he is fictitious or not. What is the most important thing to consider is the running of time. If the Income-tax authorities are precluded from making an alternative assessment, then, by the time the disputes are over, the real assessment would be barred. Therefore, I cannot see why an alternative assessment, that it to say, protective assessment, should be declared to be i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities. Mr.Meyer on behalf of the Income-tax authorities agreed to give an undertaking that they will take this money and keep it in a suspense account until the Supreme Court has decided the rights of the parties one way or the other, and further that the Income-tax authorities will not execute or enforce the taxes twice over, that is to say, once against Jagannath Hanumanbux and a second time against Ladhuram Taparia. The petitioners, however, are not agreeable to this course. It is quite evident that they are anxious to take away the money. After all, relief under article 226 is discretionary and it ought not to be exercised so as to defeat a lawful claim, particularly that of the State's revenue. So far as these debtors are concerned, I do not think that they can with any safety to themselves pay the monies to Messrs.Jagannath Hanumanbux. Under the circumstances, I do not see why I am compelled to make an order which will confuse all these debtors and be instrumental in aiding the immediate petitioner before me to realise monies and take it beyond the reach of the Income-tax authorities. While I cannot hold that a protective recovery is permissible in law, I do hold that o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustified in resisting the enquiry which is proposed to be held by respondent No.I in pursuance of the impugned notice issued by him against the appellant. Under these circumstances we do not propose to deal with the point of law sought to be raised by Mr.Nambiar." We would, however, like to add one direction in fairness to the appellants. The proceedings taken against both the appellants should continue and should be dealt with expeditiously having regard to the fact that the matter is fairly old. In the proceedings taken against Lalji the Income-tax Officer should make an exhaustive enquiry and determine the question as to whether Lalji is liable to pay the tax on the income in question. All objections which Lalji may have to raise against his alleged liability would undoubtedly have to be considered in the said proceedings. Proceedings against Chhotalal may also be taken by the Income-tax Officer and continued and concluded, but until the proceedings against Lalji are finally determined no assessment order should be passed in the proceedings taken against Chhotalal. If in the proceedings taken against Lalji it is finally decided that it is Lalji who is responsible to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e again reiterate that the Tribunal, in the appeals filed by the Department, has not decided the matter on merits. It has only allowed the appeals merely on the ground that the substantive assessments made in the case of Tolin Rubbers Private Limited have been set aside by a Division Bench of this Court. 28. In our opinion, in a situation of this nature, an equitable consideration requires to have been adopted by the Tribunal. It could have kept the appeals filed by the Department pending till a substantive assessment is passed by the Income Tax Officer as directed by this Court while disposing of the Writ Appeal or in the alternative, it could have decided the appeals filed by the Department on merits, since the assessees have succeeded before the first appellate authority. Merely because a substantive assessment has been set aside by a Bench of this Court, it is not permissible for the Tribunal to have allowed the Department's appeals by setting aside the orders passed by the first appellate authority. 29. In view of the above, we are of the opinion, we cannot sustain the conclusion reached by the Tribunal while allowing the Department's appeals. Therefore, we pass the followin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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