901. Board’s authorisation for taking action under section 154 beyond time limit specified under section 154(7) in cases of protective assessments requiring to be cancelled – Order under section 119(2)(b)
A copy of the order dated 20-12-1971 passed by the Board on the subject is enclosed for information and guidance.
Circular : No. 71 [F.No. 246/25/71-A & PAC], dated 20-12-1971.
ANNEX – ORDER REFERRED TO IN CLARIFICATION
1. Where the same income was assessed, as a protective measure, in the hands or more than one assessee or as the income of more than one assessment year, and one or more of these protective assessments needs to be cancelled as a result of some of the relevant assessments having become final and conclusive, it has been the practice of the Income-tax Department to cancel the redundant assessments under section 154, treating these as involving mistakes apparent from the records. This is being done by the Income-tax Officers either suo motu or on applications made by assessees. Sometimes, it is not possible to take action under section 154 in such cases because of the operation of the time limit laid down in sub-section (7) of section 154. Since the operation of this time limit causes genuine hardship to the affected assessees, the Central Board of Direct Taxes, in exercise of the powers vested in them under clause (b) of sub-section (2) of section 119, hereby authorises the Income-tax Officer to take action under section 154, or to admit or dispose of on merits applications under section 154 filed by assessees seeking relief, for cancelling such protective assessments as have become redundant by waiving, if necessary, the time limit fixed under sub-section (7) of section 154.
2. Every case of the relaxation of the time limit on the authority of this order shall be reported by the Income-tax Officer to the Inspecting Assistant Commissioner, in whose jurisdiction he is functioning within one month of the passing of such order.
JUDICIAL ANALYSIS
EXPLAINED IN – The above circular was referred to in Kirtikumar Vinodray, Sanjay Kumar Vinodrai and Sandip Ashwinkumar Trust v. ITO 1995 Tax LR 186 (ITAT-Ahd.), with the following observations:
“. . . Once we hold that the entire income should be assessed in the hands of the trustees in their representative capacity under section 161(1A), it is simultaneously necessary to also direct the Assessing Officer to delete the share income from the trust in the hands of the respective beneficiaries as otherwise it would result in levy of tax twice on the same income, which is not permissible under the aforesaid provisions and which is clearly invalid in view of the various decisions referred to herein before. Such a finding is, therefore, a necessary finding for a proper disposal of the present appeal before us. We have, therefore, directed the ITO to rectify the assessments in the case of all the three beneficiaries by passing appropriate orders. We would also like to make it clear that once the entire income has been held to be taxable in the hands of the trustees in their respective capacity under section 161(1A), the inclusion of the same income in the hands of the respective beneficiaries in their respective returns and its acceptance under section 143(1) would only be in the nature of a protective inclusion in the hands of the beneficiaries which deserves to be deleted and cancelled under section 154 regardless of the fact that a period of more than 4 years have already passed. Such deletion of the share income from the trust in the hands of the beneficiaries will also be in consonance with Circular No. 71, dated 20-12-1971 issued by the Board under section 119 read with section 154 of the Income-tax Act, 1961. The ITO is, therefore, directed to grant necessary relief in the assessments of all the three beneficiaries as indicated above.” (p. 191)
