Case Law Details
CIT Vs Smt. Meenakshi Devi Avaru (Karnataka High Court)
Protective, precautionary or alternate assessment is an assessment which is made ex- abundanti cautela by the Assessing Authority and is therefore called protective or Precautionary Assessment or alternative assessment. When the Department has any doubt as to the person who is or will be deemed to be in receipt of the income, protective or alternative assessments are permitted. Thus, there is no double assessment if the first assessment is void.
It is no doubt true that the IncomeTax Act/Wealth-Tax Act nowhere provides that a protective or precautionary assessment can be raised in respect of one and the same income/wealth on two different persons. A departmental practice that has however gained judicial recognition is that, in certain circumstances, where it appears to the Income-Tax Authorities that certain income has been received during the relevant assessment year but it is not clear who has received that income and prima facie it appears that the income may have been received either by A or B or by both together, it would be open to the relevant Income-Tax Authorities to determine the said question by taking appropriate proceedings both against A and B. This is done so that such income/wealth may not escape taxation altogether. This has been held to be quite sensible because the Revenue has to be protected against the bar of limitation. 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. But while protective assessment is permitted, protective recovery is not allowed. It is one thing to say that the Authorities are merely making an assessment and another thing to say that at one and the same time they could not only make assessment in respect of one set of dues but proceeds to realize both.
Thus, until there is a final assessment in existence the raising of alternative assessment by the Revenue cannot be prevented. Besides, the assessment to tax is one of the processes open in law to adjudicate the title of the parties or the shares of the parties or in the context of Wealth-Tax, whether the asset belongs to the Assessee on the Valuation Date. The powers of the Assessing Officer are also, so far as Revenue purposes are concerned, plenary in the sense he has to decide who is the owner and to whom does a particular income belong. He must, of course, decide the question in accordance with the other provisions of law. But it is for the Revenue authority to decide in accordance with law the rights of the parties and to decide to whom the income/assets in question belong.
On the issue of Protective Assessments, we have already noted above that the demands in question have been raised under the Protective Assessments only framed by the Assessing Authority and the recovery on the basis of the same is not enforceable as of now and therefore, the appellate Orders by the Appellate Tribunal and the Commissioner of Wealth-Tax (Appeals) even though decided the Questions on merits would remain in the character of the Protective Assessments only, but since the Tribunal has decided the question of law also, that is why it has given rise to the aforesaid Substantial Questions of law which we are called upon to decide.
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