Kerala High Court
Commissioner Of Income-Tax vs Dr. David Joseph on 13 December, 1994
Equivalent citations: [1995]214ITR658(KER)
JUDGMENT V.V. Kamat, J.
1. The Income-tax Appellate Tribunal, under Section 256(1) of the Income-tax Act, 1961, has referred the following question :
" Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee-trust cannot be taxed in view of the fact that one of the beneficiaries of the trust had earlier been assessed to tax as a beneficiary of the trust ?"
2. From the statement placed before us, the short matrix is provided as below : The assessment year is 1980-81, ending on March 31, 1980. The assessee is the executor of a trust created by himself for the benefit of his two minor children, Pradeep George Joseph and Pramod John Joseph. The Income-tax Officer assessed the income of the property acting under Section 164(1) of the Income tax Act, 1961. The assessment was completed on February 18, 1983. It appeared that long before this assessment, the Income-tax Officer had already assessed the minor beneficiary, Pramod John Joseph, on December 31, 1980.
3. It was contended before the Appellate Assistant Commissioner that once a beneficiary is assessed and he has been specified as such in the trust deed, the assessee-trust cannot thereafter be taxed, The Appellate Assistant Commissioner negatived this contention taking the assessee before the Tribunal.
4. The basic facts do not have any dent anywhere. It is more clear that the beneficiary, Pramod John Joseph, was already assessed prior in point of time by an assessment order dated December 31, 1980, and it was thereafter that the trust on the basis that it is an association of persons was proceeded against under Section 164(1) of the Income-tax Act, 1961. In fact, there should be no difficulty to proceed further on the basis of this factual situation, to conclude that the Income-tax Officer cannot subsequently assess the trust as it would obviously amount to a process of double taxation, apart therefrom.
5. The Tribunal has referred to three circulars dated February 24, 1967, December 26, 1974, and August 24, 1966. In the order of reference, the Tribunal has been careful to tell us the respective source of these circulars. The Tribunal has also been cautious to make a reference that the Departmental Representative was not able to show any circular or instruction to the contrary. These circulars are to the effect that once the choice is made by the Department to tax either the trust or the beneficiary, it is no more open to the Department to go behind it and assess the other at the same time. The Tribunal has placed reliance on the decision of the Gujarat High Court in Laxmichand Hirjibhai v. CIT [1981] 128 ITR 747 to the effect that the provisions of these circulars are to be followed by the Income-tax Officer for its own internal discipline. The position that emerges would be a position for the application of the principle of finality. Once a beneficiary is assessed and his assessment is completed prior in point of time, and his assessment is an element of finality, it is a natural consequence flowing therefrom that the Department does not get any permission to go behind it for the purpose of scrutinising the procedure, for finding out faults in regard thereto, the sole object of which1 is to justify the subsequent action taken by the Department. These are in fact the normal consequences that flow from the principle of finality. This principle especially when emerged from three circulars and has established into a settled practice, any time a deviation therefrom cannot be permitted, even on the ground of a mistake with regard to the merits of the situation that received finality.
6. The Tribunal has taken up for consideration the other aspect of the process of double assessment and has placed reliance on decisions taking the view that an attempt to assess the trust much after the completion of the assessment of the beneficiary would be an illustration of double taxation. However, the Tribunal has rest content with the observation that it would not be necessary to refer all such decisions. We have also not considered this aspect of the question in view of the situation of factual finality as referred to above.
7. For the above reasons, we accept the reference and hold that the Tribunal was right in holding that the assessee-trust cannot be taxed in view of the fact that one of the beneficiaries of the trust -- Pramod John Joseph -- had earlier been assessed by the completion of the assessment proceedings on December 31, 1980, in his capacity as beneficiary of the trust.
8. A copy of the judgment shall be sent under the seal of the court and the signature of the Registrar to the Appellate Tribunal which shall pass such orders as are necessary to dispose of the case conformably to such judgment.