ACIT, CIR-60, KOLKATA, Kolkata V. Jayanta Kumar Banerjee, Mumbai

ITA 490/KOL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1651 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 24-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAURABH KUMAR
• Assessee Lawyers: D S DAMLE
• Keywords: Maximum Marginal Rate

Judgement Text

ITA N0.490/KOL/2015 JAYANTA KUMAR BANERJEE A.Y.2010 -11 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH B KOL KATA [BEFORE HONBLE SHRI N.V.VASUDEVAN, JM & SHRI WAS EEM AHMED, AM ] ITA NO.490/KOL/2015 ASSESSMENT YEAR : 2010-11 A.C.I.T., CIRCLE-60, -VERSUS- SHRI JAYANTA KUMAR BANERJEE KOLKATA KOLKATA (PAN: AELPB 5622 A) (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI SAURABH KUMAR, ADDL. CI T(DR) FOR THE RESPONDENT: SHRI D.S.DAMLE, FCA DATE OF HEARING : 21.08.2017. DATE OF PRONOUNCEMENT : 25.08.2017. ORDER PER N.V.VASUDEVAN, JM: THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 18.10.2015 OF CIT(A)-18, KOLKATA RELATING TO AY 2010-11. 2. THE REVISED GROUNDS OF APPEAL FILED BY THE R EVENUE READS AS FOLLOWS :- 1. WHETHER LD. CIT{A)-18, KOLKATA HAS ERRED ON FAC TS AND LAW BY HOLDING THAT ASSESSEE IS A BENEFICIARY OF ICLCI VENTURE VALUE TR UST WHEN NO SUCH EVIDENCE WAS PRODUCED BEFORE THE AO BY THE ASSESSEE. 2. WHETHER LD. CIT{A)-18, KOLKATA HAS ERRED ON FACT S AND LAW BY HOLDING THAT THE ASSESSEE IS A BENEFICIARY OF THE TRUST, EVEN TH OUGH IT WAS STATED BY THE ASSESSEE HIMSELF IN LETTER DATED 18.02.2013 TO THE AO THAT IF THAT ICICI VENTURE VALUE FUND ( THE FUND) IS A TRUST ESTABLISHED UNDER INDIAN TRUST ACT, 1882, WITH AN OBJECTIVE TO PROVIDE FINANCIAL AND OTHER ASSISTA NCE TO A PORTFOLIO OF INDIAN COMPANIES ... ' AND ALSO THE ASSESSEE HAD SUBSCRIBE D TO THE FUND BY PURCHASING UNITS OF THE FUND WELL AFTER ITS CREATION AND NOT F ROM THE BEGINNING. 3. WHETHER LD. CIT{A)-18, KOLKATA HAS ERRED ON FACT S AND LAW BY DELETING THE ADDITION OF RS.83,99,542/- WHEN THE ASSESSEE HAD FA ILED TO SUBSTANTIATE THE CLAIM THAT SURPLUS RECEIVED FROM ICLCI VENTURE FUND IS A PART OF THE DISTRIBUTION OF THE INCOME OF ICICI VENTURE FUND TRUST TO ITS BENEFICIA RIES, BY WAY OF SUBMISSION OF ANY CLARIFICATION CONFIRMATION OR RECONCILIATION OF AMOUNTS MENTIONED FOR RETURN OF INITIAL SUBSCRIPTION AND REDEMPTION, AT THE STAG E OF ASSESSMENT. ITA N0.490/KOL/2015 JAYANTA KUMAR BANERJEE A.Y.2010 -11 2 4. THAT THE APPELLANT RESPECTFULLY CRAVES LEAVE TO ADD, AMEND, ALTER AND/OR FOREGO ANY GROUND{S) AT OR BEFORE THE TIME OF HEARING. 3. THE ASSESSEE IS AN INDIVIDUAL. IN THE COUR SE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAS RECEIVED A SUM OF RS. 83,99,542/- FROM ICICI VENTURE VALUE FUND (VVF). IT WAS THE PLEA OF THE ASSESSEE T HAT VVF WAS A TRUST SET UP UNDER THE INDIAN TRUST ACT 1882. IT WAS AN INVESTMENT TRU ST. THE ASSESSEE IS AN EMPLOYEE OF ICICI VENTURES FUNDS MANAGEMENT CO.LTD. (VFM). VFM IS ENGAGED IN MANAGING VENTURE CAPITAL FUND. VFM INVESTED THEIR INCOME IN INVESTMENT TRUST. THE ASSESSEE AS AN EMPLOYEE OF VFM INVESTED HIS FUNDS IN VVF. THE A SSESSEE RECEIVED THE FOLLOWING SUMS DISTRIBUTED AS SURPLUS BY VVF :- NATURE OF SURPLUS AMOUNT IN RS. TAX STATUS INCOME 8,191,527 INCOME TAX LIABILITY FULLY DISCHAR GED BY ICICI VENTURE VALUE FUND PREMIUM RETURN 208,015 NOT SUBJECT TO INCOME-TAX, BEING RETURN OF PREMIUM AMOUNTS COLLECTED EARLIER. TOTAL 8,399,542 4. THE ASSESSEE IS THE HOLDER OF THE INVESTM ENTS IN INVESTMENT TRUST VVF. THE STATEMENT OF THE ACCOUNT OF THE ASSESSEE IN VVF SHO WING THE RECEIPT OF RS.83,99,542/- DURING THE PREVIOUS YEAR IS GIVEN AS ANNEXURE-I TO THIS ORDER. THE PLEA OF THE ASSESSEE BEFORE THE AO WAS THAT SINCE IT WAS THE BE NEFICIARY OF VVF AND SINCE THE TRUST VVF HAS ALREADY PAID TAX ON THE SUM RECEIVED BY THE ASSESSEE, THE SUM OF RS.83,99,542/- RECEIVED BY THE ASSESSEE FROM VVF CA NNOT AGAIN BE BROUGHT TO TAX. IN THIS REGARD THE PLEA OF THE ASSESSEE WAS THAT THE A CT CONFERS THE RIGHT .TO TAX THE INCOME OF THE TRUST EITHER IN THE HANDS OF THE BENEFICIARY OR THE TRUSTEES. IN THIS REGARD, THE CENTRAL BOARD OF DIRECT TAXES (CBDT) VIDE ITS CIRCU LAR DATED F. NO. 45178/66 - ITJ(5) DATED FEBRUARY 24, 1967 HAS CLARIFIED THAT ONCE THE DEPARTMENT HAS TAXED THE TRUSTEES OR THE BENEFICIARY, IT IS NOT OPEN TO THE DEPARTMEN T TO GO BEHIND IT AND ASSESS THE OTHER AT THE SAME TIME. ITA N0.490/KOL/2015 JAYANTA KUMAR BANERJEE A.Y.2010 -11 3 5. IT WAS ALSO THE PLEA OF THE ASSESSEE THAT VVF H AS DISCHARGED THE TAX ON THE INCOME IN REPRESENTATIVE CAPACITY. ACCORDINGLY, WHEN SUCH TAX PAID INCOME HAS BEEN DISTRIBUTED TO THE ASSESSEE, HE IS NOT LIABLE TO FU RTHER PAY TAX ON THE SAID INCOME. THE ASSESSEE RELIED ON THE PROVISIONS OF SECTI ON 160 OF THE ACT, WHICH DEFINES THE TERM 'REPRESENTATIVE ASSESSEE.' AS PER SECTION 160(1)(IV ) OF THE ACT, A TRUSTEE APPOINTED UNDER A TRUST DECLARED BY A DULY EXECUTED INSTRUMEN T IN WRITING, WHO RECEIVES OR IS ENTITLED TO RECEIVE ANY INCOME ON BEHALF OF OR FOR THE BENEFIT OF ANY PERSON SHALL BE TREATED AS A REPRESENTATIVE ASSESSEE IN RESPECT OF SUCH INCOME. FURTHER REFERENCE WAS MADE TO SECTION 161, OF THE ACT WHICH PROVIDES THAT 'REPRESENTATIVE ASSESSEE SHALL BE SUBJECT TO SAME DUTIES, RESPONSIBILITIES- AND LIABI LITIES AS IF THE INCOME WERE RECEIVED BY OR ACCRUING TO OR IN FAVOR OF HIM 'BENEFICIALLY, AND SHALL BE LIABLE TO ASSESSMENT IN: HIS OWN IN RESPECT OF THAT INCOME, BUT ANY SUCH ASS ESSMENT SHALL BE DEEMED TO BE. MADE UPON HIM IN HIS REPRESENTATIVE CAPACITY ONLY, AND THE TAX SHALL, SUBJECT TO THE OTHER PROVISIONS CONTAINED IN THIS CHAPTER, BE LE VIED UPON AND RECOVERED FROM HIM IN LIKE MANNER AND TO THE SAME EXTENT AS IT WOULD BE L EVIABLE UPON AND RECOVERABLE FROM THE PERSON REPRESENTED BY HIM. THE ASSESSEE SUBMIT TED THAT AS PER SECTION 161 OF THE ACT, THE TAX TO BE REALIZED FROM A BENEFICIARY , CA N BE LEVIED UPON AND RECOVERED FROM A REPRESENTATIVE ASSESSEE IN THE LIKE MANNER AND T O SAME EXTENT AS IT WOULD BE LEVIABLE UPON AND RECOVERABLE FROM THE PERSON REPRE SENTED BY HIM. THUS THE LIABILITY OF THE TRUSTEE WITH REGARD TO THE INCOME RECEIVED B Y HIM OR BEHALF OR FOR THE BENEFIT OF THE BENEFICIARY, IS CO-EXTENSIVE WITH THAT OF SUCH BENEFICIARY AND CANNOT UNDER ANY CIRCUMSTANCES BE LARGER OR 'WIDER THAN THAT OF SUCH BENEFICIARY AND SUCH, THE BENEFICIARY CANNOT AGAIN BE LIABLE FOR TAX ON THE S AID INCOME. ACCORDING TO SECTION 161 (1), THE TAX TO BE REALIZED FROM THE BENEFICIAR IES ETC, CAN BE LEVIED. UPON AND RECOVERED FROM THE REPRESENTATIVE ASSESSEE IN THE L IKE MANNER AND TO THE SAME EXTENT AS IT WOULD BE LEVIABLE UPON AND RECOVERABLE FROM T HE PERSON REPRESENTED BY HIM. 6. THE ASSESSEE VIDE ITS LETTER DATED 18.02. 2013 FILED BEFORE THE AO SUBMITTED A COPY OF THE LETTER DATED 21.01.2013 OF VVF WHEREIN THEY CONFIRMED THE FACT THAT THE SUM OF RS.83,99,542/- WAS DISTRIBUTED AS SURPLUS BY THEM AND THAT THEY HAVE ALREADY ITA N0.490/KOL/2015 JAYANTA KUMAR BANERJEE A.Y.2010 -11 4 PAID TAX ON THE INCOME OF THE TRUST AND THEREFORE T HE SURPLUS DISTRIBUTED TO THE BENEFICIARY CANNOT BE BROUGHT TO TAX. ACCORDING TO THE AO THE STATEMENT GIVEN BY VVF ALONG WITH THE AFORESAID LETTER DID NOT DEAL WI TH THE SUM OF RS. 83,99,542/- WHICH WAS CLAIMED BY THE ASSESSEE AS DEDUCTION. THE AO THEREFORE HELD THAT THE ASSESSEE FAILED TO SUBSTANTIATE THAT THE SUM OF RS. 83,99,542/- RECEIVED FROM VVF WAS NOT TAXABLE. ACCORDINGLY THE SAID SUM WAS BROUGHT T O TAX BY THE AO. 7. ON APPEAL BY THE ASSESSE THE CIT(A) DELETE D THE ADDITION MADE BY THE AO BY OBSERVING AS FOLLOWS :- 4.3. IN GROUND NOS. 2 TO 5 THE APPELLANT HAS CHALL ENGED THE ADDITION OF RS.83,99,542/- BEING THE SUM RECEIVED FROM ICICI VE NTURE VALUE FUND TRUST. ON SCRUTINY OF THE ASSESSMENT ORDER IT APPEARED THAT T HE AO REJECTED THE EXPLANATIONS PUT FORTH BY THE A/R ONLY BECAUSE IN HIS OPINION TH E APPELLANT HAD FAILED TO SUBSTANTIATE THE EXPLANATIONS OFFERED BY PRODUCING COGENT AND AUTHENTICATED DOCUMENTS WHICH WOULD SUBSTANTIATE THAT THE AMOUNTS RECEIVED FROM THE TRUST HAD SUFFERED TAX IN ITS HANDS & HENCE NOT TAXABLE I N ASSESSEE'S HANDS. IT APPEARED FROM THE IMPUGNED ORDER THAT THE AO, PER SE, DID NO T POINT OUT ANY SPECIFIC PROVISION OF THE I. T. ACT UNDER WHICH THE POST-TAX PAID DISTRIBUTION OF THE INCOME BY THE TRUST AMONGST BENEFICIARIES CAN BE HELD CHAR GEABLE IN THE ASSESSMENT OF THE BENEFICIARY. ON THE CONTRARY THE ASSESSEE IN TH E COURSE OF ASSESSMENT AS ALSO IN THE COURSE OF APPEAL PLACED SUFFICIENT DOCUMENTA RY EVIDENCE WHICH PROVED THAT THE ASSESSEE WAS ONE OF THE BENEFICIARY OF ICICI VE NTURE VALUE FUND TRUST. IT TRANSPIRED FROM THE DOCUMENTS ON RECORD THAT THE SA ID TRUST WAS A DISCRETIONARY TRUST AND IT WAS REGULARLY ASSESSED TO TAX UNDER TH E CHARGE OF INCOME-TAX OFFICER, WARD 9(1),BENGALURU. BOTH BEFORE THE AO AS WELL AS IN THE COURSE OF APPE AL THE APPELLANT FURNISHED CONFIRMATIONS FROM THE TRUSTEES OF THE ICICI VENTURE VALUE FUND TRUST WHEREIN IT WAS CERTIFIED BY THEM THAT TH E SAID TRUST WAS REGULARLY FILING ITS INCOME TAX RETURNS IN RESPECT OF INCOME DERIVED BY THE TRUST AND TAXES DUE THEREON WERE PAID. I FURTHER FIND FROM THE AIR' S SUBMISSIONS THAT SIMULTANEOUSLY WITH PASSING OF THE IMPUGNED ORDER F OR AY. 2010-11; THE SAID AO INITIATED RE-ASSESSMENT PROCEEDINGS FOR AYS 2006-07 AND 2008-09 BECAUSE AS PER THE INFORMATION GATHERED BY HIM IN THE COURSE OF PR OCEEDINGS FOR AY 2011-12 IT WAS NOTED THAT THE APPELLANT HAD RECEIVED SIMILAR P AYMENTS IN THESE TWO YEARS FROM THE SAID TRUST. FROM THE REASONS RECORDED U/S 148(2) FOR THESE YEARS IT TRANSPIRED THAT THE ONLY REASON FOR WHICH THE ASSES SMENTS FOR THESE 2 YEARS WERE REOPENED WAS TO ASSESS THE AMOUNTS WHICH THE ASSESS EE HAD RECEIVED FROM ICICI VENTURE VALUE FUND TRUST IN A YS 2006-07 & 2008-09. FROM THE DOCUMENTS PLACED BEFORE ME IT FURTHER TRANSPIRED THAT IN THE COURSE OF THE SAID RE-ASSESSMENT PROCEEDINGS THE AO NOT ONLY OBTAINED THE CONFIRMATI ONS DIRECTLY FROM THE TRUSTEES OF THE ICICI VENTURE VALUE FUND TRUST BUT THE AO ALSO OBTAINED INFORMATION FROM THE ITO, WARD 9(1), BENGALURU IN W HOSE CHARGE THE SAID TRUST ITA N0.490/KOL/2015 JAYANTA KUMAR BANERJEE A.Y.2010 -11 5 WAS REGULARLY ASSESSED. ON RECEIPT OF THE RELEVANT INFORMATION AND ON BEING SATISFIED THAT THE SAID ICICI VENTURE VALUE FUND TR UST WAS PAYING TAX ON ITS ENTIRE INCOME AND THE AMOUNTS WERE DISTRIBUTED BY T HE TRUST ONLY OUT OF THE POST- TAX PAID INCOME, THE SUCCESSOR AO WHILE FRAMING THE ASSESSMENTS U/S 147/143(3) FOR THE ASSESSMENT YEARS 2006-07 & 2008-09 ACCEPTED THE APPELLANT'S PLEA FOR NON-TAXABILITY OF THE SUMS RECEIVED ON THE DISTRIBU TION OF INCOME BY THE TRUST. I THUS FIND THAT ON THE SAME SET OF FACTS THE SUCCEED ING AO AFTER CONDUCTING ENQUIRIES DIRECTLY FROM THE TRUST AS ALSO FROM THE ASSESSING OFFICER OF THE TRUST ACCEPTED THE APPELLANT'S CONTENTION THAT THE SUM WH ICH THE APPELLANT WAS RECEIVING FROM ICICI VENTURE VALUE FUND TRUST WAS I N THE NATURE OF DISTRIBUTION OF POST-TAX PAID INCOME. IN THE CIRCUMSTANCES IN TE RMS OF PROVISIONS OF SECTION 160 & 161 OF THE INCOME-TAX ACT, 1961 SUCH INCOME W AS CHARGEABLE ONLY IN THE HANDS OF THE TRUSTEES AND NOT IN THE HANDS OF THE A PPELLANT BEING ONE OF THE BENEFICIARIES. 4.4. THE APPELLANT'S PLEA WITH REGARD TO NON-TAXABI LITY OF THE AMOUNTS RECEIVED OUT OF THE POST-TAX PAID DISTRIBUTION OF INCOME BY THE TRUST IS SQUARELY COVERED BY THE CBDT CIRCULAR NO. 157[F NO. 228/08173-IT(A-2)] DATED 26.12.1974. IN THIS CIRCULAR THE BOARD HAVE CLARIFIED THAT ONCE THE INC OME IS ASSESSED IN THE HANDS OF THE TRUST THEN SUCH INCOME ON ITS DISTRIBUTION CANN OT BE ASSESSED IN THE HANDS OF THE BENEFICIARY. THE SAID CIRCULAR MERELY CLARIFIES THE FUNDAMENTAL PRINCIPLE OF TAXATION WHICH IS TO THE EFFECT THAT THE SAME INCOM E CANNOT SUFFER TAX MORE THAN ONCE. I ALSO NOTE THAT ON THE IDENTICAL FACTS THE C IT(APPEALS)-XXX, NEW DELHI IN THE CASE OF SHRI SUMIT CHANDWANI HAD DELETED THE AD DITION MADE IN RESPECT OF THE AMOUNT WHICH THE SAID ASSESSEE HAD RECEIVED ON DIST RIBUTION OF INCOME BY ICICI VENTURE VALUE FUND TRUST. ON CONSIDERATION OF THE T OTALITY OF THE FACTS & CIRCUMSTANCES THEREFORE I HAVE NO HESITATION IN HOL DING THAT THE SUM OF RS.81,91,527/- WHICH THE ASSESSEE RECEIVED BY WAY O F DISTRIBUTION OF POST-TAX PAID INCOME FROM ICICI VENTURE VALUE FUND TRUST WAS NOT CHARGEABLE TO TAX IN THE HANDS OF THE APPELLANT. ADDITIONALLY DURING THE YEAR UNDER CONSIDERATION TH E ASSESSEE RECEIVED RS.2,08,015/- TOWARDS REFUND OF PRINCIPAL AMOUNT CO NTRIBUTED BY HIM TO ICICI VENTURE VALUE FUND TRUST FOR BEING ADMITTED AS BENE FICIARY. NO DEDUCTION FOR THE AMOUNTS CONTRIBUTED WAS CLAIMED AT THE TIME OF ITS PAYMENT. AS PER THE CONFIRMATION FURNISHED BY ICICI VENTURE VALUE FUND TRUST, THE SUM OF RS.2,08,015/- WAS CERTIFIED TO BE REFUND OF THE PRI NCIPAL CONTRIBUTION PAID BY THE ASSESSEE AND THEREFORE ON ITS REFUND NO ADDITION TO THE ASSESSEE'S INCOME COULD BE JUSTIFIED. IN THE CIRCUMSTANCES THE AO IS DIRECTED TO DELETE THE ENTIRE ADDITION OF RS.83,99,542/-. GROUND NOS. 2 TO 5 IS ACCORDINGLY A LLOWED. 8. AGGRIEVED BY THE ORDER OF CIT(A) THE REVE NUE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. ITA N0.490/KOL/2015 JAYANTA KUMAR BANERJEE A.Y.2010 -11 6 9. WE HAVE HEARD THE SUBMISSIONS OF THE LD.DR , WHO RELIED ON THE ORDER OF THE AO. THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE ORDE R OF CIT(A). 10. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIN D THAT VVF IN ITS LETTER DATED 21.01.2013 FILED BEFORE THE AO HAS CLEARLY EXPLAINE D THAT TAXES HAVE BEEN PAID BY IT AND THE SURPLUS ARE DISTRIBUTED TO THE ASSESSEE. IT HAS BEEN CLEARLY EXPLAINED IN THE SAID LETTER THAT OUT OF THE SUM OF RS. 83,99,542/- A SUM OF RS.2,08,015/- WAS RETURN OF PREMIUM AMOUNTS COLLECTED BY VVF FROM THE ASSESSEE AND THEREFORE THAT CANNOT BE IN THE NATURE OF INCOME. WITH REGARD TO THE REMAINING RS.81,91,527/- VVF HAS CLEARLY EXPLAINED THAT IT HAD INCOME TAX LIABILITY AND THER EFORE THE BENEFICIARY NAMELY THE ASSESSEE NEED NOT SUFFER TAX ON THE VERY SAME AMOUN T. THIS LETTER HAS BEEN COMPLETELY IGNORED BY THE AO IN HIS ORDER OF ASSESSMENT. IN TH E LIGHT OF THE AFORESAID LETTER WE ARE OF THE VIEW THAT THE SUM OF RS. 83,99,542/- CANNOT BE BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE IN VIEW OF THE PROVISION OF SECTION 16 1(1) OF THE ACT. 11. THE GENERAL RULE AS LAID DOWN IN SEC. 161(1) I S THAT INCOME RECEIVED BY A TRUSTEE ON BEHALF OF THE BENEFICIARY SHALL BE ASSESSED IN T HE HANDS OF THE TRUSTEE AS REPRESENTATIVE ASSESSEE AND SUCH ASSESSMENT SHALL B E MADE AND THE TAX THEREON SHALL BE LEVIED UPON AND BE RECOVERED FROM THE REPRESENTATIV E ASSESSEE 'IN LIKE MANNER AND TO THE SAME EXTENT AS IT WOULD BE LEVIABLE UPON THE RE COVERABLE FROM THE PERSON REPRESENTED BY HIM'. TO THE ABOVE RULE, HOWEVER, TH REE EXCEPTIONS HAVE BEEN INCORPORATED IN THE ACT :- (A) UNDER S. 161(1A), TH IS RULE OF APPORTIONMENT AND DETERMINATION OF PROPORTIONATE TAX ATTRIBUTABLE TO THE BENEFICIARY WILL NOT APPLY TO ANY INCOME EARNED BY THE TRUSTEE AS PROFITS AND GAINS O F A BUSINESS. THE WHOLE OF SUCH INCOME SHALL BE TAXED AT THE 'MAXIMUM MARGINAL RATE '. A SIMILAR PROVISO OCCURS ALSO IN S. 164(1) RESTRICTING BENEFITS WHERE BUSINESS IN COME IS INVOLVED. (B) UNDER S. 164(1), IF THE BENEFICIARIES ARE NOT IDENTIFIABLE O R THE INDIVIDUAL SHARES OF THE PERSONS ON WHOSE BEHALF AND FOR WHOSE BENEFIT THE INCOME IS RECEIVABLE ARE INDETERMINATE OR UNKNOWN, SUCH INCOME, AGAIN, WILL BE TAXED AT THE ' MAXIMUM MARGINAL RATE'. (C) IN CERTAIN OTHER CIRCUMSTANCES, SET OUT IN THE PROVISO TO S. 164(1), THE RELEVANT INCOME ITA N0.490/KOL/2015 JAYANTA KUMAR BANERJEE A.Y.2010 -11 7 WILL BE ASSESSABLE NOT AT THE MAXIMUM RATE BUT AT T HE RATE APPLICABLE TO IT AS IF IT WERE THE TOTAL INCOME OF AN AOP. 12. IN CIT VS. DAVID JOSEPH 214 ITR 658 (KER) THE HONBLE KERALA HIGH COURT FOUND THAT THE TRIBUNAL IN THE IMPUGNED ORDER BEFOR E THE HONBLE HIGH COURT HAS REFERRED TO THREE CIRCULARS DT. 24TH FEB., 1967, 26 TH DEC., 1974 AND 24TH AUG., 1966. THESE CIRCULARS ARE TO THE EFFECT THAT ONCE THE CHO ICE 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 POSITION THAT EMERGES WOULD BE A POSITION FOR THE APPLICATION OF THE PRINCIPLE OF FINALITY. O NCE 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 THERE FROM 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 OBJE CT OF WHICH IS TO JUSTIFY THE SUBSEQUENT ACTION TAKEN BY THE DEPARTMENT. THESE ARE IN FACT T HE NORMAL CONSEQUENCES THAT FLOW FROM THE PRINCIPLE OF FINALITY. THIS PRINCIPLE ESPE CIALLY EMERGES FROM THREE CIRCULARS AND HAS ESTABLISHED INTO A SETTLED PRACTICE, ANY TI ME A DEVIATION THEREFROM CANNOT BE PERMITTED, EVEN ON THE GROUND OF A MISTAKE WITH REG ARD TO THE MERITS OF THE SITUATION THAT RECEIVED FINALITY. THE HONBLE COURT HELD 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 HAD EARLIER BEEN ASSESSED BY THE COMPL ETION OF THE ASSESSMENT PROCEEDINGS ON 31ST DEC., 1980 IN HIS CAPACITY AS BENEFICIARY O F THE TRUST. IN RAI SAHE SETH GHISALAL MODI FAMILY TRUST V. CIT, 149 ITR 724 (MP) THE HONBLE M.P.HIGH COURT HELD THAT IF ITO MAKING ASSESSMENT ON BENEFICIARIES , KNEW FULLY WELL THAT S. 164(1) APPLIED, YET EXERCISED HIS DISCRETION TO ASSESS THE BENEFICIARIES AND NOT THE TRUST AND THE MERE FACT THAT HE STATED IN THE ASSESSMENT ORDE R THAT THE ASSESSMENTS WERE SUBJECT TO RECTIFICATION WAS OF NO AVAIL. IN TRUSTEES OF C HATURBHUJ RAGHAVJI TRUST VS. CIT, 50 ITR 693 (BOM) THE HONBLE BOMBAY HIGH COURT HELD TH AT UNDER SUB-S. (2) OF S. 41 OF 1922 ACT), IT IS PERMISSIBLE FOR THE IT AUTHORITIES TO MAKE DIRECT ASSESSMENT ON THE PERSON ON WHOSE BEHALF INCOME, PROFITS AND GAINS FR OM A TRUST ARE RECEIVABLE. SEC. 41 ITA N0.490/KOL/2015 JAYANTA KUMAR BANERJEE A.Y.2010 -11 8 HAVING PROVIDED FOR TWO ALTERNATIVE METHODS, NAMELY , EITHER TO TAX THE INCOME IN THE HANDS OF THE TRUSTEES OR DIRECTLY IN THE HANDS OF T HE PERSON ON WHOSE BEHALF THE INCOME WAS RECEIVABLE UNDER THE TRUST, AND ONE OF THEM HAV ING BEEN AVAILED OF BY THE IT DEPARTMENT IN DIRECTLY ASSESSING BENEFICIARY IN RES PECT OF THE INCOME, THE OTHER WAS NO LONGER AVAILABLE TO THE DEPARTMENT. IT WAS CONTENDE D ON BEHALF OF THE REVENUE THAT THE OPTION WAS OF THE ITO WHO WAS ASSESSING THE TRUST T O DECIDE WHETHER HE WOULD ASSESS THE INCOME IN THE HANDS OF THE TRUSTEES OR DIRECTLY IN THE HANDS OF THE BENEFICIARY. THIS CONTENTION WAS REJECTED BY THE HONBLE HIGH COURT W HICH HELD THAT SEC. 41 WAS A SPECIAL ENABLING PROVISION WHICH PERMITTED THE ASSE SSMENT IN THE HANDS OF THE TRUSTEES BUT DID NOT PRECLUDE THE DIRECT ASSESSMENT IN THE H ANDS OF THE BENEFICIARIES. THERE IS NOTHING IN S. 41 WHICH WOULD INDICATE THAT THE CHOI CE BETWEEN THE ALTERNATIVE METHODS PROVIDED THEREIN HAS TO BE MADE ONLY AT THE TIME OF THE ASSESSMENT OF THE TRUSTEES OR THAT THE CHOICE ONLY BELONGS TO THE ITO WHO IS ASSE SSING THE TRUST. 40. 13. IN CIRCULAR NO.157 DATED 26.12.1974 OF CBDT, T HE CBDT HAS CLARIFIED ON ASSESSMENT OF TRUST WHERE SHARE OF BENEFICIARIES UN KNOWN. IT HAS BEEN CLARIFIED THEREIN AS FOLLOWS: ACCORDING TO THE SCHEME OF THE IT ACT OF 1961, EVEN AS IT WAS UNDER THE IT ACT OF 1922, THE GENERAL PRINCIPLE IS TO CHARGE ALL INCOME ONLY ONCE. THE BOARD DESIRE TO REITERATE THE EARLIER INSTRUCTIONS IN THI S REGARD. IN ORDER THAT THERE IS NO LOSS OF REVENUE, THE ITO SHOULD KEEP THIS POINT IN VIEW AT THE TIME OF RAISING THE INITIAL ASSESSMENT EITHER OF THE TRUST OR THE BENEFICIARIES AND ADOPT A COURSE BENEFICIAL TO THE REVENUE. HAVING EXERCISED HIS OPTION ONCE, WILL IT NOT BE OPEN TO THE ITO TO ASSESS THE SAME INCOME FOR THAT ASSESSMENT YEAR IN THE HANDS O F THE OTHER PERSON (I.E., THE BENEFICIARY OR THE TRUSTEE). 14. THE CIT(A), IN OUR VIEW, WAS THEREFORE FULLY J USTIFIED IN DELETING THE ADDITION MADE BY THE AO. ORDER OF THE CIT(A) DOES NOT CALL F OR ANY INTERFERENCE. ACCORDINGLY THE APPEAL BY THE REVENUE IS DISMISSED. ITA N0.490/KOL/2015 JAYANTA KUMAR BANERJEE A.Y.2010 -11 9 15. IN THE RESULT THE APPEAL BY THE REVENUE IS DISMISSED. O RDER PRONOUNCED IN THE COURT ON 25.08.2017. SD/- SD/- [WASEEM AHMED] [ N.V.VASUDEVAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 25.08.2017. [RG PS] COPY OF THE ORDER FORWARDED TO: 1.SHRI JAYANTA KUMAR BANERJEE, 802, A-WING, CHAITAN YA TOWERS, A.M.MARG, PRABHADEVI, MUMBAI-400025. 2.A.C.I.T., CIRCLE-60, KOLKATA. 3. C.I.T.(A)- 18, KOLKATA 4. C.I.T- 20 , KOLKATA 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER, SENIOR PRIVATE SECRETARY HEAD OF OFFICE/D.D.O, ITAT KOLKATA BENCHES