1. This reference has been made by the Income-tax Appellate Tribunal, at the instance of the assessee on the direction of this court to answer the following question :
'Whether, on the facts and circumstances of the case, the Tribunal was right in confirming the protective assessment ?'
2. The facts stated by the Tribunal are that in the course of assessment proceedings for the assessment years 1967-68 to 1969-70, in the case of Messrs. Vinit Talkies, Jabalpur, a claim was made that income from conducting of matinee shows in the premises of Vinit Talkies did not belong to the firm, but to Smt, Dayabai.
3. Smt. Dayabai filed her separate return of income in which the income from the matinee show business at the premises of Vinit Talkies was disclosed in respect of the three assessment years. The ITO recorded a finding that the income was (to be assessed) in the hands of Messrs. Vinit Talkies, that the income from matinee show business in fact belonged to the firm and that Smt. Dayabai was merely a name-lender. He, therefore, included the said income in the total income of the firm. However, the JTO computed the income of the matinee show business and held that since the entire business belonged to the firm, Messrs. Vinit Talkies, the total income will be clubbed in the hands of the firm. However, he made a protective assessment of the same income in the hands of the lady, Smt. Dayabai, for the three assessment years under dispute.
4. The findings recorded by the ITO were upheld by the Tribunal in the case of Vinit Talkies.
5. Against the protective assessment made by the ITO in the hands of Dayabai, appeals were filed before the AAC who upheld the protective assessment made by the ITO for the three years. The assessee filed a second appeal against the order of the AAC before the Tribunal. The Tribunal, relying on the order in the case of the firm, Messrs Vinit Talkies, held that the lower authorities rightly treated the assessee as a mere name-lender and they rightly included the income purported to have been earned by the assessee by running the matinee shows in the total income of the firm, Messrs. Vinit Talkies, and the Tribunal, therefore, dismissed the appeal filed by Smt. Dayabai. Aggrieved by this order, under the direction of this court, the Tribunal had made this reference to answer the question noted above.
6. Learned counsel for the assessee brought to our notice the fact that after the judgment of the Tribunal, an application under Section 256(2), submitted by Messrs. Vinit Talkies before this court, was rejected by this court on July 7, 1980. It is, therefore, clear that after the Tribunal's judgment in the appeals filed by Messrs. Vinit Talkies and also the appeal filed by Smt. Dayabai, the Tribunal confirmed both the assessments. The net result is that the income earned from the matinee shows displayed in the premises of Vinit Talkies has been assessed in the hands of Messrs. Vinit Talkies and also has been assessed as the income of Smt. Dayabai which only means that the same income has been assessed twice, which, in law, is not permissible.
7. Similar question was considered by the Supreme Court in Lalji Haridas v. ITO : 43ITR387(SC) where their Lordships observed as under (p. 393):
'If in the proceedings taken against Lalji it is finally decided that it is Lalji who is responsible to pay tax for the income in question, it may not become necessary to make any order against Chhotalal. If, however, in the said proceedings Lalji is not held to be liable to pay tax or it is found that Lalji is liable to pay tax along with Chhotalal, it may become necessary to pass appropriate orders against Chhotalal. When we suggested to the learned counsel that we propose to make an order on these lines, they all agreed that this would be a fair and reasonable order to make in the present proceedings.'
8. Similarly the Allahabad High Court also had an occasion to consider similar questions in the case of Hemlata Agarwal v. CIT : 64ITR428(All) .
9. It is, therefore, clear that the protective assessment made against Smt. Dayabai was only to meet a situation that in case the assessment on Messrs. Vinit Talkies is not made, this assessment could become operative, cannot now be maintained as the same income has already been assessed as the income in the hands of the firm Messrs. Vinit Talkies, Jabalpur.
10. In this view of the matter, our answer to the question referred by the Tribunal is in the negative, i.e., the Tribunal was not justified in confirming the protective assessment. In the circumstances of the case, parties are directed to bear their own costs.