ORDER
Shri Y. Upadhyay, Accountant Member
1. The departmental appeal and the cross-objection of the assessee are taken together and disposed of by a common order.
2. The assessee is an individual who is a minor and who is admitted to the benefits of the partnership in Vidya Sagar & Co., Dhanbad. The assessee disclosed the income of Rs. 44,467 but deducted the same amount indicating that the amount was taxable under section 64(1) (iii) of the Income-tax Act, 1961 (“the Act”), in the hands of his guardian. Therefore, the nil return was filed. The ITO allowed several opportunities to the assessee to indicate whether the income has been disclosed in the hands of the guardians and, if so, where they are assessed. These particulars were not filed by the assessee and, consequently, the ITO assessed the minor on protective basis on the total income of Rs. 48,923; the higher income was taken on the basis of the firm’s assessment. No appeal was filed by the assessee and the assessment made by the ITO was accepted. Thereafter, an order under section 154 of the Act was passed on 31-8-1979 by which the mistake in calculation of tax was rectified. A second rectification order was passed on 11-3-1980 by which the mistake in charging interest under section 139(8) of the Act was corrected.
3. The assessee after the second order passed by the ITO under section 139(8) on 11-3-1980 went in appeal before the AAC and contended that the ITO had completely misdirected himself in making protective assessment and unnecessarily raising demand on the minor. It was stated that details were filed. Otherwise, the ITO should have ascertained the names and addresses, from the assessing ITOs, of the parents of the minor and would have conveyed the assessed income to be included under section 64(1) (iii). On the arguments of the assessee, the AAC stated as hereunder :
“I have gone through the submissions of the counsel for the appellant and of the opinion that after the amendment of section 64 by the Taxation Laws (Amendment) Act, 1970, with effect from 1-1-1971 and sub-section (1) as so renumbered has further been substituted by the Taxation Laws (Amendment) Act, 1975 with effect from 1-4-1976, the position after 1976 has changed completely : income arising to a minor child from admission to the benefits of partnership, directly or indirectly, should be included under the provisions of clause (i) of sub-section (3) of section 64, in the total income of the parents even if the parents were not partners in that firm. In this instant case, the Income-tax Officer seem to have completely misdirected himself in making protective assessment on the minor and accordingly unnecessarily raised paper-demand.”
Accordingly, the AAC annulled the assessment. The department is in appeal and the assessee has filed the cross-objection.
4. Shri S. Mukherjee, the departmental representative, stated the facts of the case and took two objections on the order of the AAC. He stated that the assessment under section 143(3) of the Act was posted on 20-2-1979. The assessee did not prefer any appeal and the assessment made by the ITO was accepted by him. The first rectification took place on 31-8-1979. That order was also accepted by the assessee and there was no appeal. The second rectification order was passed on 11-3-1980 by which the interest chargeable under section 139(8) was corrected. The appeal had been filed thereafter. Therefore, the AAC was not competent to hear the appeal against the order passed by the ITO under section 143(3) on 20-2-1979 after the passing of the second rectified order on 11-3-1980. He stated that the appeal against the order passed under section 143(3) was not in conformity with section 246 of the Act and, therefore, the AAC was not justified in annulling the assessment. The second objection of the departmental representative was that the minor had income from Vidya Sagar & Co. The income earned by the minor was to be subjected to tax, but, however, that was assessable in the hands of the guardian under section 64(1) (iii). The ITO allowed several opportunities to the assessee to give the particulars of the assessments of his parents. No details were filed. Under the above circumstances, the protective assessment made by the ITO was fair and the AAC was not justified to annul the assessment unless he was sure that the income earned by the assessee had been subjected to tax in the hands of the guardian. He, therefore, urged that the assessment made by the ITO may be restored.
5. Shri Pawan Kumar, the counsel of the assessee, on the other hand, stated that the assessment order passed by the ITO on 20-2-1979 under section 143(3) was rectified finally on 11-3-1980 by which interest chargeable under section 139(8) was modified. After the passing of the second rectification order on 11-3-1980, the original order merged with the rectified order of the ITO and, therefore, the assessee had right of appeal. He relied on Vedantham Raghaviah v. Third Addl. ITO [1963] 49 ITR 314. The reply of the counsel on the second argument of the department was that the minor had income, no doubt, but the income was assessable in the hands of the guardian under section 64(1) (iii). The guardian of the minor were assessed in Calcutta and this fact was brought to the knowledge of the ITO and, therefore, the AAC was justified to annual the assessment.
6. The sequence of the case had been narrated by the departmental representative. The assessee, in the present case, is a minor who earned the income of Rs. 44,467 from Vidya Sagar & Co., Dhanbad, in which he was admitted to the benefits of the partnership. The return showing the nil income was filed on the ground that the income earned by the minor was assessable under section 64(1) (iii) in the hands of the guardian. No particulars were filed before the ITO though repeated requests were made. The assessment on protective basis, in the above circumstances, was made by the ITO on 20-2-1979. The appeal is a special right which an assessee enjoys if the same is provided under the statute. There is no inherent right of appeal. If a right of appeal is not given by the statute, no appeal would lie. Section 246 deals with appeals. Section 246(c) specifically deals with the appeal against the order passed by the ITO under section 143(3). Section 249 deals with the limitation. The appeal under section 246 could be presented in the prescribed form and verified in the prescribed manner within 30 days from the date of service of the demand notice. The appeal, in the present case, had been filed after passing of the second rectified order on 11-3-1980. Consequently, the appeal against the assessment made by the ITO under section 143(3) was not in time. Rather, the assessment was accepted by the assessee. Under the above circumstances, the departmental representative is correct in saying that the AAC was not competent to entertain the appeal of the assessee. The appeal could have been admitted by the AAC on the limited point which was in issue in the second rectified order which was passed on 11-3-1980 subject to the provisions of law. Under the above circumstances, the AAC was not competent to annul the assessment made by the ITO on protective basis. The assessee has referred to the decision in Vedantham Raghaviah (supra) and has urged that after the second rectification order passed on 11-3-1980, whole assessment was available for appeal. The case referred to by the assessee’s counsel had been perused and section 246 had been taken into consideration. The principle of merger did not apply to the whole of the order passed by the ITO under section 143(3). The original order merged with the subsequent order only on the point which is raised in the subsequent order. Other points of the order get finality if they are not rectified. This view is supported by the decision in Rohtak and Hissar Districts Electric Supply Co. (P.) Ltd. v. CIT [1981] 128 ITR 52 (Delhi), Poonjabhai Vanmalidas v. WTO [1978] 114 ITR 38 (Guj.) and CIT v. City Palayacot Co. [1980] 122 ITR 430 (Mad.). Under the above circumstances, the argument of the assessee’s counsel is not accepted.
7. However, the matter could be looked into even on facts. The minor earned income from Vidya Sagar & Co. The income earned by the minor was liable to tax. However, the income was liable to be taxed under section 64(1) (iii) in the hands of the guardian. The ITO persistently enquired about the details of the assessments of the guardian of the minor. No details were given by the assessee before the assessing officer so that the income earned by the minor could be subjected to tax. Under the above circumstances, there was no option but to complete the assessment on protective basis. The completion of assessment on protective basis is permissible within the law if the assessing officer could not have the firm opinion as the who could be assessed for the income. The hon’ble Calcutta High Court in Jagannath Hanumanbux v. ITO [1957] 31 ITR 603 stated that it is open to the department to make assessments on two persons in respect of the same income where it is doubtful which assessee is liable to pay the tax because unless such “protective” or “alternative” assessment is made, assessment proceedings against the party ultimately found to be liable may become time barred; but the department cannot recover the tax from both the assessee in respect of the same income. Therefore, even though the income was assessable under section 64(1) (iii), unless the ITO was sure that the income earned by the minor had been subjected to tax in the hands of the guardian, it was open to him to assess the income on protective basis and the assessee was not to suffer as both demands from the minor and the guardian could not be recovered from the same income. Therefore, even on merit, the AAC was not justified to annul the assessment made by the ITO. The order of the AAC is set aside and the protective assessment made by the ITO is maintained. As the appeal of the department is allowed, there is no force in the cross-objection of the assessee.
8. In the result, the departmental appeal is allowed and the cross-objection of the assessee is dismissed.