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income-tax Officer Vs. Rama Shanker Singh Bechu Ram - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Allahabad
Decided On
Judge
Reported in(1983)6ITD115(All.)
Appellantincome-tax Officer
RespondentRama Shanker Singh Bechu Ram
Excerpt:
.....indian income-tax act, 1922. thereafter, the ito made an assessment on the huf on the basis of the return submitted by 's'. it was held by the supreme court that the ex parte order, which was set aside, was assessment made on 's' in the status of an individual and that there was no assessment against the family. the assessment made against the family was not, therefore, an assessment under section 27. that assessment was clearly barred by time and limitation was not saved by the second proviso to section 34(3) of the 1922 act. the supreme court clarified that the same person could be taxed both as an individual as well as the karta of his family. the two capacities are totally different, they are two different assessees.6. the above principle applies to the case of the assessee also. an.....
Judgment:
1. The Income-tax Department conducted a search under Section 132 of the Income-tax Act, 1961 ('the Act'), at the business premises of Ramashanker Singh Bechu Ram Motilal Hiralal, at Hazaripur, Gorakhpur, on 8-3-1976. A number of books of account and valuable articles were found in the search. On the basis of the material gathered, the ITO was of the view that by reason of the omission and failure on the part of the assessee to make a return under Section 139 of the Act. its income chargeable to tax had escaped assessment for the assessment year 1969-70. The ITO, accordingly, sought approval of the Commissioner in the status of an AOP. A notice under Section 148 of the Act was subsequently issued to the assessee on 26-2-1977 which was served on 18-3-1977. This notice did not give the status. On receipt of the notice, the assessee wrote to the ITO that it was not clear in which status the return was required to be filed. The assessee also requested the ITO to communicate the status for submission of the return. In the meantime his permission was sought for extension of the date of the filing of return. This letter was written to the ITO on 13-5-1977. It was submitted before us that the ITO did not reply to this letter.

2. Subsequently, the assessee submitted a return showing nil income on 8-9-1977 in the status of a firm. A letter, dated 8-9-1977, was also submitted along with this return stating that there was no firm in existence in the assessment year 1969-70 as it had come into existence for the first time from 1-4-1975 under the deed of partnership dated 13-3-1976. It was, therefore, stated in the letter that there was no default on the part of the assessee in non-submission of any return under Section 139 for the assessment year 1969-70 and it was also because of this reason that the return now submitted showed nil income.

The ITO, after examining the case in considerable detail, made the assessment under Section 143(3) read with Sections 144B and 147(a) of the Act on 8-9-1981 in the status of an AOP. Before making the assessment, he also complied with the provisions of Section 144B.3. The assessee appealed to the Commissioner (Appeals). The Commissioner (Appeals), after going through the facts of the case, came to the conclusion that there was no AOP in existence in the assessment year 1969-70 and, therefore, no assessment, could be made in that status. He, accordingly, cancelled this assessment.

4. The department is now in appeal before us. The learned departmental representative submitted before us that the findings of the Commissioner (Appeals) were not correct. On behalf of the assessee, it was submitted before us that since the return was filed in the status of a firm, making of an assessment in the status of an AOP on the basis of that return was incorrect and, therefore, also apart from the reasons given by the Commissioner (Appeals) the assessment could not survive.

5. We have carefully considered the submissions placed before us. The Allahabad High Court in the recent case in CWT v. J.K. Srivastava & Sons [1983] 142 ITR 183 has held that a return filed in the status of an AOP could not be treated as a return in the status of an individual and, therefore, the cancellation of the assessment by the Tribunal, made in the status of an individual, was justified. In this case, the assessee had filed its wealth-tax return in the status of an AOP. The WTO rejected the contention of the assessee that no wealth-tax was chargeable on an AOP and assessed it in the status of an individual.

The Tribunal held that an AOP was an entity different from an individual and the voluntary return filed in the status of an AOP could not be treated as a return in the status of an individual and since no notice was issued to the assessee in the status of an individual to file a return, the WTO had no jurisdiction to assess the assessee in the status of an individual and cancelled the assessment. In reference, it was held that if the WTO was of the opinion that the status of the assessee was that of any individual, he should have issued a notice requiring it to file a return, which was not done, and since the period of limitation for issuing notice under Section 17 of the Wealth-tax Act, 1957 had expired, the Tribunal was justified in cancelling the assessment of the assessee in the status of an individual. This principle was earlier laid down by the Supreme Court in the case of CIT v. Rameshwar lal Sanwarma [1971] 82 ITR 628. In this case, a notice was issued to 'S' in his individual status. He submitted a return on behalf of his HUF. The ITO passed an ex parte assessment on 'S' as an individual. This assessment was vacated under Section 27 of the Indian Income-tax Act, 1922. Thereafter, the ITO made an assessment on the HUF on the basis of the return submitted by 'S'. It was held by the Supreme Court that the ex parte order, which was set aside, was assessment made on 'S' in the status of an individual and that there was no assessment against the family. The assessment made against the family was not, therefore, an assessment under Section 27. That assessment was clearly barred by time and limitation was not saved by the second proviso to Section 34(3) of the 1922 Act. The Supreme Court clarified that the same person could be taxed both as an individual as well as the karta of his family. The two capacities are totally different, they are two different assessees.

6. The above principle applies to the case of the assessee also. An AOP is entirely different from a firm. Notice was issued requiring an AOP to submit the return as it was in that status that the approval of the Commissioner was obtained. Since the return had been filed in the status of a firm, it was, in fact, no compliance to the notice issued under Section 148 by the ITO. The return submitted in the status of the firm was, therefore, an invalid return which could not be made the basis of the assessment on an AOP. We may observe that the responsibility for this situation squarely lies on the ITO who did not reply to the assessee's letter, dated 13-5-1977, already referred to above. It was submitted before us on behalf of the department that the principle laid down by the Allahabad High Court in the case of J.K.Srivastava & Sons {supra) had no application to the present case as in the cited case the return submitted was voluntary. We have already clarified this position above by holding that the issue of the notice under Section 148 in the status of an AOP was in order. However, by submitting the return in the status of a firm, there is no effective compliance of the notice. The ITO was, therefore, in error in making the assessment on the basis of an invalid return.

7. It was also suggested before us that the assessment could be treated to have been made under Section 144 of the Act on the ground that no valid return had been submitted by the assessee in response to notice under Section 148. Well, the situation could have been saved had there been no application of Section 144B to the case. We have already stated above that the WTO had referred the matter under Section 144B to the IAC and it was only after receiving his instructions that the assessment had been made on 8-9-1981. Sub-section (1) of Section 144B clearly states that this section will apply only to an assessment to be made under Section 143(3). Sub-section (2) of Section 153 of the Act states that no order of assessment, reassessment or recomputation shall be made under Section 147 where it is to be made under clause (a) of that section, after the expiry of four years from the end of the assessment year in which the notice under Section 148 was served. As per this provision, the assessment was required to be made by 31-3-1981. Since it was made on 8-9-1981, it is clearly barred by limitation, even if the plea of the learned departmental representive, that it could be treated as an assessment under Section 144, be accepted and also the reference to the IAC under Section 144B be treated as redundant or be ignored. We, therefore, uphold the cancellation of the assessment by the Commissioner (Appeals), though for different and legal reasons.

8. Before we close, we may dispose of another contention of the learned departmental representative. He argued that we should confine ourselves only to the reasons given by the Commissioner (Appeals) for cancellation of the assessment and that we should not enter into any other legal or factual arena. In our opinion, that is not a correct approach. An appellate authority is entitled to take into consideration all the facts of the case as might be available at the relevant time and also the prevalent law and the legal position as enunciated by the Courts.


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