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Commissioner of Income-tax Vs. Lakshmi Narayanan - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberTax Case No. 926 of 1980 (Reference No. 306 of 1980)
Judge
Reported in(1986)52CTR(Mad)240; [1986]157ITR816(Mad)
ActsIncome Tax Act, 1961 - Sections 261
AppellantCommissioner of Income-tax
RespondentLakshmi Narayanan
Appellant AdvocateJ. Jayaraman, Adv.
Respondent AdvocateP.P.S. Janarthana Raja, Adv.
Excerpt:
- .....the tribunal was right in holding that the commissioner could not have considered the order of the income-tax officer to be prejudicial to the revenue inasmuch as the finding of the income-tax officer was in confirmity with the decision of the tribunal for the assessment years 1970-71 and 1971-72 on identical issues even though not accepted by the department and which decision was available to the income-tax officer before he completed the assessment 2. if the answer to the first question is in the negative, whether the tribunal was right, on the facts and in the circumstances of the case, in holding that only 1/7th of the share income from m/s. southern mercantile corporation was includible in the hands of the assessee ?' 2. the assessee was a partner in a firm called southern.....
Judgment:

Ramanujam, J.

1. The following two questions have been referred to us for our opinion by the Income-tax Appellate Tribunal at the instance of the Revenue :

'1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the Commissioner could not have considered the order of the Income-tax Officer to be prejudicial to the Revenue inasmuch as the finding of the Income-tax Officer was in confirmity with the decision of the Tribunal for the assessment years 1970-71 and 1971-72 on identical issues even though not accepted by the Department and which decision was available to the Income-tax Officer before he completed the assessment

2. If the answer to the first question is in the negative, whether the Tribunal was right, on the facts and in the circumstances of the case, in holding that only 1/7th of the share income from M/s. Southern Mercantile Corporation was includible in the hands of the assessee ?'

2. The assessee was a partner in a firm called Southern Mercantile Corporation and not the entire income from the said Corporation for the said two years. That claim was not accepted by the Income-tax Officer but when the matter reached the Tribunal, the Tribunal held that only 1/7th of the share income from the firm in the hands of the assessee should be assessed. Based on the said decision, the assessing authority, for the subsequent year 1973-74, assessed 1/7th share income of the firm in the assessee's hands. The Commissioner of Income-tax issued a show-cause notice to revise the said assessment of the assessing authority for the year 1973-74 on the ground that it is prejudicial to the Revenue and, therefore, it has to be revised. Subsequently, the decision of the Tribunal rendered with reference to the assessment years 1070-71 and 1971-72 holding that it is only the 1/7 share income of the firm in the hands of the assessee that could be assessed was challenged before this court and this court in CIT v. Lakshmi Narayanan [1981] 132 ITR 355, disagreeing with the view taken by the Tribunal held that the entire income from the firm should be taxed in the hands of the assessee. The order of the Commissioner in consequence of the initiation of the proceedings by the Commissioner of Income-tax for the assessment year 1973-74 also came before the Tribunal. The Tribunal has taken the view that since the notice proposing to revise the order of the Income-tax Officer has been issued at a stage when the judgment of the Tribunal for the assessment years 1970-71 and 1971-72 held the field, the revisional proceedings cannot be sustained and in that view it set aside the revisional order of the Commissioner and sustained the order of the Income-tax Officer holding that only 1/7th share income of the firm should be included in the hands of the assessee. Aggrieved by the order of the Tribunal with reference to the assessment year 1973-74, the above two questions have been referred to this court at the instance of the Revenue.

3. So far as the first question is concerned, it is seen that the Tribunal was of the view that the Commissioner was in error in proceeding on the basis that the order of the Income-tax Officer holding that only 1/7th share income of the firm is includible in the hands of the assessee is prejudicial to the Revenue cannot be sustained as the decision of the Tribunal for the assessment years 1970-71 and 1971-72 held the field and that the mere fact that the Revenue has not accepted the decision of the Tribunal is not a ground for ignoring the same and proceeding to revise the order of the Income-tax on the basis that the Tribunal's decision is not correct. However, having regard to the fact that the decision of the Tribunal in respect of the assessment years 1970-71 and 1971-72 had subsequently been set aside by this court in CIT v. Lakshmi Narayanan [1981] 132 ITR 355, the notice proposing to revise the order of the Income-tax Officer issued by the Commissioner should be taken to be valid. Though the said decision of this court was rendered subsequent to the order of the Tribunal in this case, the said decision should be taken to be declaratory and that should be taken to be the law on the date when the notice to revise the assessment was issued by the Commissioner. Therefore having regard to the said decision in CIT v. Lakshmi Narayanan [1981] 132 ITR 355 taking a view different from the view taken by the Tribunal for the assessment years 1970-71 and 1971-72, the Tribunal is not right in holding that the Commissioner was not justified in issuing a notice proposing to revise the order of the Income-tax Officer. In this view, the first question has to be answered in the negative and in favour of the Revenue.

4. Coming to the second question, it is seen that this court has held in CIT v. Lakshmi Narayanan [1981] 132 ITR 355, that the entire share income from the firm of M/s. Southern Mercantile Corporation should be included in the hands of the assessee and following the said decision which was rendered in the assessee's own case for the earlier years, the second question has to be answered in the negative and in favour of the Revenue. There will, however, be no order as to costs.

5. Learned counsel for the assessee makes an oral application for grant of leave to appeal to the Supreme Court against the judgment just now rendered. According to the learned counsel for the assessee, against the decision in CIT v. Lakshmi Narayanan [1981] 132 ITR 355, the Supreme Court has granted special leave and now that this court has answered the reference in the light of the said decision, leave to appeal to the Supreme Court may be granted in this case. Having regard to the fact that the decision of this court in the abovementioned case is already the subject-matter of an appeal before the Supreme Court and as we have followed the said decision of this court in this case, Leave to appeal to the Supreme Court is accordingly granted.


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