M/S.MUBARAK TRADING COMPANY vs. COMMR.OF INCOME TAX

ITA/327/2002HC KeralaKLHC01021150200229 January 2008Author: HONOURABLE MR.JUSTICE T.R.RAMACHANDRAN NAIR,HONOURABLE MR.JUSTICE C.N.RAMACHANDRAN NAIR11 pages
AI SummaryDismissed

What were the facts?

The appellant, M/s. Mubarak Trading Company, a partnership firm, filed a belated income tax return for assessment year 1994-95 on November 19, 1996. The Assessing Officer (AO) issued proceedings under Section 143(1)(a) and simultaneously a notice under Section 148 for income escaping assessment. The appellant requested the belated return be treated as filed against the Section 148 notice. The AO completed the assessment under Section 147 read with Section 143(3), granting the firm status. The Commissioner of Income Tax (CIT), under Section 263, revised the order, holding the appellant should be assessed as an 'Association of Persons' (AOP) due to failure to file the return within the stipulated period, as per Section 184(5). The Income Tax Appellate Tribunal (ITAT) upheld the CIT's order, leading to this appeal.

What did the High Court hold?

The High Court held that Section 184(5) of the Income Tax Act, prior to its amendment, stipulated that if there was any failure on the part of a firm as mentioned in Section 144, the firm would not be assessed as such for that assessment year and would be assessed as an association of persons. The failures mentioned in Section 144(1) include failure to make a return required under Section 139(1) and not making a revised return under Section 139(4) or (5). The appellant admittedly filed a belated return, which was beyond the period stipulated in Section 139(1) or (4). Therefore, there was a failure on the part of the appellant as contemplated under Section 144(1)(a), attracting Section 184(5). The Court rejected the appellant's contention that a best judgment assessment under Section 144(1) was a prerequisite for denying firm status. It clarified that a failure under Section 144(1) does not always necessitate a best judgment assessment; assessment can be based on books of accounts even if the return was belated. The Court found the Karnataka High Court's decision inapplicable as it concerned a situation where the assessee was disabled from filing the return due to seizure of books. The Court agreed with the Tribunal's view that the appellant was rightly declined the status of a 'firm' and ordered to be assessed as an 'association of persons'.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, and particularly in view of admitted failure of the appellant to file return under sub-section (1), (4) or (5) of Section 139, the appellant is entitled to be assessed in the status of a 'firm' or has to be assessed in the status of 'association of persons' under Section 184(5) of the Income Tax Act? Assessee's contentions: The appellant argued that to deny the status of a 'firm' under Section 184(5), a best judgment assessment under Section 144(1) is mandatory. They relied on an unreported decision of the Karnataka High Court in I.T.A. No. 4 of 2004 and paragraph 66 of the Explanatory Note to the Finance Act, 2003. Since the assessment was made under Section 147 read with Section 143(3) and not under Section 144(1), Section 184(5) is not applicable. Revenue's contentions: The revenue contended that Section 184(5) prior to amendment states that any failure on the part of the firm as mentioned in Section 144(1) leads to disentitlement of firm status and assessment as AOP. The failure to file a return within the stipulated period, as per Section 144(1)(a), is sufficient to attract Section 184(5).

Which sections of the Income-tax Act were involved?

Section 260A,Section 263,Section 143(1)(a),Section 148,Section 147,Section 143(3),Section 184(5),Section 144(1),Section 139(1),Section 139(4),Section 139(5),Section 142(1),Section 142(2A),Section 143(2),Section 144

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE T.R.RAMACHANDRAN NAIR TUE AY, THE 29TH JANUARY 2008 / 9TH MAGHA 1929 ITA.No. 327 of 2002() --------------------- AGAINST ORDER IN ITA.230/COCH/2002 DATED 24.7.2002 OF I.T.A.TRIBUNAL,COCHIN BENCH. .................... APPELLANT: --------------------------- M/S. MUBARAK TRADING COMPANY, P.T.ROAD, BADAGARA, REPRESENTED BY PARTNER, K.ABDUL AZEEZ, KALHATH HOUSE. BY ADV. SRI.T.M.SREEDHARAN SRI.A.V.MURALEEDHARAN SMT.JAYASREE MANOJ SRI.TONY CHACKO SMT.PREMLA O.T. RESPONDENTS: ------------- THE COMMISSIO

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