MRS. NILOFER HAMEED BANGALORE vs. INCOME TAX OFFICER KOCHI
What did the High Court hold?
The Tribunal found that the principle laid down in Commissioner of Income Tax v. Dalmia Manganese Corporation [supra] was not applicable to the present case. The Supreme Court's decision in Dalmia Manganese Corporation dealt with a situation where there was a completed assessment and proceedings were taken under Section 154 for rectification, whereas in this case, there was no regular assessment made. The Tribunal held that resort to Section 148 was appropriate as Section 155 applies only to a completed assessment of a partner, and the share of firm income determined by the Settlement Commission under Section 245D(4) was not part of the partners' completed assessment. Therefore, the High Court found no reason to interfere with the Tribunal's order, answering the question of law against the assessee and in favour of the Revenue.
What were the facts?
The appeals concern two assessees, partners in a firm, for assessment years 1986-1987 and 1988-1999. The firm had approached the Settlement Commission, which passed an order under Section 245D of the Income Tax Act, 1961, resulting in an enhanced income for the partners. The partners did not file returns following this order. Consequently, the Assessing Officer issued notices under Section 148, with sanction under Section 151, and completed best judgment assessments under Section 144. The assessees appeared before the Assessing Officer, sought adjournments, but did not subsequently appear. The First Appellate Authority ruled in favour of the assessees, relying on a Supreme Court decision, on the ground that the Assessing Officer should have proceeded under Section 155(1)(C) instead of Section 148.
What were the issues?
1. Whether the Assessing Officer was justified in initiating reassessment proceedings under Section 148 of the Income Tax Act, 1961, when the Settlement Commission's order under Section 245D enhanced the partners' income, or if proceedings should have been initiated under Section 155(1)(C) of the Act? (Question of law) Assessee's Contention: The Assessing Officer ought to have proceeded under Section 155(1)(C) of the Act and not under Section 148. The assessee relied on the decision in Commissioner of Income Tax v. Dalmia Manganese Corporation [236 ITR 46 (SC)]. Revenue's Contention: Not recorded in the judgment.
Which sections of the Income-tax Act were involved?
Section 245D,Section 148,Section 151,Section 144,Section 155(1)(C),Section 154
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
JUDGMENT K. Vinod Chandran, J. Two assessees, who are partners of a firm, are before us in the above two appeals arising from the assessment years 1986-1987 and 1988- 1999. The short facts required for consideration of the appeals are that the firm, in which the appellants were partners, was before the Settlement Commission, who had passed an order under Section 245D of the Income Tax Act, 1961 [for brevity, 'the Act']. The order passed by the Settlement
Commission
resulted
in enhancement of the income of the partners. The partners did not file any return pursuant to the order passed by the Settlement Commission. In such circumstances, the Assessing Officer issued notice to the partners under Section 148 of the Act, with sanction obtained under Section 151 and assessment completed under Section 144. 2. The proceedings were completed after affording the assessee with an opportunity, which was not availed of. We find from the assessment order that the assessee's had appeared before the Assessing Officer and sought adjournment, but then did not subsequently appear. The Assessing Officer took the income of the assessee as found by the Settlement Commission and completed the assessment. The ground raised in first appeal was that there were two notices issued under Section 148 and the assessment was barred by limitation. However, before the First Appellate Authority, this was not urged and an additional ground was raised. The ground so raised was that the Assessing Officer ought to have proceeded under Section 155(1)(C) of the Act and not under Section 148. The First Appellate Authority found in favour of the assessee relying on a decision of the Hon'ble Supreme Court in Commissioner of Income Tax v. Dalmia Manganese Corporation [236 ITR 46 (SC)].
The Tribunal found that the subject matter in Dalmia Manganese Corporation [supra] was relating to the withdrawal of development rebate allowed by the Assessing Officer in the regular
assessment
order.
Subsequently, proceedings were taken under Section 154 of the Act for rectification of the assessment. The Hon'ble Supreme Court found that when there is a specific provision in so far as re-opening of assessment, there could be no resort made to a general provision for rectification.
The Tribunal found that the dictum does not apply in the present case, when there was no regular assessment made. Resort could only be had to Section 148, since Section 155 applies only in the case of a completed assessment of a partner and the share of the income of the firm as found in an order passed under Section 245D(4)[clause (c) of Section 155(1)] is not included in the partners completed assessment. We do not think any interference can be made to the order of the Tribunal, since the question has been answered perfectly in tune with the law. We hence answer the questions of law raised here against the assessee and in favour of the Revenue and reject the appeals. However, we make it clear that the remand order in so far as the limitation is concerned, would be left open for consideration by the First Appellate Authority. K. VINOD CHANDRAN JUDGE ASHOK MENON JUDGE sp/22/01/19
Appendix — schedule of exhibits
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