THE COMMISSIONER OF INCOME TAX vs. SMT.DAKSHAYANI AMMA

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ITA/836/2009HC KeralaKLHC01025597200903 February 2012Bench: HONOURABLE MR.JUSTICE C.N.RAMACHANDRAN NAIR5 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the Tribunal was justified in its order. The Court observed that the issue decided in the proceedings under Section 154 was a debatable one. The status in which the assessee was assessed was the ground raised in the first appeal, which the appellate authority had allowed with specific reasoning. The Court found that such a finding could not be reversed by the same authority through proceedings under Section 154, as these proceedings are meant for rectifying mistakes apparent from the record, not for re-adjudicating debatable issues. The Court also noted that the tax involved was not substantial, which might have influenced the department's initial decision not to appeal the first order of the CIT (Appeals). Consequently, the High Court found no grounds to interfere with the Tribunal's order which had declared the Section 154 proceedings illegal and without jurisdiction. The appeal was dismissed.

What were the facts?

The assessee, Smt. Dakshayani Amma, was assessed for capital gains on the distribution of assets upon the closure of a theatre. The initial assessment was challenged by the assessee on the grounds that it was made against a partner and not the partnership firm. The Commissioner of Income Tax (Appeals) initially accepted this contention and allowed the appeal. The department did not challenge this order. However, the CIT (Appeals) later initiated suo motu proceedings under Section 154 of the Income Tax Act, 1961, revising the initial appellate order. The CIT (Appeals) held that the assessment was indeed against the firm, despite the partner's name being mentioned. The assessee appealed this Section 154 order to the Income Tax Appellate Tribunal (ITAT). The ITAT found the Section 154 proceedings to be illegal, unauthorized, and without jurisdiction.

What were the issues?

1. Whether the Tribunal was justified in holding that the CIT (Appeals) erred in rectifying the first appellate order under Section 154 of the Income Tax Act, 1961? (Question of law) The Assessee's Contention: The assessee argued that the initial assessment was made against a partner and not the firm, and the CIT (Appeals) had rightly accepted this. The subsequent rectification under Section 154 was an attempt to alter a debatable finding of fact and law, which is beyond the scope of Section 154. The Tribunal's finding that the Section 154 proceedings were illegal, unauthorized, and without jurisdiction was correct. The Revenue's Contention: The revenue contended that the CIT (Appeals) was justified in rectifying the order under Section 154. The initial assessment was indeed against the firm, and the mention of the partner's name was merely incidental. The rectification was necessary to correct a manifest error.

Which sections of the Income-tax Act were involved?

Section 154,Section 143(3),Section 147

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 HON'BLE MR. JUSTICE BABU MATHEW P.JOSEPH FRIDAY, THE 3RD DAY OF FEBRUARY 2012/14TH MAGHA, 1933 ITA.No. 836 of 2009 ( ) ----------------------- ITA.436/2004 of I.T.A.TRIBUNAL,COCHIN BENCH APPELLANT(S): ------------ THE COMMISSIONER OF INCOME TAX, THRISSUR. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S): -------------- SMT. DAKSHAYANI AMMA, FOR M/S. SREE KALEESWARI TALKIES, KODULGALLUR, THRISSUR DISTRICT.(DIED) *ADDL.RESPONDENT IMPLEADED. SUDHA KRISHNAKUMAR, DAUGHTER AND L/HR. OF SMT. DAKSHAYANI AMMA (LATE) RAVIPURAM SANNIDHI, NEAR RAVIPURAM TEMPLE, ERNAKULAM. *ADDL. RESPONDENT IMPLEADED VIDE ORDER ON I.A.1754/11 DATED 3.2.2012. BY SRI.MOHAMMED RAFIQ THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 03-02-2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

I.A.836/09. APPENDIX 1. ANNEXURE-A: TRUE COPY OF THEORDER OF THE ASSESSING OFFICER U/S.143(3) R.W.S.147 OF THE INCOME TAX DATED 31.12.2001. 2. ANNEXUR-B : TRUE COPY OF THE ORDER OF THE COMMISSIOER OF INCOME TAX (APPEALS) IN ITE-7/R-II/TCR/CIT- V/EKM/01-02 DATED 01.01.2003. 3. ANNEXURE-C : TRUE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX ( APPEALS) IN ITA-7/R-II/TCR/CIT-V/EKM/ 01-02 DATED 22-3-2003. 4. ANNEXURE-D : TRUE COPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL IN I.T.A. NO.436(COCH)/2004 DATED 13.3.2007. // TRUE COPY // P.S. TO JUDGE.

C.N. RAMACHANDRAN NAIR & BABU MATHEW P.JOSEPH, JJ. ------------------------------------------------------------ I.T. Appeal No. 836 of 2009 ------------------------------------------------------------- Dated this 3rd day of February, 2012 JUDGMENT Ramachandran Nair, J: Heard learned Standing Counsel for the appellant and Advocate Mr. Rafeeque, appearing for the legal heir of the respondent-assessee, who died during pendency of the appeal. 2. The short question raised in the department appeal is whether the Tribunal was justified in holding that CIT (Appeals) went wrong in rectifying the first appellate order under Section 154 of the Act. The assessment was made against a partnership firm with name of a partner and the tax assessed was on the capital gains on distribution of assets on closure of a theatre. The assessee challenged the assessment on the ground that it was made against a partner and not against the firm and therefore not tenable. The CIT (Appeals) accepted this contention

[I.T. Appeal No.836/2009] 2 and allowed the appeal. Strangely, the department did not challenge the order of CIT (Appeals). However, CIT (Appeals) through sou motu proceedings dated 22.3.2004 revised initial appellate order dated 1.1.2003 under Section 154 of the Act by holding that assessment was in fact on the firm though only partner was also named therein. On appeal filed by the assessee against Section 154 order, the Tribunal held that proceedings under Section 154 was illegal, unauthorised and without jurisdiction. 3. After hearing both sides, we do not find any ground to interfere with Tribunal's order because the issue decided in proceedings under Section 154 is a debatable one. The status in which assessee was assessed was the ground raised in first appeal which the appellate authority allowed with reasoning stated by him. This findings certainly cannot be reversed by another set of reasons by the same authority in a proceedings under Section 154. We further notice that the tax involved is not very big and that is why the department has not chosen to file

[I.T. Appeal No.836/2009] 3 appeal against first order of CIT(Appeals) for one year. Thereafter, CIT (Appeals) revised its first order against assessee under Section 154. We do not find any ground to interfere with the Tribunal's order I.T. Appeal is, therefore, dismissed. Sd/- C.N. RAMACHANDRAN NAIR, JUDGE. Sd/- BABU MATHEW P. JOSEPH, JUDGE. krs.

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