M/S.MURUGESH & COMPANY, KOLLAM vs. THE COMMISSIONER OF INCOME TAX, TVM.

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ITA/217/2002HC KeralaKLHC01021040200228 February 2008Bench: HONOURABLE MR.JUSTICE T.R.RAMACHANDRAN NAIR,HONOURABLE MR.JUSTICE C.N.RAMACHANDRAN NAIR5 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the assessee is entitled to claim the status of a registered firm in the regular assessment proceedings under Section 143(3). The Court found force in the assessee's contention, referencing the decision in K.V. MANGARAM & CO.'s case, which held that an intimation under Section 143(1)(a) is not an assessment. The Court noted that the AO had not considered this binding precedent. The Court also questioned the AO's approach of completing a Section 143(3) assessment without considering the registered firm status, especially when the return was belated, suggesting Section 147 proceedings might have been more appropriate if the AO intended to disallow the claim based on the belated filing. Consequently, the orders of the Tribunal and lower authorities were set aside. The matter was remanded to the AO for reconsideration in light of the K.V. MANGARAM & CO. decision, with a direction to provide the assessee with an opportunity to file a written reply to any proposals and to be heard before passing final orders.

What were the facts?

The assessee, M/s. Murugesh & Company, filed a belated return for assessment year 1993-94, claiming status as a registered firm. The return was not accompanied by a certified copy of the partnership deed as required by Section 184(2) of the Income Tax Act. The Assessing Officer (AO) initially issued an intimation under Section 143(1)(a). The assessee filed a Section 154 application for registered firm status, which was rejected as the certified copy of the partnership deed was furnished only after receiving the Section 143(1)(a) intimation. Subsequently, the AO completed the assessment under Section 143(3) but did not consider the assessee's claim for registered firm status based on the filed partnership deed. The first appellate authority upheld the AO's decision. The assessee filed two appeals before the Tribunal: one against the order on the Section 154 application and another concerning additions sustained in the assessment.

What were the issues?

1. Whether the assessee is entitled to claim the status of a registered firm in regular assessment proceedings under Section 143(3) of the Income Tax Act, 1961, despite the belated filing of the return and the certified copy of the partnership deed. Assessee's Contentions: The assessee argued that the intimation under Section 143(1)(a) is not an assessment, and therefore, they are entitled to claim registered firm status in the regular assessment proceedings under Section 143(3). They relied on the decision of the Kerala High Court in K.V. MANGARAM & CO.'s case, 245 I.T.R. 353. Revenue's Contentions: The revenue contended that since the return itself was time-barred, the certified copy of the partnership deed produced later need not be considered. The revenue also questioned why the AO initiated and completed a regular assessment under Section 143(3) instead of proceedings under Section 147 if the return was time-barred.

Which sections of the Income-tax Act were involved?

Section 184(2),Section 143(1)(a),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 HONOURABLE MR. JUSTICE T.R.RAMACHANDRAN NAIR THURSDAY, THE 28TH FEBRUARY 2008 / 9TH PHALGUNA 1929 ITA.No. 217 of 2002() --------------------- ITA.398/COCH/1998 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/ASSESSEE ----------------------------------- M/S.MURUGESH & COMPANY, KOLLAM, REPRESENTED BY ITS MANAGING PARTNER SHRI.V.MOHAN KUMAR BY ADV. SRI.T.M.SREEDHARAN SRI.V.P.NARAYANAN RESPONDENTS: RESPONDENT/REVENUE ------------------------------- THE COMMISSIONER OF INCOME-TAX, THIRUVANANTHAPURAM. BY ADV. SRI.GEORGE K. GEORGE, SC FOR IT THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 28/02/2008, ALONG WITH ITA 239/2002, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

C .N. RAMACHANDRAN NAIR & T.R. RAMACHANDRAN NAIR, JJ. --------------------------------------------

I.T.A. No. 217 & 239 OF 2002 -------------------------------------------- Dated this the 28th day of February, 2008 JUDGMENT C.N. Ramachandran Nair,J. These two appeals filed by the assessee arise from the common order of the Tribunal for the assessment year 1993-94. The assessee though claimed the status as a registered firm in the belated return filed, such return was not accompanied by certified copy of partnership deed in terms of Section 184(2) of the I.T. Act. The assessing officer first sent intimation under Section 143(1)(a) against which assessee filed Section 154 application for grant of status of registered firm. Rectification application was rejected because certified copy of the partnership deed was furnished only after receipt of intimation under Section 143(1)(a) by the assessee. However, strangely, even though assessment was completed under Section 143(3) of the Act, the assessee's case for assigning status as registered firm was not considered by the assessing officer based on the certified copy of the

2 partnership deed already filed by the assessee. Since the first appellate authority concurred with the assessing officer, the assessee filed sepsarate appeals before the Tribunal, one against the order on application under Section 154 and the other pertaining to addition sustained in assessment. Even though we do not find any question of law arising from the order of the Tribunal pertaining to modified quantum of addition, we find some force in the contention of the assessee with regard to status assigned because of the decision of this Court in K.V. MANGARAM & CO's case, 245 I.T.R. 353 wherein a Division Bench of this Court has held that intimation under Section 143(3)(a) is not an assessment. Going by this decision, we feel the assessee is entitled to claim status as registered firm in the regular assessment proceedings under Section1 43(3) of the Act. Even though senior counsel appearing for the respondent-revenue contended that since return itself was time barred, certified copy of the partnership deed produced later need not be considered, we do not know whey then the assessing officer initiated and completed regular assessment under Section 143(3) after issuing notice under Section 143(2) instead

3 of initiating proceedings under Section 147 of the Act. Since the assessing officer has not considered the decision of this Court referred above, which has a direct bearing on the issue raised, we set aside the orders of the Tribunal and that of the lower authorities with direction to the assessing officer to reconsider the entire matter with reference to the decision of this Court referred above. We make it clear that proposal should be given about the fresh orders to be passed by the assessing officer and assessee should be given an opportunity to file written reply on the proposal and a hearing before final orders are passed. Appeals are allowed as above. (C.N.RAMACHANDRAN NAIR) Judge. (T.R.RAMACHANDRAN NAIR) Judge. kk

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