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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Per B R Baskaran, AM:
The appeal by the Revenue is directed against the order dated 26.8.2013 passed by the ld. CIT(A)-10, Mumbai and it relates to assessment year 2003-04. 2. The revenue is aggrieved by the decision of ld. CIT(A) in holding that the reopening of assessment is not valid in law.
The facts relating to the issue are stated in brief. The assessee is an individual and he filed his return of income on 27.11.2003 declaring a total income of Rs.1,82,509/-, besides declaring Long Term Capital Loss (LTCL) of Rs.31,34,908/-. The assessment was completed under section 143(3) of the Act accepting the return filed by the assessee. According to 2 the AO, the LTCL declared by the assessee was allowed to be carried forward. Subsequently, the AO noticed that the assessee has filed the return of income belatedly on 27.11.2003 as against the due date of 31.7.2003 (3.10.2003 as per the order of extension) for assessment year 2003-04. Hence, as per the provisions of section 80 of the Act, the assessee was not entitled to carry forward the loss declared in the return of income. Hence, the AO reopened the assessment by issuing notice on 26.3.2009 to the assessee.
In the reopened assessment proceedings, the assessee contended that he is a representative of M/s Sham Sunder Goenka Trust and the said trust was a partner in the partnership firm named M/s Go Go International. It was further submitted that due date for filing of return of income, in case of working partner of a firm whose accounts are required to be audited under this Act or under any other law for the time being in force is 31st October, 2003 and the same was extended to 30.11.2003 for assessment year 2003-04. It was further submitted that the other partner of M/s Go Go International was a Private Limited Company. Since the partnership firm consisted of two legal persons and no other natural person was available, the assessee submitted that he has only carried on the activities of the partnership firm as representative of M/s Sham Sunder Goenka Trust. Accordingly he submitted that he should be considered as “working partner” within the meaning of Explanation 4 to Section 40(b) of the Act and accordingly the due date for filing of income tax return should be taken as 30.11.2003. Accordingly, it was contended that the return of income filed by the assessee on 27.11.2003 should be considered as having been filed well within the stipulated time limit. Accordingly, it was contended that the assessee is entitled to carry forward the LTCL. The AO was not convinced with the said explanations of the assessee, since the assessee was only a beneficiary of M/s Sham Sunder Goenka Trust and he
3 is not a partner in the firm M/s Go Go International in his individual capacity. Accordingly, the AO held that the assessee has filed the return of income beyond the stipulated time limit and hence he is not entitled to carry forward LTCL of Rs.31,34,908/- in the subsequent year.
In the appellate proceedings, the assessee took new contention by stating that the assessment has been reopened after expiry of four years from the end of assessment year without pointing out that there is failure on the part of the assessee to disclose fully and truly all the material facts relevant to the completion of assessment, as required under the first Proviso to Section 147 of the Act. Accordingly, the assessee contended that the reopening is bad in law. The ld.CIT(A) was convinced with the said contentions and accordingly he annulled the assessment order. Aggrieved, the Revenue has filed this appeal before us.
We heard the parties and perused the record. We notice that the ld. CIT(A) has granted relief to the assessee by following the first proviso to Section 147 of the Act which reads as under: “Income escaping assessment.
If the [Assessing] Officer [has reason to believe] that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) : Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment
4 year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year.” In the instant case, the original assessment has been completed u/s 143(3) of the Act and the assessment has been reopened after the expiry of four years from the end of the assessment year under consideration.
Hence the first proviso to sec. 147 is applicable to the instant case. According to the ld. CIT(A), there is no failure on the part of the assessee to disclose all the material facts fully and truly necessary for completion of assessment and hence he has held that the reopening of assessment is not valid in law. However, a careful perusal of the return of income filed by the assessee would show that the assessee has declared income from capital gains and income from other sources. In the return of income it is nowhere mentioned that the assessee is a partner in the firm M/s Go Go International either in his individual capacity or as representative of M/s Sham Sunder Goenka Trust. Further, it is no where mentioned that the due date for filing return of income for the year under consideration was 30-11-2003 as per the extended time limit. Hence, in our view, it cannot be said that the assessee has disclosed all the material facts necessary for assessment fully and truly as required by the first Proviso to Section 147 of the Act.
We have noticed that the assessee’s main contention before the AO was that he should be considered as “working partner” of M/s Go Go International, in the terms of section 40(b) of the Act. We notice that the said contention was not raised before the ld. CIT(A). In any case, we notice that the partner of M/s Go Go International was only the Trust namely M/s Sham Sunder Goenka Trust and not the assessee. The 5 expression “Working Partner” is defined under Explanation 4 to sec. 40(b) as under:- 40(b). … Explanation 4.—For the purposes of this clause, “working partner” means an individual who is actively engaged in conducting the affairs of the business or profession of the firm of which he is a partner;] A careful perusal of the above said definition would show that the working partner should be an individual actively engaged in conducting the affairs of the business or process of the firm of which he is a partner, meaning thereby, the individual should be a partner of the firm. In the instant case, the assessee is not a partner of the firm M/s Go Go international. He is only representing the actual partner. Accordingly, we are of the view that the AO was justified in holding that the assessee cannot be considered as working partner of M/s Go Go international. Even otherwise, the assessee has nowhere said that the accounts of M/s Go Go International is required to be audited under the provisions of the Act or under any other law, though the same is no relevant here.
In view of the above, we are unable to agree with the view expressed by Ld CIT(A) and accordingly we set aside the order of ld.CIT(A) and restore the order of AO.
In the result, the appeal filed by the revenue is allowed. Pronounced accordingly on 30th Oct, 2015. घोषणध खुरे न्मधमधरम भें ददनधंकः 30th Oct, 2015 को की गई । (AMARJIT SINGH) ( B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER भुंफई Mumbai: 30th Oct, 2015. 6 व.नन.स./ SRL , Sr. PS
आदेश की प्रतिलऱपप अग्रेपिि/Copy of the Order forwarded to : अऩीरधथी / The Appellant 1. प्रत्मथी / The Respondent. 2. आमकय आमुक्त(अऩीर) / The CIT(A)- concerned 3. आमकय आमुक्त / CIT concerned 4. ववबधगीम प्रनतननधध, आमकय अऩीरीम अधधकयण, भुंफई /
DR, ITAT, Mumbai concerned गधर्ा पधईर / Guard file. 6. आदेशधनुसधय/ BY ORDER,सहधमक ऩंजीकधय (Asstt.