Madras High Court
Shanthi Diamonds vs Income-Tax Officer. on 12 March, 1990
Equivalent citations: [1990]33ITD619(MAD), (1990)37TTJ(MAD)54
ORDER
, VALIDITY--Two appeals before two Commissioners (Appeals).
Ratio :
Where two appeals are filed by partners before two different Commissioners and assessment order was set aside by one Commissioner, his order attained finality and second appellate order, even if validity made, had to be set aside.
Held :
Just as the Commissioner of Income Tax (Appeals), Madurai held, and correctly so, that valid appeal could be preferred to him by any partner of the firm, the Commissioner of Income Tax (Appeal)-V, Madras had also a valid appeal before him. On a valid appeal he passed a valid appellate order, setting aside the assessment. When that order was not contested by either the appellant before him or by the revenue, that order attained a certain degree of finality. When the Commissioner of Income Tax (Appeals), Madurai came to take up the appeal in 1988, there was no assessment order on which he could adjudicate. This is because the order of the Commissioner of Income Tax (Appeals)-V, Madras was a valid order and consequent to that, the assessment stood set aside. This being so, the only proper order which can be passed for the assessment year 1982-83 is to set aside the order of the Commissioner of Income Tax (Appeals), Madurai as far as this assessment year is concerned and give the finding that since the assessment already stood set aside by the order of the Commissioner of Income Tax (Appeals)-V, Madras, the Income Tax Officer has to make a fresh assessment.
Application :
Also to current assessment years.
Income Tax Act 1961 s.247 ORDER Per Shri George Cheriyan, (Sr. Vice-President) - ITA No. 3862/Mds/88 is an appeal by the revenue relating to the assessment year 1982-83, ITA No. 3612/Mds/88 is an appeal by the assessee also relating to the assessment year 1982-83 and ITA No. 3613/Mds/88 is an appeal by the assessee relating to the assessment year 1983-84.
2. We first take up the appeals for the assessment year 1982-83. For this year the assessment order was passed by the ITO, City Circle-II (2), Trichy on 21-3-1985 on the assessee in the status of a registered firm. The accounting period adopted was the financial year 1-4-1981 to 31-3-1982. The income as computed was Rs. 10,58,070 against income returned of Rs. 46,966. The main additions both under the head other sources was (a) investment of Rs. 11,100 and income outside the books computed at Rs. 10,00,000. This income outside the books was computed consequent to a comparison made by the ITO between entries in certain documents which were obtained during a search on 20-10-1982, and the accounts as maintained by the assessee. The income computed was allocated amongst seven partners. The partners and their shares were as under :
1.
B. K. N. Kannan 25%
2. B. K. N. Rajaram 12 1/2%
3. B. K. Shanthilal 12 1/2%
4. B. K. Sukumaran 12 1/2%
5. B. K. Sekar 12 1/2%
6. B. K. Jaykumar 12 1/2%
7. B. K. Vairam 12 1/2%
3. B. K. N. Kanna filed an appeal Against the order of assessment to the CIT (Appeals)-V, Madras who was the Commissioner who had jurisdiction over the assessee at the material time. This appeal was filed on 20-4-1985. While this appeal was pending apparently because the other group of partners headed by Rajaram had not received the copy of the assessment order, they applied for the copy of the assessment order which was duly furnished to them and an appeal signed by partner Rajaram was filed this time before the CIT (Appeals), Madurai on 26-9-1986. This appeal came to be filed before the CIT (Appeals), Madurai apparently because by that time as assessment jurisdiction has been transferred from Trichy to the ITO, Circle-II (5), Madurai
4. Thus two appeals were pending - One before the CIT (Appeals)-V, Madras and the other before the CIT (A), Madurai. The CIT (Appeals)-V, Madras apparently was not aware of the appeal which stood filed before his counter-part at Madurai. He took up the appeal and after hearing the counsel who appeared before him passed an order on 23-3-1987. By this order he set aside the assessment for the assessment year 1982-83.
5. Thereafter the appeal filed at Madurai came to be taken up by the CIT (Appeals), Madurai. It was Brought to his notice that the Kannan group had filed an appeal for the same assessment year and that as evidenced by order in ITA No. 31/85/- 86/TRY dated 32-3-1987 the assessment stood aside.
6. The CIT (Appeals), Madurai embarked upon examination whether he had jurisdiction to hear the appeal or not, and if he had, what orders he could pass. He referred to the judicial pronouncements in CIT v. Babu Ram Chandra Bhan [1969] 74 ITR 143 (All.) and CIT v. General Textiles [1978] 111 ITR 727 (Cal.) and came to the conclusion that he had jurisdiction to dispose of the appeal because any partner who is aggrieved could file a valid appeal under the provisions of section 247.
7. Thereafter he proceeded to examine whether when the assessment order for the asst. year 1982-83 had already been set aside by one CIT (Appeals) on an appeal filed by one of the partners, he was compelled to pass a similar order setting aside the assessment or whether he could decide the issue on the merits. He came to the conclusion that he could decide the issue on merits. He therefore went into the merits of the case and he was of the view, briefly stated, that there was no warrant for estimating the undisclosed income at Rs. 10 lakhs and based on the exact difference there should have been only an addition of Rs. 9,62,504. He added this to the income of Rs. 46,966 returned and arrived at a figure of Rs. 10,09,476 which he confirmed. Regarding the balance of Rs. 11,100 he remanded the matter to be examined afresh as to whether it should be included or not.
8. As far as the order of the CIT (Appeals)-V, Madras was concerned passed on 23-3-1987, the Kannan group did not appeal and the revenue also did not appeal. The result was that there was an order of the first appellate authority setting aside the assessment for the assessment year 1982-83 which remained unchallenged by either the revenue or the appellant concerned when the CIT (Appeals), Madurai came to decide the appeal on 14-9-1988.
9. Against the order of the CIT (Appeals) both the revenue and the assessee are aggrieved. According to the revenue since an earlier order had been passed by the CIT (Appeals)-V, Madras setting aside the assessment, the CIT (Appeals), Madurai could not have passed the order that he did. According to the assessee adequate relief had not been given and further relief is due.
10. For the present we have the matters for the assessment year 1982-83 and go to the assessment year 1983-84.
11. For the assessment year 1983-84, there was, according to the assessee, a change in the constitution from 14-11-1982 when the Rajaram group went out of the firm. Therefore the plea in brief was that if any income was to be apportioned between the assessment year 1982-83 and 1983-84, which was not accounted for, the period of apportionment should start on 1-4-1981 and should end on 14-11-1982. Thereafter if there was any extra income or for that matter any income earned by the firm, the Kannan group alone would have to bear the liability.
12. The counsel for the assessee had taken a plea before the CIT (Appeals), Madurai that no assessment could at all be made on the firm for the assessment year 1983-84. That contention has been expressly given up before us. The learned counsel very fairly stated that such a contention, as now advised, was totally untenable.
13. The fact, therefore, remains that for the assessment year 1983-84 an assessment on the firm itself cannot be challenged. For the assessment year 1983-84, the Kannan group did not file any appeal apparently. The appeal filed only is by the Rajaram group.
14. The CIT (Appeals) as far as this year was concerned confirmed the business income but set aside the computation of the income under the head Other Sources. Against this the assessee is aggrieved because according to the Rajaram group primarily income subsequent to 14-11-1982 cannot be considered in their hands. This is apart from other grounds taken in the appeal.
15. From the date of the order passed by the CIT (A)-V, Madras and the date of receipt thereof by the Administrative Commissioner the time limit for making a reassessment would expire on 31-3-1990. The reassessment, we understand, has not yet been made.
16. We agree with the Commissioner (Appeals), Madurai that section 247 gives a right to any partner to prefer an appeal. Therefore the appeal filed by the Rajaram group before him was certainly a valid appeal.
17. We now come to the interesting issue as to whether there was any constraints on him in the appellate order which he could pass. Viewing the matter from first principles on this point, this can be resolved very simply. Just as the CIT (Appeals), Madurai held, and correctly so, that a valid appeal could be preferred to him by any partner of the firm, the CIT (Appeals)-V, Madras had also a valid appeal before him. On a valid appeal he passed a valid appellate order. As we have already stated, he was unaware of the appeal pending before the CIT (Appeals), Madurai. Be that as it may, he passed a valid appellate order setting aside the assessment. When that order was not contested by either the appellant before him or by the revenue, that order attained a certain degree of finality. When the CIT (Appeals), Madurai came to take up the appeal field by the Rajaram group in 1988, there was no assessment order on which he could adjudicate. This is because the order of the CIT (Appeals)-V, Madras was a valid order and consequent to that the assessment stood set aside. When the assessment stood set aside to be re-done and no fresh assessment had been made, there was nothing on which the CIT (Appeals), Madurai could adjudicate as far as the assessment year 1982-83 is concerned. Therefore all his findings in relation to the assessment year 1982-83 have to be considered as mere observations on an assessment order for the assessment year 1982-83 which had already been validly set aside by another CIT (Appeals) who had competent Jurisdiction. This being so, the only proper order we can pass for the assessment year 1982-83 is to set aside the order of the CIT (Appeals), Madurai as far as this assessment year is concerned and give the finding that since the assessment already stood set aside by the order of the CIT (Appeals)-V, Madras, the Income-tax Officer has to make a fresh assessment.
18. We would make it clear that in making the fresh assessment, the ITO will not be fettered by any observations of either CIT (Appeals). The Assessing Officer would be competent to make a fresh assessment in accordance with law after giving the assessee a full opportunity of being heard and after discussing the claims, if there are rival groups, of both parties.
19. We make it clear that since the valid order which subsisted was that of the CIT (Appeals)-V, Madras the fresh assessment of which he is the Assessing Officer is making to give effect to that order, has to be passed before the limitation for passing such order which expires on 31-3-1990. The period left is short. We have dictated this order in the open court. This is to enable the Assessing Officer to straightway take the order so that as adequate an opportunity as is still possible is not denied to the assessee.
20. Coming to the assessment year 1983-84, the basis adopted by the ITO was to equally apportion excess balances and consider whether there was any income or not. The finding for the assessment year 1982-83 will have a definite bearing on the assessment for the year 1983-84 also. Apart from this, the claim that one of the groups had gone out from 14-11-1982 would also have to be processed on merits, and to the extent any part of the claim may be tenable, that would have a bearing on the apportionment of the income between the partners inter se. Hence we consider that the proper course for the assessment year 1983-84 will be to set aside the orders of the authorities below, viz. the ITO as well as the CIT (Appeals), Madurai and direct the Assessing Officer to make a fresh assessment in accordance with law. For the sake of completeness, though it has not bearing on our findings, we may state that we were informed that the jurisdiction now vests with the Assistant Commissioner (Investigation), Trichy.
21. The result is, all the appeals are treated as allowed for statistical purposes.