Gujarat High Court
Dalpatbhai Damjibhai vs Commissioner Of Income-Tax on 1 February, 1993
Equivalent citations: [1994]205ITR144(GUJ)
JUDGMENT G.T. Nanavati, J.
1. The question which is referred to this court by the Income-tax Appellate Tribunal under section 256(1) of the Income-tax Act, 1961, is as under :
"Whether, on the facts and in the circumstances of the case, the ground challenging the Income-tax Officer's order refusing to record partition of Hindu undivided family could be raised in the appeal where the quantum of the assessee's total income had also been disputed ?"
2. The assessment of the assessee, Chhaganlal, for the assessment year 1971-72 was completed under section 143(1) on November 12, 1971. He had applied for reopening the assessment under section 143(2)(a) as the status shown as Hindu undivided family in the return was not accepted by the Income-tax Officer. The Income-tax Officer, considering the fact that the business of iron and hardware was started by the assessee in his individual capacity and that right from Samvat year 2015 (assessment year 1960-61), he was assessed as an individual, and other circumstances, held that the status of the assessee as individual was rightly adopted by him. The assessee's income was thus computed and tax liability was assessed on that basis. This order was passed on March 29, 1974. It further appears that he had also made an application under section 171 on the ground that a partition had taken place and, therefore, the assessee should be assessed as an individual. This claim of the assessee was rejected by passing an order on March 29, 1974. Against the assessment order, the assessee preferred an appeal to the Appellate Assistant Commissioner. In that appeal, it was contended that the Income-tax Officer had failed to appreciate the deed or partition and had committed an error in not accepting the claim of the assessee that the business of the assess was really the business of the Hindu undivided family and that he correct status of the assessee was, therefore, Hindu undivided family. The Appellate Assistant Commissioner held that the assessee's claim for Hindu undivided family status was not justified. He further held that, as a separate order was passed by the Income-tax Officer under section 171 and as an appeal is separately provided against an order passed under that section, a separate appeal ought to have been filed challenging the said order. As no separate appeal was filed, the challenge to that order should not be entertained. He, therefore, dismissed the appeal. The assessee then preferred an appeal to the Tribunal. Before the Tribunal also, it was contended that the assessee, Chhaganlal, had, under some mistaken notion, disclosed the income from the said business as of individual, though in reality, it belonged to the Hindu undivided family. The Tribunal, after considering the partition deed, the statements of other coparceners and other, relevant facts and circumstances, came to the conclusion that the business in question really belonged to the Hindu undivided family and that it was not the individual business of the assessee. The Tribunal, therefore, directed the income from the business should shown in the hands of the Hindu undivided family. As regards the contention regarding partition, the Tribunal noted the fact that, against the order passed by the Income-tax Officer, no separate appeal was filed by the assessee and, therefore, the finding recorded by the Income-tax Officer that no partition had taken place could not be reconsidered in the quantum appeal. The finding recorded by the Appellate Assistant Commissioner in this behalf was thus confirmed though, on the other point, the appeal was allowed. The assessee then moved the Tribunal for referring the above stated question to this court. It may be stated that though the assessee is Chhaganlal, in the title of the appeal memo before the Appellate Assistant Commissioner and also before the Tribunal, Dalpatbhai Damjibhai, the father of Chhaganlal, is shown as the appellant. Even in the reference application, the name of the applicant is shown as Dalpatbhai Damjibhai. On perusal of the record, it appears that the draft statement of facts is signed by Chhaganlal Dalpatbhai and the name of the applicant is also shown as Chhaganlal Dalpatbhai. The learned advocates appearing for both the sides agree that the assessee in this case is Chhaganlal and not Dalpatbhai.
3. It was contended on behalf of the applicant that the appeal which was preferred by the assessee before the Appellate Assistant Commissioner was composite appeal and the Appellate Assistant Commissioner ought to have entertained the same. In not considering the challenge to the order passed under section 171, the Appellate Assistant Commissioner and also the Tribunal have sacrificed justice at the alter of hypertechnicality. In support of his contention that the appeal should have been treated as a composite appeal and that such an appeal is maintainable, learned counsel for the applicant relied upon a decision of this court in Patel and Co. v. CIT [1986] 161 ITR 568. In that case, it was held (headnote) :
"A right of appeal conferred by the statute has to be liberally construed and where appeals lie to the same authority, it would be too technical an approach to adopt to partly reject a composite appeal on the ground that separate appeals ought to have been filed instead of a composite one. The right of appeal is by way of a remedy provided by the statute and should not ordinarily be denied to the assessee unless the law prohibits it. It cannot be said that a single composite appeal would not lie because different clauses of sub-section (1) of section 246 were attracted, namely, clause (c) in so far as the appeal was against the order of the assessment made under sub-section (3) of section 143 and clause (j) in so far as it related to the Income-tax Officer's order refusing renewal of registration. Since neither the Act not the Rules prohibit a single composite appeal, such an appeal would be competent."
4. That was a case of a firm and the claim was for renewal of registration. But the observations made therein would certainly apply to a case of this type also Learned counsel for the assessee also drew out attention to a decision of the Rajasthan High Court in Ansari Jewellers v. CIT [1987] 167 ITR 380, which has also taken a similar view. Learned counsel also relied upon the observations of the Supreme Court in CIT v. Calcutta Discount Co. Ltd. [1973] 91 ITR 8 to the effect that, if that had become necessary, they would have held that he Tribunal was wrong in rejecting the appeal summarily on the ground that the necessary plea was not taken.
5. As against that, learned counsel for the Revenue relied upon the observations made by the Bombay High Court in Tuljansa Janardhansa Pawar v. CIT [1950] 18 ITR 648 that (headnote) :
"When an authority upon whom judicial functions are conferred has to decide or hear a case or an appeal, he can only do so provided he has heard all parties who are likely to be affected by the order which he is going to make."
and submitted that the procedure which the Appellate Assistant Commissioner has to follow in an appeal against an order passed under section 171 is different from the procedure which he has to follow in a quantum appeal. In the quantum appeal, only the assessee is required to be heard; whereas, in the appeal against the order passed under section 171, all affected parties are required to be heard. For this reason, he submitted that it should be held that a composite appeal is not competent.
6. As pointed out by this court in Patel and Co. v. CIT [1986] 161 ITR 568, if the Act and the rules made thereunder do not prohibit the filing of a composite appeal, it should not be dismissed on the ground that it is not competent. If appeals are provided to the same authority against two to more orders passed by the Income-tax Officer, then merely because these appeals are provided by different clauses of section 246(1), it would be too technical to say that, for that reason, separate appeals should be filed and that if a composite appeal is filed, then it should be regarded as incompetent. In a case where one of the two orders has become time-barred, then it may not be regarded as improper not to entertain such a composite appeal. But, where such a question does not arise and the appeal is otherwise not incompetent, there can be no justification in holding that a composite appeal of the type with which we are concerned in this reference is not competent. As stated earlier, the order under section 143(3) and the order under section 171 were passed on the same day by the same Income-tax Officer. Both the orders were challenged before the same authority within time though by filing a composite appeal. Therefore, the Appellate Assistant Commissioner and the Tribunal were not justified in treating it as an appeal against the order of assessment only and not entertaining the plea regarding the partition on the ground that for that, a separate appeal was necessary. Moreover, in this case, the Income-tax Officer had not accepted the claim of the assessee that the income which was derived from the business was that of the Hindu undivided family. As the claim for status as Hindu undivided family was not accepted, the claim for giving effect to the partition was also rejected. Thus, the claim for partition was dependent upon the claim for status as Hindu undivided family.
7. For these reasons, the question referred to us is answered in the negative, i.e., in favour of the assessee and against the Revenue. Reference is disposed of accordingly with no order as to costs.