Bombay H.C : Whether the undisclosed income of a partner can be treated as undisclosed income of the firm for the purposes of Chapter XIV-B of the IT Act, 1961.

High Court Of Bombay

CIT vs. Tirupati Oil Corporation

Sections 158BC, 158BD

S.H. Kapadia & A.P. Shah, JJ.

IT Appeal No. 28 of 2000

28th February, 2000

Counsel Appeared

R.V. Desai with J.P. Deodhar, for the Appellant : L.S. Devani, for the Respondent

JUDGMENT

BY THE COURT :

The short point which arises for consideration in the present matter is whether the undisclosed income of a partner can be treated as undisclosed income of the firm for the purposes of Chapter XIV-B of the IT Act, 1961.

2. The facts of this appeal are as follows : A search operation under s. 132 of the Act was carried out at the residences of the partner pursuant to which notice under s. 158BC of the IT Act was issued to the firm on 5th Aug., 1996, requiring the assessee-firm to furnish its return of income for the block period in question. The AO came to the conclusion that since a partnership firm is not a legal entity the assessee-firm was liable with regard to the material detected at the residence of its partner. The Tribunal in appeal, however, rightly came to the conclusion that under the IT Act, a registered firm is a taxable unit and if the AO wanted to proceed under Chapter XIV-B of the IT Act with regard to the undisclosed income of the partner for the purposes of making block assessment on the assessee-firm, then the AO was required to invoke s. 158BD which has not been done in the present case and, therefore, the block assessment made on the firm without following the procedure under s. 158BD was bad in law. We do not find any error of law in the judgment of the Tribunal. No substantial question of law, in any event, arises. Hence, the appeal is dismissed.

[Citation : 248 ITR 194]

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