High Court Of Karnataka
R. D. Mendon & Sons vs. ITO
Section 184(5)
Asst. Year 1994-95
Deepak Verma & K. L. Manjunath, JJ.
IT Appeal No. 411 of 2003
13th February, 2008
Counsel Appeared :
S. Parthasarathi, for the Appellant : M.V. Seshachala, for the Respondent
JUDGMENT
Deepak Verma, J. :
Heard Sri S. Parthasarathi for the appellant and Sri M.V. Seshachala for the respondent. The assessee feeling aggrieved by the order dt. 29th May, 2003, passed by the Tribunal, Bangalore Bench, in ITA No. 568/Bang/1999 for the asst. yr. 1994-95 is before us challenging the same under s. 260A of the IT Act, 1961 (hereinafter referred to as “the Act”). The appeal before the Tribunal was preferred by the Revenue, which came to be allowed. Hence this appeal by the assessee. The short material facts for deciding this appeal are as under : According to the assessee, it should have been assessed in the status of firm only since the assessee had complied with the notice under ss. 148, 143(2) of the Act and the assessment had also been completed under s. 143 (3) of the Act. As per the assessment order, the assessee confirmed an income of Rs. 37,221. The notice under s. 143 of the Act was issued and served on the assessee as the assessee had failed to file the return. Sec. 139(4) of the Act required theassessee to furnish the return within 31 days from the date of issuance of such notice. The status of the assessee-firm was treated as an AOP under s. 184(5) of the Act as there was a default committed by the assessee as mentioned under s. 144 of the Act. In response to the notice issued under s. 143(2) the assessee along with the accountant of the assessee appeared and produced the books of account and other details. The same were verified. The assessee had claimed interest on capital of Rs. 99,974 and remuneration to partners of Rs. 1,10,000. As the status of the firm was taken as an AOP, the assessee’s claim of remuneration and interest as mentioned above were disallowed and thus the assessment was completed. The assessee was constrained to file an appeal against the said order of the AO before the CIT(A). The CIT(A) allowed the appeal of the assessee. Aggrieved by the said order passed by the CIT(A), the Revenue preferred an appeal before the Tribunal wherein its appeal has been allowed. Hence this appeal by the assessee. The Tribunal came to the conclusion that the assessing authority was right in treating the assessee as an AOP basically relying on a judgment of the Supreme Court in the case of CIT vs. Smt. P.K. Noorjahan (1999) 155 CTR (SC) 509 : (1999) 237 ITR 570 (SC).
Even though the appellant has formulated four substantial questions of law, but after having heard learned counsel for the parties and after perusal of records, we are of the considered opinion that it is to be heard only on the following substantial question of law :
“(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in treating the appellant as an AOP as against the claim of ‘firm’, when the return filed though belated had been entertained and the assessment had been completed under s. 143(3) of the Act and when the AO had not proceeded to pass an ex parte order as contemplated under s. 144 of the Act ?”
8. Learned counsel appearing for the parties have not disputed before us that the said question has already been answered by a Division Bench of this Court passed on 20th Feb., 2004, in IT Appeal No. 4 of 2004 against the Revenue and in favour of the assessee. Paras 9 and 10 of the said order read as hereunder :
“9. It is true that when there is a ‘failure’ on the part of the assessee as enumerated in s. 144, the direction in s. 184(5) that the firm should be assessed as an ‘AOP’ is mandator). But the question is whether there is a failure as mentioned in s. 144. Sec. 144 provides that in the event of there being any of the three failures as enumerated in sub-s. (1) of s. 144, after giving due opportunity to the assessee to show cause, the AO may proceed to pass a best judgment assessment. But, the AO has not proceeded to pass a best judgment assessment under s. 144 which he ought to have done if there was any failure as mentioned in s. 144. The fact that the AO did not do so clearly leads to an inference that there was ‘no failure’ as mentioned in s. 144. When it is not possible to comply with a provision, it is not possible to say that there is ‘failure to comply with a provision’. In the circumstances, the first question also does not arise. We are of the view that the Tribunal was justified in holding that the status of the assessee should be treated as ‘registered firm’ and not as AOP.
10. As neither of the questions of law raised by the Revenue arises for consideration on the facts of the case, the appeal is dismissed.” In view of the aforesaid, we are of the opinion that no question of law arises for reconsideration as the same has been answered already by this Court. In view of the aforesaid, the appeal filed by the assessee is hereby allowed and the order of the Tribunal stands hereby quashed.
[Citation : 323 ITR 655]
