High Court Of Punjab &Â Haryana
CIT vs. Nand Lal Labhu Ram
Assessment Year 1993-94
Adarsh Kumar Goel And Ajay Kumar Mittal, Jj.
ITA Nos. 162 And 163 Of 2005
MarchÂ 31, 2011
Ajay Kumar Mittal, J. – The paper-book of this case is said to have been burnt in the fire incident that took place in the premises of this court on the night of January 30, 2011. Learned counsel for the appellant has made available two copies of the paper-book to the Registry for reconstruction of the file. The said copies are taken on record. The paper-book of this appeal is treated as having been reconstructed.
2. This order will dispose of two appeals, i.e., Income-tax Appeals Nos. 162 and 163 of 2005 as identical questions are involved therein. The facts have been taken from Income-tax Appeal No. 162 of 2005.
3. This appeal under section 260A of the Income-tax Act, 1961 (for short “the Act”), has been filed by the Revenue against the order dated September 16, 2004, passed by the Income-tax Appellate Tribunal Chandigarh Bench “A”, Chandigarh (in short “the Tribunal”) in I. T. A. No. 348/ Chandi/2001, relating to the assessment year 1993-94.
4. The following substantial questions of law have been claimed for determination by this court :
“(i) Whether the Income-tax Appellate Tribunal was right in law in observing that the controversy, as to whether the assessee was duty bound to file a certified copy of the partnership deed when there was no change in the constitution of the firm may thus, not be relevant, even though there was a change in constitution of the firm, with effect from April 1, 1992, in so far as two new partners joined the firm in place of three outgoing partners ?
(ii) Whether the Income-tax Appellate Tribunal was right in law in allowing the assessee the status of firm even though the assessee failed to furnish a copy of the partnership deed with the return of income consequent to change in constitution of the firm ?
(iii) Whether the firm having failed to comply with the provision of section 184 of the Income-tax Act, 1961 was to be assessed as an association of persons in view of section 185 of the Income-tax Act, 1961 ?”
5. The facts, in brief, necessary for adjudication as narrated in the appeal, are that the respondent-assessee filed its return for the assessment year 1993-94 on August 30, 1993, declaring income of Rs. 2,365 wherein it claimed its status as PFAS. The return was processed under section 143(1)(a) and notice under section 148 of the Act was issued to the assessee. During the course of assessment proceedings under sections 143(3)/ 147 of the Act, the Assessing Officer found that the assessee had not furnished a certified copy of the partnership deed along with the return of income. It was observed that as per the provisions of section 40(b) of the Act and also for the reason that the assessment year 1993-94 was the first year of the changed partnership on account of change in partners, it was mandatory to file the original partnership deed specifying the interest, and the remuneration paid to the partners, which the assessee failed to do. However, during the course of assessment proceedings, the assessee filed a photo copy of a partnership deed in which the names of the fathers of the partners had not been mentioned, and on the basis of that, the Assessing Officer formed an opinion that the partnership deed, a photostat copy whereof had been furnished, had not been executed. On the basis of the above, the Assessing Officer, vide order dated March 24, 2000, concluded that the status of the assessee was merely that of an “AOP”. The Assessing Officer further concluded that once that was so, no deduction was admissible to the assessee on account of salary and interest paid to the partners under section 40(b) of the Act. The Assessing Officer, thus, made addition of a sum of Rs. 45,000, which the assessee had debited to the income returned on account of salary to the partners. Besides, a sum of Rs. 1,01,000 was disallowed and also added to the income returned, which the assessee had paid as interest to the partners. The Assessing Officer further made an addition of an amount of Rs. 3,23,669 which the assessee had shown to have paid as interest on the capital of the partners.
6. The appeal carried by the assessee against the order of the Assessing Officer before the Commissioner of Income-tax (Appeals) (for short “the CIT(A)”), was allowed vide order dated January 24, 2001 whereby the additions made by the Assessing Officer were deleted. While doing so, the Commissioner of Income-tax (Appeals) held that the assessee was entitled to be treated as PFAS and deduction on account of payment of salary and interest to the partners is also allowable. It was further observed that the Assessing Officer had erred in holding that the assessee had diverted interest-bearing funds to its sister concern, M/s. Garg Rice and General Mills. It was further observed that for ordering disallowance of interest or any part thereof, it was essential that a clear finding be recorded by the Assessing Officer that the borrowed money or the part thereof had been utilized for the purposes other than the business.
7. The Tribunal, vide the order appealed against herein put its seal of affirmation on the finding returned by the Commissioner of Income-tax (Appeals) and dismissed the appeal of the Revenue.
8. We have heard learned counsel for the parties and perused the record.
9. The point for consideration in this case is, whether the assessee respondent could be treated to be a partnership firm or it was to be assessed as an association of persons.
10. The Tribunal while upholding the order of the Commissioner of Income-tax (Appeals) held that the assessee was assessable as partnership firm and the relevant finding recorded in that behalf in para. 6 of the order is as under :
“We have given our careful consideration to the rival contentions. It is not disputed that the status of the assessee was taken as that of PFAS at the time of processing the return. During the course of assessment proceedings under section 143(3), it is also not disputed that the assessee has filed a copy of the partnership deed duly signed by the partners. Since there has been a compliance with the procedural provisions of this statute, the assessee was entitled to the status of PFAS. The controversy, as to whether the assessee was duty bound to file a certified copy of the partnership deed when there was no change in the constitution of the firm may, thus, not be relevant in so far as the assessee has complied with the provisions of section 184 for grant of status of PFAS. Finding no infirmity in the order of the Commissioner of Income-tax (Appeals), we decline to interfere.”
11. The Commissioner of Income-tax (Appeals) and the Tribunal concurrently came to the conclusion that there was no change in the constitution of the firm and the assessee had filed a copy of the partnership deed which was signed by all the partners. It was further recorded that the procedural requirement of the Act had been complied with and, therefore, the assessee was liable to be assessed in the capacity of a partnership firm. An effort has been made by the learned counsel for the Revenue to show that the findings of fact recorded by the Commissioner of Income-tax (Appeals) and affirmed by the Tribunal are erroneous. But the counsel has not been able to show any perversity in the said findings except trying to persuade this court to re-appraise the evidence. Finding no ground to interfere with the findings aforesaid, the substantial questions of law are answered against the Revenue. The appeals are accordingly dismissed.
[Citation : 336 ITR 303]