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Madhya Pradesh High Court · body

2006 DIGILAW 819 (MP)

Commissioner of Income Tax v. Modi Brother

2006-07-06

ABHAY GOHIL, S.SAMVATSAR

body2006
Judgment ( 1. ) THIS appeal is filed by the IT Department under Section 260a of the IT Act (for short the Act) being aggrieved by the order dt. 15th Dec, 2000 passed by the Tribunal, Delhi, in Case No. IT 865/del/1995. ( 2. ) THE brief facts of the case are that the respondent-assessee deals with foodgrains. In the assessment year the assessee submitted his return showing his income to the tune of Rs. 1,10,829. The assessment was completed under Section 143 (3) of the Act. The assessee was assessed on total income of Rs. 1,58,325. ( 3. ) BY order dt. 30th March, 1993 the CIT initiated proceeding against the assessee under Section 263 of the Act. On 4th Nov. , 1994 the CIT remanded the case back to the AO by holding that he has not conducted any enquiry as regards to agricultural income of the firm. As per assessee-firm some agricultural income was earned by them individually, which was shown in the capital account. As per the CIT, the ITO should have enquired whether the agricultural income is the income of the assessee-firm or is of the partners of the firm and remanded the matter to the AO. This order was challenged by the assessee-firm by filing an appeal before the Tribunal. The Tribunal has set aside the remand order. Hence, this appeal. ( 4. ) THIS appeal was admitted by this Court on 20th Feb. , 2006 on following substantial questions of law: (i) Whether the Tribunal was justified in considering the documents which were not on record before the assessing authority in passing the impugned order ? (ii) Whether finding recorded by the CIT regarding loss or profit could be interfered with without any cogent material on record ? ( 5. ) THE gist of question No. 1 is that whether the Tribunal was justified in considering the documents, which were not on record before the assessing authority. From perusal of para 4 of the impugned judgment, it appears that the learned Counsel for the assessee has produced a chart appended at p. 45 of the paper book to explain the shortage for assessment. This document was filed for the first time before the Tribunal and was not there before the AO. ( 6. From perusal of para 4 of the impugned judgment, it appears that the learned Counsel for the assessee has produced a chart appended at p. 45 of the paper book to explain the shortage for assessment. This document was filed for the first time before the Tribunal and was not there before the AO. ( 6. ) LEARNED Counsel for the respondent submitted that the chart produced by the assessee was in fact the assessment orders for the years 1988-89, 1989-90, 1990-91, 1991-92. However, these assessment orders are not of the assessee in the present case, but they are of the partners of the assessee-firm. Thus, the assessee in that proceeding is quite different from the present assessee. In such situation, documents filed could not have been considered by the Tribunal, which were produced for the first time for setting (aside) the order of the CIT. ( 7. ) SHRI Ankur Modi, learned Counsel for the respondent has vehemently urged that the income of the partners and the income of the firm are two separate income. According to him, the agricultural income, which is shown in the capital account is the independent income of the partners and cannot be assessed in the hands of the present assessee. However, from perusal of the return, it appears that in the return which is at p. 31 of the paper book before the Tribunal, the agricultural land having a value of Rs. 4,41,071 is shown as assets of the assessee. Once the land is shown to be the land owned by the assessee, then the income which is derived from such land normally should be assessed in the hands of the assessee. ( 8. ) SHRI Ankur Modi, learned Counsel for the respondent has heavily relied on judgment of Allahabad High Court in the case of Indian Rice Mills v. CIT [1996 ]218 ITR508 (All ), [1996 ]85 TAXMAN227 (All ) and in the case of CIT v. Jaiswal Motor Finance (1983 )37 CTR (All )217 , [1983 ]141 ITR706 (All ). In these cases, it is held that an income of a partner cannot be clubbed with the income of the firm at the time of assessment. There is no dispute about this principle. In these cases, it is held that an income of a partner cannot be clubbed with the income of the firm at the time of assessment. There is no dispute about this principle. However, in the present case, there is a dispute whether the income in question is of the assessee-firm or its partner and for this purpose an enquiry is necessary, which were not conducted by the assessing authority. Therefore, the matter is rightly remanded back by the CIT. ( 9. ) AS in the present case as the matter is remanded, we do not wish to express our opinion on this point, as the assessee filed an application in subsequent year for correction in the return by stating that agricultural land is owned by the partners independently and this point can be decided by the AO. While deciding the matter afresh, the assessee shall be free to demonstrate before the AO and convince him that the income which is derived from agricultural land is the income of the partners and not of the firm. But, for this purpose, an enquiry is necessary, which was not conducted by the assessing authority at the time of assessment and therefore remand order cannot be interfered with on this ground. ( 10. ) AS regards question No. 2 is concerned, the said question does not arise for consideration, firstly in view of answer of question No. 1. It clearly appears from the order Annex. A-l, which is an assessment order passed by the ITO that there was no enquiry in the matter whether the income which is derived from the agricultural land is the income of the assessee-firm or its partners. Once the matter is remanded to the assessing authority for holding an enquiry in the matter, the question No. 2 does not arise for consideration. ( 11. ) IN view of the matter, this appeal is allowed. The impugned order passed by the Tribunal is set aside and the assessing authority is directed to proceed with an enquiry in accordance with the order passed by the CIT. ( 12. ) IN the facts and circumstances of the case, there shall be no order as to costs.