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2012 DIGILAW 4784 (MAD)

Commissioner of Income Tax v. Dawood Sons

2012-11-23

N.KIRUBAKARAN, P.P.S.JANARTHANA RAJA

body2012
JUDGMENT P.P.S. JANARTHANA RAJA, J. 1. The Revenue is on appeal as against the order of the Income Tax Appellate Tribunal, Madras 'A' Bench dated 25.08.2006 in ITA.No.2602/Mds/2004 and dated 31.08.2006 in ITA.No.3246/Mds/04. raising the following questions of law:- "1. Whether in the facts and circumstances of the case, the Tribunal was right in holding that the assessee's status cannot be changed from Association of persons to firm under Section 143(1) when in fact the assessee had filed its return inducating its status as Firm in Form 3CD? 2. Whether in the facts and circumstances of the case, the Tribunal was right in going into the question of the assessee's status, when the assessee had not filed an appeal raising that dispute before the Tribunal?" 2. The brief facts arising out of the case are as under:- The issue involved in both the tax case appeals are one and the same and hence, they are taken up together and disposed of by a common judgment. The relevant assessments years under consideration are 2002-03 and 2003-04. The assessee is a partnership firm and had four partners upto 31.01.2001 and was assessed as a firm up to assessment year 2001-02. For the assessment year 2002-03, the assessee filed returns stating that their status as Association of Persons (AOP). It is also pertinent to note that along with return of income, the assessee appended a note that there is change in the constitution of the firm to partner-ship firm, however, no certified copy of the revised instrument of partnership was enclosed. The Assessing Officer passed order under Section 143(1)(a) of the Income Tax Act, 1961 treating the assessee as a firm and not AOP as claimed in the return. For the assessment year 2003-04, the assessee filed a return stating that the status as AOP. The Assessing Officer, under Section 143(1)(a) order treated the assessee as a partnership firm. Aggrieved by the same, the assessee filed appeal before the Commissioner of Income Tax (Appeals). 3. The CIT (Appeals) allowed the appeal and pointed out that the Assessing Officer cannot change the status of the assessee under Section 143(1)(a) of the Act. Aggrieved by the same, the Revenue filed appeal before the Income Tax Appellate Tribunal. The Tribunal confirmed the order of the Commissioner of Income Tax (Appeals). Aggrieved by the same, the Revenue filed appeals before this Court. 4. Aggrieved by the same, the Revenue filed appeal before the Income Tax Appellate Tribunal. The Tribunal confirmed the order of the Commissioner of Income Tax (Appeals). Aggrieved by the same, the Revenue filed appeals before this Court. 4. Learned Standing counsel appearing for the Revenue contended that the Tribunal is wrong in dismissing the Revenue's appeal and contended that there is no dispute as to the status of the assessee as a firm. It is further stated that the PAN was allotted to the assessee indicating the status of the assessee as a firm. He further contended that the Tribunal ought to have seen that while invoking Section 143(1) of the Act, the Assessing Officer has not relied or called for any documents other than those before him. It is contended that there is prima facie error in the return fled along with the enclosures as far as the status of the assessee is concerned. Thus, learned Standing counsel for the Revenue argued that the order of the Tribunal is illegal, wrong and without justification and hence, the same may be quashed. 5. Inspite of notice being served on the assessee and their name being printed in the cause list, there is no representation for the assessee. 6. Heard the learned Standing counsel appearing for the Revenue and perused the documents available on record. There is no dispute that in the present case, the assessee filed returns in the status of Association of Persons (AOP). The said returns were processed under Section 143(1)(a) of the Act and the Assessing Officer did not accept the status of the assessee as AOP and treated as firm and made additions. 7. Section 143(1) of the Act provides for assessment, without issuing any notice to the assessee and gives a limited power to the Income-tax Officer to rectify arithmetical mistakes and make prima facie adjustments only. Section 143(3) empowers the Income-tax Officer to frame assessment after notice to the assessee and after making such inquiry as he deems fit. The scope of Section 143 (1)(a) of the Act is that the Assessing Officer can allow or disallow only such claims which were admissible/inadmissible on the basis of the returns and documents accompanying the return. So it is clear that the Assessing Officer could pass order on the basis of the return filed by the assessee. The scope of Section 143 (1)(a) of the Act is that the Assessing Officer can allow or disallow only such claims which were admissible/inadmissible on the basis of the returns and documents accompanying the return. So it is clear that the Assessing Officer could pass order on the basis of the return filed by the assessee. Similarly, if any refund is found due to the assessee on the basis of the said return, it shall be granted. It is not open to the Assessing Officer to make any adjustment in the returned income by disallowing any claim for deduction, allowance or relief, unless he is satisfied on the basis of information available in the return, documents and the accounts accompanying it. If the Assessing Officer wants to make unilateral adjustments, it would render the provision wholly arbitrary and unreasonable. However, the Assessing Officer could give an opportunity to the assessee and issue a notice under Sub-Section (2) of Section 143 of the Act about the allowability of deduction or claim made by the assessee. 8. In the present case, the assessee is shown as AOP in the returns filed by it. But the Assessing Officer changed the status as to that of Firm while passing order under Section 143(1)(a) of the Act. Learned Standing Counsel for the Revenue also brought to the notice of this Court that in the case of Commissioner of Income-tax Vs. Kay Kay Family Trust reported in (2005) 278 ITR 620 (All), the Allahabad High Court had taken the view that the Assessing Officer has no jurisdiction to change the status while making the assessment under Section 143(1) of the Act. The Punjab and Haryana High Court also in the case of Commissioner of Income Tax Vs. Tek Ram (HUF) reported in (2008) 300 ITR 357 (P&H) also considered the scope of the provision of Section 143(1)(a) of the Act and held that the status of the assessee cannot be changed while passing order under Section 143(1)(a) of the Act and held in paragraph 10 as follows:- "The Hon'ble Kerala High Court in the case of CIT Vs. K.V.Mankaram and Co., (2000) 245 ITR 353, while interpreting the scope of Section 143(1)(a) of the Act where the status of a firm was changed to an AOP, held as under (headnote):- "The proceeding under Section 143(1)(a) does not result in an order of assessment. K.V.Mankaram and Co., (2000) 245 ITR 353, while interpreting the scope of Section 143(1)(a) of the Act where the status of a firm was changed to an AOP, held as under (headnote):- "The proceeding under Section 143(1)(a) does not result in an order of assessment. The intimation given under Section 143(1)(a) cannot be treated an order of assessment. It is only to be deemed an order for the limited purpose of sections 154, 246 and 164 of the Act. Under Section 143(1)(a) of the Act, the intimation is deemed to be a notice of demand under Section 156 of the Act. Except intimation, no other order is contemplated under Section 143(10(a). There is a distinction between an order of assessment and a notice of demand. Under Section 246 also, a clear distinction is made between an intimation and an order of assessment. The Assessing Officer cannot under Section 143 (10(a), change the status of a firm to 'association of persons' which can be done under Section 185 of the Act, at the time of assessment." 9. We agree with the view taken by the Allahabad High Court and Punjah and Haryana High Court. In the present case, the Appellate Authorities had correctly rejected the plea of the Revenue and held that the Assessing Officer is not justified in changing the status of the assessee while passing the order under Section 143(1)(a) of the Act. Standing counsel appearing for the Revenue is also unable to show any material evidence or case law or any legal provision to take a contrary view. Thus, we are of the view that the finding of the Income Tax Appellate Tribunal is based on valid material evidence and in conformity with law. Hence, the order passed by the ITAT is confirmed. We do not find any error or any infirmity in the order passed by the Tribunal. We answer the questions in favour of the assessee and against the Revenue. 10. In the result, the Tax Case Appeals stand dismissed. No costs.