Commissioner Of Income-Tax, Coimbatore v. Sri K.rangaswamy Naidu, Coimbatore

IN THE HIGH COURT OF JUDICATURE AT MADARAS DATED: 12.6.2006 CORAM: THE HONOURABLE MR.JUSTICE P.D.DINAKARANandTHE HONOURABLE MR.JUSTICE P.P.S.JANARTHANA RAJA T.C.Nos.275 & 276 of 2001 ....Commissioner of Income-tax,Coimbatore...Applicantvs.Sri K.Rangaswamy Naidu,Coimbatore....Respondent inTC.275/2001Sri K.Damodaraswamy Naidu,Coimbatore.... Respondent inTC.276/2001 Tax Case References at the instance of the Revenue arisingout of the order of the Income-tax Appellate Tribunal, C-Bench,Madras in ITA Nos.2539 & 2540/Mds/90, dated 25.9.1998 for theassessment year 1987-88, against the order of The Commissioner ofIncome Tax (Appeals) Coimbatore, dated 26.4.1990 in ITA.Nos.692-C/89-90 and 699-C/89-90 and against the order of The Asst.Commissioner of Income Tax Central Circle I, Coimbatore, dated31.1.1990 P.A.No.49-520-PY-8547/Cent.I/CBE against the order ofThe Income tAx Appellate Tribunal C Bench Madras dated 17.8.2001R.A.No.457/Mds/98 and 455/Mds/98. For applicant :Mr.J.Narayanaswamy, Jr.SC. For IT. For respondent :Mr.R.Meenakshisundaram....JUDGMENT(Delivered by P.D.DINAKARAN,J.) At the instance of the Revenue, the Income-tax AppellateTribunal has stated a case and referred the following question oflaw, which is common in both tax cases: https://hcservices.ecourts.gov.in/hcservices/ "Whether, on the facts and in the circumstances of the case,the Appellate Tribunal was right in law in upholding the order ofthe Commissioner of Income-tax (Appeals) directing that theassessee's share of loss from the firm be set off against otherincome, when in fact the return filed in the case of the firm hasbeen treated as non-est, having been filed beyond the time limitprescribed under sec.139(1) of the Act?" 2.1. The assessment year with which we are concerned is 1987-88. The assessee in each case is a partner in the firm,M/s.Visalakshi Combines, Coimbatore. The claim of the assesseebefore the assessing officer was that the share of loss from thefirm, M/s.Visalakshmi Combines was to be set off against his otherincome. 2.2. The assessing officer noticed that the due date forfiling the return of income by the firm for the assessment year1987-88 was 31.7.1987, but the return was filed only 9n 29.7.1988,beyond the time limit prescribed under section 139(1) of theIncome-tax Act. Therefore, treating the return filed by the firmas non-est, the assessing officer held that there was noassessment made on the firm, nor the share of loss to beallocated to the partners was determined. 2.3. Accordingly, in the assessment of the assessee in eachcase, as a partner of the firm, no adjustment for the share ofloss was made by the assessing officer, though there was claim bythe assessee. The assessing officer made the assessment on theassessee taking the share of loss from the firm as 'Nil'. TheCommissioner of Income-tax (Appeals), however, accepted theassessee's claim. 2.4. Before the Appellate Tribunal, the Revenue contendedthat there was no apportionment of loss under section 67 of theIncome-tax Act in the case of the firm as the return filed by thefirm for the assessment year 1987-88 was treated as non-est.But, the Appellate Tribunal held that the assessment of theindividual partner was independent of the assessment of the firmand though the share income of the individual partner mightultimately be determined by the assessing officer on completion ofthe assessment of the firm, the assessability of the share incomewould not depend on such allocation. The Appellate Tribunal feltthat it was open to the assessing officer to make assessment undersection 155 of the Income-tax Act on the completion of assessmentof the firm, but such adjustment would not be possible in thepresent case since the firm itself had filed its return beyondthe time limit and the same was accepted and regular assessmentorder was passed and thus, dismissed the appeal preferred by theRevenue. 2.5. The Appellate Tribunal, at the instance of the Revenue,has stated a case and referred the above mentioned question oflaw. 3. As evident from the records, it is not in dispute that theassessing officer has not ignored the return filed by the firm,but acted on the return and made a regular assessment undersection 143(3) of the Income-tax Act and the loss, as submitted bythe firm in the return, was also accepted. Since the loss of thefirm had been accepted and the assessing officer was directed toset off the share of loss of the assessee in each case, we fail tounderstand how the return filed by the firm has been treated asnon-est as raised in the question of law. Therefore, finding itdifficult to hold that the return filed by the firm was treatedas non-est, the question of law referred to us in both the taxcases is answered in favour of the assessees. No costs. na. Sd/ Asst.Registrar /true copy/ To Sub Asst.Registrar 1. The Assistant Registrar, Income-tax Appellate Tribunal, Rajaji Bhavan, Besant Nagar, Chennai 600 090 (five copies with records) 2. The Secretary, Central Board of Direct Taxes, New Delhi (3 copies) 3. The Commissioner of Income-tax, Coimbatore. 4. The Commissioner of Income-tax (Appeals), Coimbatore. 5. The Asst. Commr. Of Income-tax, Central Circle-1, Coimbatore. + 1 cc to Mr. Meenakshisundaram, Advocate SR No.24083+ 2 ccs to Mr.N. Muralikumaran, Advocate SR No.24118, 24119 TEJ(CO)SR/4.7.2006T.C.Nos.275 & 276 of 2001