The Commissioner Of Income Tax Trichy v. S.subramaniam

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 03.01.2007 CORAM THE HON'BLE MR.JUSTICE P.D.DINAKARANANDTHE HON'BLE MRS.JUSTICE CHITRA VENKATARAMAN T.C.(A) No.266 of 2001 The Commissioner of Income TaxTrichy...Appellant Vs.S.Subramaniam..Respondent S.Subramaniam Appeal under Section 260A of the Income Tax Act, 1961 against theorder of the Income Tax Appellate Tribunal, Madras 'B' Bench dated15.2.1999 made in ITA No.1362/Mds/1991 for the assessment year 1986-87against the order of the Commissioner of Income Tax, [Appeals], Madras 34,dated 22.2.1991 an made in IT Appeal NO.104/1989-90/Trichy against [831S/1986-87 dt. 22.11.89 on the file of the Asst. Commissioner of IncomeTax, Company Circle, Trichy]. For Appellant:Mr.T.RavikumarJunior Standing CounselFor Respondent :Mr.R.VijayaraghavanJ U D G M E N T (Delivered by P.D.DINAKARAN, J.) The above tax case appeal is directed against the order of the Income-tax Appellate Tribunal dated 15.2.1999 made in ITA No.1362/Mds/1991 forthe assessment year 1986-87, raising the following substantial question oflaw: " Whether on the facts and in the circumstances of the case, theAppellate Tribunal is right in law in cancelling the order underSection 155 of the Income-tax Act, 1961 ?" 2.1. The brief facts of the case are stated as hereunder: The Revenue is the appellant. The issue raised in this appeal relatesto the assessment year 1986-87. The assessee is a partner of the firmM/s.Hotel ARR. The original assessment on the return filed by theassessee for the said assessment year was completed on 13.10.1987 undersection 143(1)(a) of the Act adopting share of loss from the firm ashttps://hcservices.ecourts.gov.in/hcservices/ Rs.5,75,437/-. But, subsequently, the assessment was sought to berectified under Section 155 of the Income-tax Act, 1961, by order dated22.11.1989 adopting the share of loss as 'Nil' on the ground that the firmhad filed its return belatedly and the same had been lodged. Aggrievedagainst the said order, the assessee preferred an appeal before theCommissioner of Income-tax (Appeals) and it was contended by the assesseebefore the Commissioner that rectification under Section 155(1)(a) of theAct can be made pursuant to the assessment or re-assessment of the firm,but not in a case where the return of the firm had only been lodged. TheCommissioner, by order dated 22.2.1991 allowed the appeal holding that asper Section 155 (1) of the Act, which gives limited jurisdiction, theassessment of a partner of the firm can be rectified only when it wasfound that on the assessment or re-assessment of the firm, the share ofthe partner has not been included in his assessment or if included, isincorrect and section 155 can be restricted to only when the assessment ofthe firm had been completed and not when return of the firm had beenlodged, as a result of the belated filing and when admittedly in theinstant case where there is no assessment of the firm M/s.Hotel ARR, noaction can be taken on the return filed by it. 2.2. Aggrieved by the same, the Revenue went on appeal before theIncome-tax Appellate Tribunal and the Tribunal, by order dated 15.2.1999,upheld the order of the Commissioner holding that the power to rectifyunder Section 155 of the Act cannot be resorted to in a case where thereis no completed assessment and more so, in a case where the return of thefirm was only lodged, as in the instant case. Hence, the present appealby the Revenue raising the substantial question of law referred to above. 3. In this connection, it is apt to refer Section 155(1) of theIncome-tax Act, 1961, which reads as follows:-155. (1) – Where in respect of any completed assessment of apartner in a firm for the assessment year commencing on the 1[st]day of April, 1992, or any earlier assessment year, it is found- (a) on the assessment or reassessment of the firm, or 3. In this connection, it is apt to refer Section 155(1) of theIncome-tax Act, 1961, which reads as follows:-155. (1) – Where in respect of any completed assessment of apartner in a firm for the assessment year commencing on the 1[st]day of April, 1992, or any earlier assessment year, it is found- (a) on the assessment or reassessment of the firm, or (b) on any reduction, or enhancement made in the income of thefirm under this section, section 154, section 250, section254, section 260, section 262, section 263 or section 264,or(c) on any order passed under sub-section (4) of section 245D onthe application made by the firm,that the share of the partner in the income of the firm has notbeen included in the assessment of the partner or, if included,is not correct, the Assessing Officer may amend the order ofassessment of the partner with a view to the inclusion of theshare in the assessment or the correction thereof, as the casemay be; and the provisions of section 154 shall, so far as maybe, apply thereto, the period of four years specified in sub-section (7) of that section being reckoned from the end of thefinancial year in which the final order was passed in the caseof the firm." https://hcservices.ecourts.gov.in/hcservices/ 4. Section 155 authorises an amendment of an order of assessment wherethe assessment had earlier been completed. It is settled law that wherethere is no order of assessment under Section 143(3), it is impermissibleto invoke jurisdiction under section 155. "Completed assessment" employedin section 155(1) means a positive act of completion which should beclearly distinguished from lapse of authority to assess on the expiry ofthe period of limitation prescribed. It cannot be held that on the lapseof the authority to assess on the expiry of the period of limitation, theprovisional assessment became final and complete. Moreover, section 155gives a limited jurisdiction to amend an order of assessment with a viewto include the proper share in the assessment or correction thereof as maybe found necessary as a consequence of the assessment or reassessment ofthe firm or any reduction or enhancement of the income thereof, videHANSRAJ DHINGRA v. UNION OF INDIA (Cal.) [(1975) 98 I.T.R. 397]. 5. Like in the case before the Calcutta High Court, where admittedlythere was no order of assessment made under section 143(3), in the instantcase, the original assessment of the assessee adopting share of loss wasonly made under Section 143(1)(a) and only after the filing of the returnof the firm belatedly and when the same had been lodged, the assessmentwas sought to be rectified under Section 155 adopting share of loss fromthe firm as 'Nil'. The facts in the present case are identical to thefacts before the Calcutta High Court in the case cited supra and hence, weare in full agreement with the views of the Calcutta High Court in thesaid case cited supra. Following the same, we hold that rectification ofthe order of the original assessment invoking section 155 of the Act isimpermissible, when the assessment had not been completed under Section143(3) and more particularly, when the return of the firm had only beenlodged. In view of the above, we answer the question of law in theaffirmative, against the Revenue and in favour of the assessee.Accordingly, the tax case appeal is dismissed. No costs. Sub Asst. Registrar. sra To: 1.The Assistant Registrar,Income Tax Appellate TribunalMadras Bench "B", Besant Nagar, 3rd Floor, Rajaji Bhavan, Chennai 90. 2.The Commissioner of IncomeTax (Appeals), Chennai.Tax (Appeals), Chennai. 3.The Assistant Commissioner of Income Tax, Company Circle, Trichy. 4. The Commissioner of Income Ta, Trichy. + 1 CC To Mr. N.Murali kumaan, Advocate SR NO.548 ava[co]gp/7.2. T.C.(A) No.266 of 2001