Wp(Md)/4208/2013 Of K.p.s. Enterprises A v. Commissioner Of Income-Tax-I

BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT DATED: 18.06.2019 CORAM: THE HONOURABLE DR.JUSTICE ANITA SUMANTH K.P.S. Enterprises a partnership firm,Represented by its Partner,Shri.K.P.Alagarsamy, 184/2, Bye Pass Road,Madurai – 625 016.... Petitioner Commissioner of Income Tax-I,Madurai – 625 002. PRAYER:Writ Petition filed under Article 226 of the Constitutionof India, praying for the issuance of a Writ of CertiorarifiedMandamus, calling for the records in the matter of assessment ofthe petitioner in file No.AAKFK1539J and revision petition in FileC.No.407/01/CIT-I/2011-12 and quash the order dated 22.02.2012 ofthe Commissioner under Section 264 and restore the matter to therespondent with a direction to consider de novo the entire facts. O R D E R The petitioner is a partnership firm comprising five (5)partners that carry on the business of development of real estate.In respect of assessment year 2007 – 2008, a notice under Section148 of the Income tax Act, 1961 [In short, 'Act'] was received andan assessment completed by the assessing authority, bringing to taxa sum of Rs.1,87,81,234/- as unexplained investment in purchase ofproperty, in terms of Section 69 of the Act. 2. The defence of the petitioner was that the propertybelonged to the individual partners and did not constitute apartnership asset. The firm submitted that the property inquestion had been purchased from a mortgagor in satisfaction ofmortgage debt in their capacity as co-owners. This was sought tohttps://hcservices.ecourts.gov.in/hcservices/be established by reference to sale deed dated 03.04.2006, registered as Document No.879 of 2006. Moreover, the balanceconsideration had been paid by the partners by way of a loan takenfrom ING Vysya Bank. These facts emanate prima facie from a readingof the aforesaid sale deed. 3. Notwithstanding this, an order of assessment dated22.02.2012 had come to be passed bringing to tax the aforesaid saleconsideration as unexplained income in the hands of the petitionerfirm. 4.The petitioner filed an application for revision of theaforesaid order before the Commissioner of Income Tax under Section264 of the Act, who by the impugned order dated 22.02.2012,rejected the same. The Commissioner of Income Tax confirms theorder of assessment on the ground that the books of accounts havenot been produced before the Assessment Officer in the course ofproceedings for assessment. 5.As far as the specific contention of the petitioner thatthe property belonged to the partners and hence could not betreated as a partnership asset is concerned the Commissioner merelyobserves and concludes that the documents produced before him andthe oral submissions of the partners lead him to conclude that theproperty had been jointly purchased by five partners of the firm.On this ground, he rejects the submissions of the firm and thepetition seeking revision of assessment. 6.I am of the view that the issue of ownership of theproperty has not been appreciated by the respondent in properperspective. The Commissioner himself states at paragraph 4(internal page 3) of the impugned order that the property has beenjointly purchased by all five partners of the firm. How he arrivesat this conclusion is unclear. No doubt, the property could havebeen jointly purchased. However, that by itself does not make it apartnership asset. The transaction thus ought to have been examinedespecially in the context of ownership, that is, whether, the samehad been purchased using the funds of the firm or the funds of theindividuals and whether the ownership vests in the name of the firmor the joint name of the partners. 6.I am of the view that the issue of ownership of theproperty has not been appreciated by the respondent in properperspective. The Commissioner himself states at paragraph 4(internal page 3) of the impugned order that the property has beenjointly purchased by all five partners of the firm. How he arrivesat this conclusion is unclear. No doubt, the property could havebeen jointly purchased. However, that by itself does not make it apartnership asset. The transaction thus ought to have been examinedespecially in the context of ownership, that is, whether, the samehad been purchased using the funds of the firm or the funds of theindividuals and whether the ownership vests in the name of the firmor the joint name of the partners. 7.In the light of the fact that the impugned order isbereft of any proper reasoning for confirmation of the order ofassessment dated 22.02.2012, I am of the view that this issue bere-visted and examined by the Commissioner, after taking intoaccount the submissions of the assessee and any supportingevidences that may be produced before him in this regard. 8.The impugned order is thus set aside and the matter isremanded to the file of the Commissioner of Income Tax, who willhear the petitioner de novo and pass a speaking order. This Writhttps://hcservices.ecourts.gov.in/hcservices/Petition is disposed of, in the aforesaid terms. Seeing as the W.P.(MD)No.4208 of 2019 matter relates to an order of assessment of the year 2011-12, thisexercise shall be completed within six weeks from the date ofreceipt of a copy of this order. No costs. Consequently, connectedmiscellaneous petition is closed. Sd/- Assistant Registrar(CS-II) // True Copy // Sub Assistant Registrar(CS) TA/MR ToThe Commissioner of Income Tax-I,Madurai – 625 002. +1CC TO MR.R.SRINIVASAN, Advocate Sr. No.69532+1CC TO MR.S.SRIMATHY, Advocate Sr. No.69571 W.P. No.4208 of 201318.06.2019 SSS(CO)TR (28.08.2019) 3P 4C https://hcservices.ecourts.gov.in/hcservices/