2008 (7) TMI 614 - AT - Income Tax

Summary

Issues Involved:
1. Status of the assessee as Partnership Firm Assessed as AOP (PFAOP) or Partnership Firm As Such (PFAS).
2. Compliance with the provisions of sections 184 and 185 of the Income-tax Act, 1961.

Detailed Analysis:

1. Status of the Assessee:
The primary issue revolves around whether the assessee should be assessed as a Partnership Firm Assessed as AOP (PFAOP) or as a Partnership Firm As Such (PFAS). The revenue contended that the correct status of the assessee is that of a firm based on the partnership deed and other documents, while the assessee claimed the status as PFAOP in the return of income.

The Tribunal noted that the assessee filed the return of income for the assessment year 1999-2000 declaring the status as PFAOP, supported by the tax calculated at the rate applicable to AOP. The Assessing Officer (AO) disagreed, stating that the partnership deed and other documents indicated the status as a firm. However, the CIT(A) sided with the assessee, noting that the partnership deed was executed on insufficient stamp paper and did not meet the requirements to be considered a valid partnership deed under the Indian Stamp Act, 1899. Consequently, the CIT(A) directed the AO to adopt the status of PFAOP as claimed by the assessee.

2. Compliance with Sections 184 and 185:
The Tribunal examined the compliance with sections 184 and 185 of the Income-tax Act, 1961. Section 184 outlines the conditions under which a firm shall be assessed as a firm, including the requirement to submit a certified copy of the partnership deed with the return of income. Section 185 stipulates that if a firm fails to comply with section 184, it shall be assessed in the same manner as an Association of Persons (AOP).

In this case, the assessee did not submit a certified copy of the partnership deed with the return of income, thus failing to comply with section 184(2). The Tribunal emphasized that mere evidence of a partnership is not sufficient to assess it as a firm; compliance with section 184(2) is mandatory. Consequently, the firm should be assessed as an AOP as per section 185.

The Tribunal also considered the amendment to section 185 by the Finance Act, 2003, effective from 1-4-2004, which changed the consequences of non-compliance with section 184. However, since the assessment year in question is 1999-2000, the old provisions apply, and the firm must be assessed as an AOP for non-compliance with section 184.

Conclusion:
The Tribunal upheld the CIT(A)'s decision, confirming that the assessee should be assessed as PFAOP due to non-compliance with the conditions laid down in section 184. The appeal filed by the revenue was dismissed, and the ground No. 3 of the appeal was decided in favor of the assessee and against the revenue.