2016 (4) TMI 745 - HC - Income Tax

Allocation of income earned by AOP - Held that - Commissioner of Income completely ignores the past practice accepted by the Revenue in orders passed under Section 143(3) of the Act taxing the income of the AOP on allocation in the hands of its individual members. Nothing is indicated in the impugned order to show that there has been any change either in facts or in law, which would warrant taking a different view from that taken by the Assessing Officer from the A.Y. 2005-06 onwards. Although the principle of res judicata may not specifically apply, yet where a fundamental aspect running through various Assessment Years is subject of consideration then as held by the Apex Court in Radhasoami Satsang Vs. Commissioner of Income Tax 1991 (11) TMI 2 - SUPREME Court , the same approach be adopted in the absence of change in facts and law. Further, in Bharat Sanchar Nigam Ltd. Vs. Union of India 2006 (3) TMI 1 - Supreme court the Apex Court held that though the principle of res judicata would not apply to tax matters as cause of action for each assessment year is different / distinct, yet in case there is no change in the factual position or the law, the views expressed in one year are binding for the subsequent years. This on the principle of consistency. Therefore, if the impugned order wants to depart from the consistent view taken earlier, it must so justify. Moreover, the impugned order also completely ignores the fact that there has been no change amongst the members of AOP as existing since A.Y. 2006-07 till date. The assessment order for A.Y. 2006-07 and orders subsequent thereto do reflect a determinate share being attributed to each of the members of the AOP. This submission has not even been adverted to in the impugned order while proceeding to hold that the shares of the individual members of the AOP are not determinate. Thus, the impugned order is in breach of natural justice being a nonspeaking order.

Summary

Issues:
Challenge to order under Section 264 of the Income Tax Act, 1961 regarding Intimation under Section 143(1) for Assessment Year 2011-12.

Analysis:
The petition challenges the order dated 18th March, 2015, passed under Section 264 of the Income Tax Act, 1961, by the Principal Commissioner of Income Tax, dismissing the Revision Application filed by the petitioners in respect of an Intimation under Section 143(1) for the Assessment Year 2011-12. The petitioners, an Association of Persons (AOP), had been filing Returns of Income since Assessment Year 2005-06, with tax payable on the income allocated among AOP members. An Intimation under Section 143(1) issued on 7th August, 2014, indicated a tax liability of &8377; 8.32 lakhs, deviating from past practice due to e-filing. The petitioners filed a Revision Petition under Section 264, seeking revision of the Intimation. The impugned order upheld the tax liability, stating that the shares of AOP members were indeterminate, necessitating assessment under Section 167B. The petitioners argued that evidence of determinate shares since 2006-07 was ignored, and the order should be quashed for not considering submissions.

The Senior Counsel for the petitioners contended that the impugned order was nonspeaking, disregarding evidence of determinate shares and past practice accepted by the Revenue. The order was criticized for ignoring submissions and not justifying a departure from consistent views. The Revenue's Counsel supported the order, citing Sections 67A and 86 of the Act, and argued that the Intimation under Section 143(1) was not challengeable under Section 264. The High Court found the impugned order to ignore past practices and held that a change in view must be justified if departing from consistency. Referring to legal precedents, the Court emphasized the importance of consistency in tax matters. The order was deemed a breach of natural justice for being nonspeaking.

The Court further noted that Sections 67A and 86, relied upon by the Revenue, were not referenced in the impugned order. Consequently, the Court quashed the order, remanding the proceedings to the Commissioner for reevaluation in light of the submissions. The issue of the Commissioner's jurisdiction to entertain Revision Applications under Section 264 from Intimations under Section 143(1) was left open for reconsideration. The impugned order was set aside, and the Revision Application was restored to the Commissioner for fresh disposal in accordance with the law, with all contentions left open for further consideration.