1982 (9) TMI 80 - AT - Income Tax

Summary

Issues:
1. Recognition of partial partition claimed by the assessee.
2. Correct assessment status of the assessee HUF.
3. Maintainability of the appeal by the revenue.

Analysis:

Recognition of Partial Partition:
The appeals arose from orders passed under sections 143(3) and 171 of the IT Act for the assessment years 1973-74 and 1974-75. The assessee HUF, consisting of three members, claimed a partial partition in the business interest, which was earlier recognized by the ITO. The ITO rejected the claim for the assessment years in question, stating that there was no division of assets, only income. However, the AAC accepted the assessee's submission, holding that the partial partition should not have been refused. The AAC directed the ITO to reassess the business income separately in the hands of the three members, upholding the original partial partition recognition.

Correct Assessment Status:
The ITO had initially held that the assessee HUF should be treated as an AOP instead of an HUF due to the earlier partition recognition. However, the AAC disagreed, stating that the correct status was that of an HUF. The AAC set aside the assessments made by the ITO and directed a recomputation of the total income assessable, with business income to be assessed individually to the three members of the HUF.

Maintainability of the Appeal:
A preliminary objection was raised regarding the maintainability of the appeal by the revenue. The appeal was initially filed under the wrong section but was later corrected. The assessee argued that the appeal was filed in the name of an individual, not the HUF. However, the tribunal overruled the objection, stating that it was a mere irregularity and accepted the appeal as properly filed on time.

In conclusion, the tribunal upheld the recognition of the partial partition claimed by the assessee HUF and directed the reassessment of business income. The correct status of the assessee HUF was confirmed as an HUF, not an AOP. The appeal by the revenue was deemed maintainable despite procedural irregularities. As a result, the appeals by the revenue and the assessee were dismissed based on the above findings.