1984 (6) TMI 76 - AT - Income Tax

Summary

Issues Involved:
1. Correctness of the order passed by the Commissioner (Appeals) under section 155(2) of the Income-tax Act, 1961.
2. Inclusion of the assessee's share of income from the property in the assessment year 1968-69.

Issue-wise Detailed Analysis:

1. Correctness of the Order Passed by the Commissioner (Appeals) under Section 155(2) of the Income-tax Act, 1961:

The appeal by the revenue challenges the consolidated order of the Commissioner (Appeals) for the assessment years 1968-69 to 1971-72. The Commissioner (Appeals) dismissed the appeals for the assessment years 1969-70 to 1971-72 but allowed the appeal for the assessment year 1968-69 in part. The Commissioner (Appeals) held that the order passed by the ITO under section 155(2) to include the assessee's share of income from the property at C-Plot, Shivasagar Estate, Bombay was incorrect. This conclusion was based on the final order in the case of the BOI, which indicated no such income from property. The Tribunal's order dated 9-2-1981, which canceled the reassessment under section 147 for this assessment year, further substantiated this conclusion.

2. Inclusion of the Assessee's Share of Income from the Property in the Assessment Year 1968-69:

The appellant, a co-owner of the building at C-Plot, Shivasagar Estate, Bombay, included his share of the lease rent in his individual capacity as per section 26. However, the ITO assessed the lease rent in the hands of the BOI and included the assessee's share in his personal assessments for rate purposes. The AAC accepted the BOI's contention that the lease rent should be assessed in the hands of individual members under section 26. The High Court held that the rent from the building should be assessed under section 26 and the income from the air-conditioning facility as income from other sources. The Tribunal directed the ITO to assess the income from the rent of the property separately in the hands of each co-owner under section 26 and the income from the air-conditioning machinery in the hands of the AOP.

The ITO deleted the income from the lease of the building from the BOI's assessment and included it in the individual co-owner's assessment under section 155(2). The Commissioner (Appeals) held that the ITO's rectification order was incorrect for the assessment year 1968-69, as the requirements of section 155(2) were not satisfied.

Submissions and Legal Reasoning:

The department argued that the Tribunal's direction to assess the rental income separately in the hands of each co-owner under section 26 was correct. The rectification under section 155(2) was justified as the share income of the member was not originally included in the individual assessment. The assessee's advocate argued that the requirements of section 155(2) were not met and that the income from the lease of the building was excluded from the BOI's assessment as per the High Court's order. Thus, there was no basis for rectification under section 155(2).

The Tribunal held that the Commissioner (Appeals) was not justified in striking down the ITO's order under section 155(2). The Tribunal emphasized that the reduction in the BOI's income as a result of the High Court's order necessitated the inclusion of the rental income in the individual co-owners' assessments under section 155(2). The Tribunal found no conflict in the legal requirements and concluded that the ITO's assumption of jurisdiction under section 155(2) was in order.

Conclusion:

The Tribunal set aside the order of the Commissioner (Appeals) and allowed the department's appeal, affirming the rectification order under section 155(2) to include the assessee's share of income from the property in the assessment year 1968-69.