1991 (8) TMI 126 - AT - Income Tax

Summary

Issues Involved:

1. Status of the appellant (AOP vs. Joint Owners)
2. Deduction of salary paid to watchman
3. Legality and validity of the assessment order
4. Limitation period for assessment under section 263
5. Merits of the assessment (capital gains computation)

Detailed Analysis:

1. Status of the Appellant (AOP vs. Joint Owners):

The appellant contested that their status should be considered as "Joint Owners" with 1/3rd share each instead of an Association of Persons (AOP). This ground was dismissed by the AAC, who maintained the status as AOP. The Tribunal upheld this decision, reinforcing that the assessment was correctly made in the hands of the AOP.

2. Deduction of Salary Paid to Watchman:

The appellant argued for a deduction of Rs. 6,000 paid as salary to a watchman. This claim was also dismissed by the AAC and subsequently upheld by the Tribunal. The Tribunal did not find any merit in allowing this deduction under the given circumstances.

3. Legality and Validity of the Assessment Order:

The appellant argued that the assessment order was bad in law and void ab initio, being barred by limitation under the IT Act. The CIT(A) initially set aside the order due to procedural lapses, such as the lack of a specific notice under section 148 to the AOP. However, the Tribunal found that the order passed on 6-1-1983 was in accordance with the directions of the Commissioner under section 263 and was not time-barred. The Tribunal noted that the Commissioner had the jurisdiction to revise the order dropping proceedings under section 148 and directed the ITO to make assessments accordingly.

4. Limitation Period for Assessment under Section 263:

The appellant contended that the reassessment proceedings were time-barred, arguing that the time-limit commenced from 31-3-1978 and ended on 31-3-1982, while the order was passed on 6-1-1983. The Tribunal rejected this argument, stating that the order passed by the ITO was within the permissible time under section 153(2A). The Tribunal clarified that the period of limitation is two years from the end of the financial year in which the order under section 263 is passed by the Commissioner. Since the Commissioner's order was passed on 26-3-1981, the ITO had until 31-3-1983 to pass the consequential order, which he did on 6-1-1983.

5. Merits of the Assessment (Capital Gains Computation):

The appellant raised additional grounds concerning the merits of the assessment, such as the amount awarded, the nature of capital gains (long-term vs. short-term), and the cost of acquisition. However, these grounds were not pressed before the AAC, and thus, the AAC did not deal with them. The Tribunal declined to allow the appellant to re-agitate these issues before them, noting that there was no order from the first appellate authority on these grounds. The Tribunal emphasized that the appellant had already succeeded in frustrating the department's attempt to tax the capital gains in the hands of the AOP in previous proceedings.

Conclusion:

The Tribunal dismissed the appeal, confirming the order of the first appellate authority. The Tribunal found that the assessment order was not time-barred and was in accordance with the directions under section 263. The arguments concerning the merits of the assessment were not entertained as they were not pressed before the AAC. The Tribunal also rejected the appellant's reliance on various case laws, finding them materially different from the present case.