1983 (5) TMI 46 - AT - Income Tax

Summary

Issues:
1. Assessment of income without proper basis.
2. Status of the assessee as a registered or unregistered firm.
3. Setting aside of assessment by the AAC.
4. Disposal of application under section 146 by the ITO.
5. Powers of the AAC to set aside an assessment.

Analysis:

1. The appeal pertains to the assessment of a partnership firm for the assessment year 1978-79. The Income Tax Officer (ITO) completed the assessment under section 144 of the Income-tax Act, 1961, estimating the income at Rs. 25,000 due to lack of evidence supporting the declared income of Rs. 12,000. The firm was treated as unregistered. The firm contested this assessment, claiming to be a registered firm and challenging the lack of basis for the income estimation.

2. The firm appealed to the Appellate Authority Commissioner (AAC), arguing that the ITO's income estimation lacked justification and that the firm was registered, supported by a declaration filed in Form No. 12. The AAC agreed with the firm, setting aside the assessment and directing the ITO to pass an order under section 184(7) for a fresh assessment. The revenue appealed this decision to the Tribunal.

3. During the Tribunal hearing, arguments were presented regarding the ITO's failure to dispose of the firm's application under section 146 within the prescribed 90-day period. The revenue contended that the assessment should not have been set aside, while the firm argued that the AAC had the authority to do so under section 251(1)(a) and emphasized the importance of the pending application under section 146.

4. The Tribunal upheld the AAC's decision, noting that the ITO's failure to dispose of the application under section 146 within 90 days did not automatically invalidate the assessment. It directed the ITO to first address the pending application and then proceed with a fresh assessment as per the AAC's directions. The Tribunal affirmed the AAC's order, dismissing the revenue's appeal and emphasizing the need for a proper assessment based on the firm's status and declarations.

5. In conclusion, the Tribunal found in favor of the firm, highlighting the importance of proper assessment procedures and the significance of addressing pending applications within the stipulated time frame. The Tribunal upheld the AAC's decision to set aside the assessment and directed the ITO to conduct a fresh assessment in accordance with the law and the firm's declarations.