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Issues:
1. Allocation of profits among partners in an unregistered firm. 2. Interpretation of sections 13(b), 158, and 246(c) of the Income Tax Act, 1961. 3. Jurisdiction of the Appellate Assistant Commissioner (AAC) to entertain an appeal. Detailed Analysis: 1. The case involves the allocation of profits among partners in an unregistered firm, M/s. Arun Kumar Mundra & Co., engaged in share dealings. The Income Tax Officer (ITO) treated the firm as unregistered due to the absence of a claim for registration. The partnership deed indicated that profits would be accumulated for 8 years without distribution among partners to avoid inclusion in individual assessments. The ITO, invoking section 13(b) of the Indian Partnership Act, allocated profits among partners, leading to an appeal by the assessee. 2. The Appellate Assistant Commissioner (AAC) held that the ITO was unjustified in allocating profits among partners based on an article negating the application of section 13 of the Partnership Act. The Department challenged this decision, arguing that the ITO's allocation was necessary for unregistered firms under section 158. The AAC's admission of the appeal was questioned, citing section 246(c) of the IT Act, which requires objection to income assessment, tax amount, or status for appeal. 3. The Tribunal analyzed the jurisdictional issue, noting that the AAC erred in admitting the appeal as the assessee did not object to income determination, tax assessment, or status. The Tribunal emphasized that the ITO's allocation of profits in unregistered firms is not prohibited by section 158, even if not part of the same order. The Tribunal overturned the AAC's direction, allowing the Departmental appeal and reinstating the ITO's allocation of profits among partners. In conclusion, the Tribunal upheld the Departmental appeal, emphasizing the ITO's authority to allocate profits among partners in unregistered firms and highlighting the necessity of objections for appeal under the Income Tax Act.
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