2002 (9) TMI 260 - AT - Income Tax

Summary

Issues Involved:
1. Validity of the Commissioner of Income-tax's order under section 263 of the I.T. Act.
2. Applicability of section 184(5) of the I.T. Act.
3. Status of the assessee as a registered firm or AOP.
4. Jurisdiction of the Commissioner of Income-tax under section 263 in light of the merger theory.

Issue-wise Detailed Analysis:

1. Validity of the Commissioner of Income-tax's Order under Section 263:
The Commissioner of Income-tax found that the assessment orders for the years 1994-95 and 1995-96 were erroneous and prejudicial to the interests of the revenue because the assessee did not file the return under section 139 and thus, the provisions of section 184(5) were attracted. The Commissioner held that the assessee's status should be considered as an AOP and not a registered firm. The assessee contended that section 263 presupposes an existing order by the Assessing Officer, which should be erroneous and prejudicial to the revenue. The assessee argued that since no order was passed under section 184, the status of 'firm' could not be held as erroneous and prejudicial to the revenue. The Tribunal upheld the Commissioner's order, noting that the Assessing Officer's failure to determine the correct status resulted in undue tax advantages to the assessee, thus prejudicing the revenue.

2. Applicability of Section 184(5) of the I.T. Act:
The Commissioner of Income-tax did not accept the assessee's contention that the return filed in response to section 148 notice should be treated as one filed under section 139, and thus, the assessment should be completed as such. The Commissioner held that section 184(1) is subservient to section 184(5), which starts with "notwithstanding anything contained in the foregoing provisions of the section." The Tribunal agreed with the Commissioner, stating that section 184(5) becomes redundant if the assessee's argument is accepted. The Tribunal emphasized that an assessee who fails to file the return voluntarily cannot be treated equally with an honest assessee who files the return on time.

3. Status of the Assessee as a Registered Firm or AOP:
The assessee argued that the continuity of registration is automatic if the assessment is completed under section 143(3) and not under section 144. The Tribunal rejected this argument, stating that the failure to file the return on time as required under section 139 leads to the application of section 184(5), and the assessee's status should be treated as AOP. The Tribunal noted that the privilege of being assessed as a registered firm is conditional upon compliance with the law, and failure to file returns on time disqualifies the assessee from this privilege.

4. Jurisdiction of the Commissioner of Income-tax under Section 263 in Light of the Merger Theory:
The assessee contended that the assessment order for the year 1994-95 had merged with the order of the Commissioner (Appeals), and thus, the Commissioner of Income-tax could not invoke section 263. The Tribunal clarified that the issue of registration was never before the Commissioner (Appeals), and thus, the Commissioner of Income-tax's jurisdiction under section 263 was not excluded. The Tribunal upheld the Commissioner's order, noting that the erroneous status adopted by the Assessing Officer prejudiced the revenue, and the only recourse was to resort to section 263.

Conclusion:
The Tribunal dismissed the appeals by the assessee, upholding the orders passed by the Commissioner of Income-tax under section 263 for both the assessment years 1994-95 and 1995-96. The Tribunal emphasized the importance of timely compliance with the filing requirements under section 139 and the conditional nature of the privilege of being assessed as a registered firm.