1980 (6) TMI 57 - AT - Income Tax

Summary

Issues:
1. Assessment of profit share in a firm as HUF or Individual.
2. Creation of sub-partnership and applicability of section 64 of the IT Act.
3. Jurisdiction of CIT (A) to set aside assessment order.
4. Levy of interest under sections 139 and 217(1)(a).

Analysis:
1. The appeal concerned the assessment year 1974-75 where the assessee, a partner in a firm, claimed his share of profit should be assessed as an individual, not as HUF. A partial partition was done in 1965, dividing the assets among the assessee, his wife, and minor son. The ITO initially treated the income as a sub-partnership, leading to the whole income being clubbed under section 64 of the IT Act. The CIT (A) set aside the assessment, stating the income should be assessed in the hands of the family, either as HUF or AOPs.

2. The Commissioner's decision was challenged by the assessee, arguing that the CIT (A) exceeded jurisdiction by setting aside the assessment order and not addressing the specific grounds raised in the appeal. The assessee contended that the CIT (A) should have decided based on various grounds, including the existence of a sub-partnership and the applicability of section 64.

3. The Tribunal reviewed previous orders and found that similar cases had been decided in favor of the assessee, where only 1/3rd of the share income was assessed in the individual's hands, with the rest allocated to the wife and minor son. Following precedent, the Tribunal held that the CIT (A) erred in setting aside the assessment, directing the ITO to include only 1/3rd share of profits in the assessee's total income.

4. Regarding the levy of interest under sections 139 and 217(1)(a), the Tribunal noted that the CIT (A) did not address this issue due to setting aside the assessment. However, the Tribunal stated that the assessee would be entitled to relief on the interest levied. The Tribunal rejected the appellant's ground based on a Full Bench decision of the Allahabad High Court.

In conclusion, the appeal was partly allowed, with the Tribunal directing the ITO to include only 1/3rd share of profits in the assessee's total income and providing relief on the interest levied under sections 139 and 217(1)(a).