1995 (4) TMI 106 - AT - Income Tax

Summary

Issues:
- Whether the Assessing Officer could make an assessment under section 143(1) read with section 155 of the Income-tax Act, 1961 without a completed assessment in the case of the partners.
- Interpretation of section 155(1) and its applicability in cases where there is no completed assessment in the case of a partner in a firm.

Analysis:
1. The appeals involved partners in a firm who received a sum as their share of profit for the assessment year 1972-73, below the taxable limit, with no other source of income. The Assessing Officer made an assessment in 1989 under section 143(1)/155 of the Act, which the appellants contested before the DC(A) on the grounds of no prior assessment for that year.

2. The appellants argued that for the Assessing Officer to exercise powers under section 155, a completed assessment in the partner's case was a prerequisite. The Departmental Representative sought time to verify if the appellants had filed returns for the relevant year, eventually confirming no assessment had been made for them.

3. Section 155(1) pertains to completed assessments of partners in a firm, allowing amendments if the partner's share of income was not included or incorrect. The section is a machinery provision following section 154 for rectification of mistakes. It mandates a completed assessment in the partner's case for any amendments under section 155.

4. The Tribunal noted the absence of any assessment for the appellants in the relevant year, precluding the Assessing Officer from utilizing section 155 for making an assessment. Section 155 is not a charging section but a machinery provision requiring a completed assessment for its application. Without a prior assessment, the Assessing Officer had no jurisdiction to assess under section 143(1) and impose tax liability on the appellants.

5. Consequently, the Tribunal held that the orders made by the Assessing Officer and upheld by the DC(A) were legally flawed. As there were no completed assessments in the partner's case, the application of section 155 to make an assessment was deemed improper. Therefore, both appeals were allowed, and the orders were quashed.

6. The judgment clarifies the importance of a completed assessment in a partner's case for invoking section 155 of the Income-tax Act, emphasizing that the machinery provision cannot be used in the absence of a prior assessment. This decision sets a precedent for cases where assessments are attempted without fulfilling the necessary conditions outlined in the relevant provisions of the Act.