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Issues:
1. Appeal against order of CIT under section 263 of the IT Act setting aside assessment. 2. Determination of whether two firms with identical partners and profit-sharing ratios should be assessed separately or together. Analysis: The appeal before the ITAT Madras-A involved a case where the CIT set aside the assessment under section 143(3) of the IT Act and directed a reassessment including the income of another firm, M/s. K. S. Rangiar & Bros., for the years 1975-76. The dispute arose due to the identical partners and profit-sharing ratios in two firms, M/s K.N. Swamy Baghavathar Sons and M/s K. S. Rangiar & Bros. The CIT contended that only one assessment should be made due to the commonality of partners and profit-sharing ratios. The assessee firm argued that despite the common partners, the businesses were distinct, with no interlacing of finances between the two concerns. They maintained that separate assessments were appropriate as each firm was a distinct entity under the IT law. The CIT acknowledged the genuine existence of both firms but insisted on aggregating the income for a single assessment based on legal precedents. In the appeal, the counsel for the assessee referenced various case laws to support the argument for separate assessments, emphasizing the lack of interlacing or dovetailing in the affairs of the two firms. The Departmental Representative, however, relied on legal precedents to assert that identical partners and profit-sharing ratios necessitated a single assessment. The ITAT, after considering the submissions, noted that the absence of common control or interlacing in the firms' affairs supported the view that separate assessments were appropriate. They highlighted the distinct nature of the businesses and capital contributions, concluding that for income-tax purposes, the two firms were separate entities. Consequently, the ITAT set aside the CIT's order and upheld the assessment made by the ITO in the case of the assessee, allowing the appeal.
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