1967 (9) TMI 7 - HC - Income Tax

Status of the assessee - What the Tribunal has done is to confirm the assessment which has been made by the ITO only with the modification that the status of the assessee would be changed to that of an association of persons - Tribunal was competent to consider the question of the correct status of the assessee

Summary

Issues Involved:
1. Competence of the Tribunal to consider the correct status of the assessee.
2. Determination of the assessee's status as an "association of persons."
3. Refusal to allow raising an additional ground regarding disallowance of Rs. 6,800 paid as salary.

Issue-wise Detailed Analysis:

1. Competence of the Tribunal to Consider the Correct Status of the Assessee:
The Tribunal was competent to consider the question of the correct status of the assessee. The Appellate Tribunal found that no valid partnership could have been formed because one of the partners, Radha Kishan Kewal Kishan, was itself a firm. The registration of the firm having been declined by the assessing authority, there was no justification to make the assessment on the petitioner as an unregistered firm. The Tribunal directed the Income-tax Officer to substitute the status of the assessee to that of an association of persons, supported by the Supreme Court decision in Dulichand Laxminarayan v. Commissioner of Income-tax. The Tribunal's jurisdiction under section 33(4) of the Act includes passing such orders as it thinks fit, which encompasses determining the correct status of the assessee.

2. Determination of the Assessee's Status as an "Association of Persons":
The Tribunal determined that the correct status of the assessee is that of an association of persons. This conclusion was based on the fact that a firm is a person and the correct status of the assessee is that of an association of persons. The Tribunal directed the Income-tax Officer to substitute this status. The Tribunal's decision was supported by various legal precedents, including the Supreme Court's ruling in Commissioner of Income-tax v. McMillan & Co., which held that the appellate authority can exercise the same powers as the Income-tax Officer. The Tribunal's determination was also supported by the definition of "person" in section 2(31) of the Income-tax Act, 1961, which includes an association of persons.

3. Refusal to Allow Raising an Additional Ground Regarding Disallowance of Rs. 6,800 Paid as Salary:
The Tribunal upheld the Appellate Assistant Commissioner's refusal to allow the assessee to raise an additional ground regarding the disallowance of Rs. 6,800 paid as salary to Harkishan Lal. This objection was not permitted to be raised as it had not been specifically mentioned in the grounds of appeal before the Appellate Assistant Commissioner. However, the Tribunal noted that while this could not be allowed if the assessee is held to be a partnership firm, different considerations may prevail in the case of an association of persons. When the status is being altered, the justice of the case requires that the objection of the assessee should be taken into consideration.

Conclusion:
The Tribunal was competent to consider the correct status of the assessee and correctly determined the status as an association of persons. The refusal to allow raising an additional ground regarding the disallowance of Rs. 6,800 was upheld, but it was suggested that this objection should be reconsidered in light of the altered status. The answers to the first two questions were in the affirmative, and the third in the negative, with no order as to costs of the reference.