1979 (7) TMI 156 - AT - Income Tax

Summary

Issues: Whether the Appellate Assistant Commissioner (AAC) should have entertained the appeal on the facts of the case.

Analysis:
The case involved an appeal by a Hindu Undivided Family (HUF), which is a partner in a firm, regarding the inclusion of share income in the firm's assessment. The Income Tax Officer (ITO) had included 50% share income amounting to Rs. 22,874 in the HUF's assessment based on the firm's assessment. The AAC dismissed the appeal as incompetent, stating that the HUF could only raise such contentions in an appeal against the firm's assessment, not in its own appeal. The HUF then appealed to the Tribunal.

The authorized representative of the HUF argued that the HUF could deny liability under section 246 of the Income Tax Act and was not questioning the total income or apportionment of the firm, falling outside the purview of section 247. The Department representative, however, contended that since the remuneration was part of the apportionment of share income, section 247 precluded the HUF from raising the issue.

The Tribunal analyzed section 247 and clarified that a partner cannot raise certain matters in an appeal against their own assessment, specifically related to total income, loss of the firm, or apportionment among partners. The Tribunal distinguished between questioning the apportionment of share income and challenging the inclusion of specific items like salary. It held that a partner can dispute the inclusion of salary income in the HUF's hands and argue for individual assessment under section 246(c). Citing a Supreme Court case, the Tribunal emphasized that such issues have been addressed at the highest legal level, indicating that section 247 does not apply in such cases. Consequently, the Tribunal found that the AAC erred in dismissing the appeal and directed a review on the merits of the issue.

In conclusion, the Tribunal partially allowed the appeal, emphasizing the partner's right to challenge the inclusion of specific income items and directing the AAC to reconsider the matter based on merit, particularly regarding the assessment of remuneration in individual hands rather than the HUF's hands.