2007 (4) TMI 320 - AT - Income Tax

Summary

Issues Involved:
1. Whether the four family members constituted an 'association of persons' (AoP) for carrying on their dairy business.
2. Validity of the reassessment proceedings initiated u/s 147.
3. Validity of the notices issued u/s 148.

Summary:

Issue 1: Existence of an 'Association of Persons' (AoP)
The main issue in these appeals was whether the four family members'father and his three sons'formed an 'association of persons' (AoP) for their dairy business. The Assessing Officer (AO) and the CIT(A) held that the family members constituted an AoP based on a statement made by one of the members during a survey conducted u/s 133A. However, the Tribunal found that the AO's decision was not supported by relevant material on record. The Tribunal noted that the family members were conducting their business individually and were assessed separately for their income. The Tribunal emphasized that volition on the part of the members to form an AoP is essential, and there was no evidence to show that the family members had voluntarily combined for a common purpose. Consequently, the Tribunal held that the decision of the lower authorities that an AoP existed could not be sustained, and all assessment orders passed in the status of AoP were quashed.

Issue 2: Validity of Reassessment Proceedings u/s 147
The Tribunal observed that the reassessment proceedings initiated u/s 147 were not valid as the notices u/s 148 were not served on all the four members. The Tribunal cited several case laws to support the view that in cases where the existence of an AoP is not admitted, notices must be served on all members to validly assume jurisdiction u/s 147. The Tribunal found no material on record to show that such notices were served on all members, rendering the reassessment proceedings unsustainable.

Issue 3: Validity of Notices Issued u/s 148
The Tribunal noted that the notices u/s 148 were addressed to 'Kokani Bharat Dairy (AoP), Manager Member Zakir Peersaheb Kokani' and there was no evidence to show that these notices were served on all four members. The Tribunal held that in the absence of proper service of notices on all members, the assessment orders were unsustainable and deserved to be quashed.

Conclusion:
In conclusion, the Tribunal allowed all nine appeals filed by the assessee, holding that the family members did not constitute an AoP, and the reassessment proceedings and notices issued u/s 147 and 148 were invalid.