2006 (1) TMI 78 - HC - Income Tax

AOP - 1. Whether, Tribunal was right in dismissing the appeal of the Revenue by holding that the payment was made by Shri Kulwant Singh, although the facts as found for the Commissioner of Income-tax (Appeals) in order dated October 8, 1992, for the assessment year 1989-90 were different? 2. Whether, Tribunal was justified in holding that no association of persons was in existence when it is undisputed that payment to Excise authorities was made on behalf of three persons (Sh. Kulwant Singh, Sh. Balbir Singh and Sh. Daljit Singh) who later on formed a firm with effect from April 1, 1988? 3. Whether the order of Tribunal was perverse as it was based on unsupported version of the assessee? - The finding recorded by the Tribunal is a pure finding of fact, giving rise to no question of law, much less a substantial question of law

Issues:
1. Whether the Tribunal was right in dismissing the appeal by holding that the payment was made by a specific individual despite different facts found by the Commissioner of Income-tax in a previous order?
2. Whether the Tribunal was justified in holding that no association of persons existed when payments were made on behalf of multiple individuals who later formed a firm?
3. Whether the Tribunal's decision was based on an unsupported version of the assessee, rendering it perverse?

Detailed Analysis:
Issue 1:
The appeal by the Revenue under section 260A of the Income-tax Act, 1961 was directed against an order passed by the Income-tax Appellate Tribunal pertaining to the assessment year 1988-89. The Revenue contended that the Tribunal erred in dismissing the appeal by holding that the payment was made by a specific individual, contrary to facts found in a previous order. The Tribunal's decision was based on the lack of evidence supporting the existence of an association of persons in the assessment year 1988-89. The Court upheld the Tribunal's decision, emphasizing that the determination of the existence of a firm or association of persons is a factual matter based on evidence. Since no material besides the excise license was presented to prove the existence of an association of persons, the Court found no fault in the Tribunal's conclusion.

Issue 2:
The Assessing Officer framed an assessment under section 144 of the Act, considering the assessee as an association of persons for the assessment year 1989-90. However, on appeal, the addition made by the Assessing Officer was deleted as the alleged investment was related to the assessment year 1988-89. Subsequently, for the assessment year 1988-89, the Assessing Officer initiated action under section 148 and framed an assessment on the respondent as an association of persons. The Commissioner of Income-tax (Appeals) annulled the assessment, stating that since the assessee-firm was formed after April 1, 1988, no assessment could be made on an association of persons prior to that date. The Tribunal upheld this view, leading to the Revenue's appeal.

Issue 3:
The Revenue contended that the excise license issued in March 1988 in the name of the firm's partners indicated the existence of a firm or association of persons in the previous year relevant to the assessment year 1988-89. However, the Court disagreed, stating that the mere issuance of an excise license did not prove the existence of a firm or association of persons before the formation date. The Court emphasized that the determination of the existence of a firm or association of persons is a factual inquiry requiring supporting evidence. As no additional evidence was presented besides the excise license, the Court upheld the Tribunal's decision that no assessment could be framed in the status of an association of persons for the relevant year.

In conclusion, the Court dismissed the appeal, stating that the Tribunal's finding regarding the non-existence of a firm or association of persons in the relevant year was a factual determination and did not give rise to any substantial question of law.

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