Procedure for simultaneous assessment of firms and partners. - Income Tax - 1427/CBDT

INSTRUCTION NO. 1427/CBDT Dated: November 18, 1981 Reference is invited to Circular No.3 issued by Director of Inspection (I.T.Audit) wherein it was desired that assessments of the firm and its partners should be taken up for assessment simultaneously. If for any reason there is delay in completing the firm's assessment entries should be made in the provisional share income register prescribed vide Board's circular F.No.56(6) IT/58 dated 3-2-59 and reiterated in F.NO.36/31/63-ITA-I(B) dated 3-7-64 and follow up action watched carefully. On the other hand, if it is found that the delay is likely to occur in completing the assessments of the partners the share income assessed in the hands of the partners should invariably be communicated to the partners file, so that the correct share is adopted later at the time of partners assessment. 2. It has been experienced that this procedure is not being scrupulously followed. IN para 52 of the C AG's report for the year 1978-79, it has been pointed out that in many cases where assessments of the partners were made adopting the share income from the firm as declared were not subsequently revised u/s.155 of the Act adopting higher share income as per firm's assessment resulting in loss to the revenue. 3. The Board has noted with concern the observations in the report of the C AG and desire that recurrence of such type of mistakes/omissions should be eliminated. With a view to have a check on the repetition of such mistakes the following procedure is laid down. 1) While completing the assessment of the firm the ITO should note down the names and designation of the officers assessing each of the partners. If the partner is assessed in the same ward or circle his share of income as per firm's assessment should be noted on the return of the partner at the time of the completion of firm's assessment for being adopted at the time of the completion of the partner's assessment. 2) If the partner is assessed in some other ward, circle or station the ITO assessing the firm should immediately communicate the share income of the partner to the concerned ITO and should insist for its acknowledgement by the latter. While communicating the share income of the partner, the brief summary of the capital account should also be reported. 3) While completing the assessment of the partner the ITO should insist upon the assessee to produce a copy of his capital account in the firm and also get the name and designation of the ITO assessing the firm as also its PA.NO. This will help the ITO in ascertaining the correct share income of the partner from the ITO assessing the firm. 4) The register prescribed for keeping a record of cases in which the provisional share income has been adopted should be strictly maintained by the steno and the entries therein made as soon as the firm's assessment is completed and ITO should periodically check it say once every month. The above instructions should be strictly adhered to.