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TMI Blog1988 (3) TMI 136X X X X Extracts X X X X X X X X Extracts X X X X ..... ch its income was assessed under s. 22 instead of s. 28 of the IT Act as claimed by them. The order to this effect for the immediately preceding year 1981-82 was confirmed by the first appellate authority. The income earned by the appellant firm during the income earned by the appellant firm during the years in question, i.e. 1982-83 to 1984-85 met the same fate at the hands of the ITO. The view taken by the assessing officer was confirmed by the first appellate authority. Hence these appeals under s. 253 before us. 3. Before the CIT(A), apart from challenging the computation of their income under the head property rather than business by taking an additional ground under s. 255 of the IT Act, the appellant also contended that in the event of the assessment of their income under behead property, the income earned should be assessed in respect of the partners separately as envisaged by s. 26. 4. The Commissioner(A) following; his predecessor's order dt. 28th March, 1985 pertaining to the asst. Yr. 1981-82 dismissed the main grounds of appeal holding that the assessing authority had rightly assessed the income derived from letting out of godowns as "income from property." 5. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant could be said to have been carrying of business, thus entitling them to registration of partnership under s. 26A of the IT Act, 1922. In that case, the Punjab Haryana High Court brushed aside the department's arguments that since the as was not carrying on business, the firm was not entitled to registration. They have observed: "The only argument addressed by the learned counsel for the Department was that earning of rental income is not income from business. That may or may not be so. But that is a matter wholly irrelevant for the purpose of determining whether a partnership should or should not be registered under s. 26A of the Act. All that has to be seen is whether there is a validly constituted partnership and for that purpose one has to offer to the provision of the Partnership Act.," Thus it is seen that by addressing themselves to a narrower question of law the broader question whether the absence of business activity render a partnership invalid was a point never considered by them. As regards other case laws where the various High Court have held that letting out the property on else would constitute business, each case has turned on its own facts and there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessed and the issue of the status was not agitated. The appellant further stated "that the proposal to set aside the assessment on the status issue is objected to. There is no appeal against the order dealing with the status that the contentions in the additional grounds of appeal.......are to the effect that the income form property belonging to the partners who jointly own the property with definite shares as such there should not be an assessment on Firm. Therefore, the grant of registration does not arise inasmuch as there is no firm because of the stand of the Department that the partnership did not carry on any business. There is no firm, it is only a group of persons who own the property and there cannot be an assessment either under the status of Registered Firm or Unregistered Firm. Thus the appellant has practically conceded that there can be no assessment either in the status of registered firm or unregistered firm in respect of the lease income enjoyed by the joint owners of the property. The assessment is therefore set aside with a direction to bring on record the co-owners of the property and complete the assessments according to law." 7. Learned counsel for the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessed under s. 22 or under s. 28 of the IT Act. The commissioner (A) was absolutely not justified in using a passage from the assessment order of a proceeding year in opening a new ground, namely, the continuance of registration of the firm, which was never the subject-matter or appeal. 11. Similarly there appears to be a patent gain giving on the part of the first appellate authority when it decided to serve the appellant firm with a notice during the course of hearing the appeal to show cause as to why the status as registered firm be not set aside. It appears to us that the learned Commissioner(A) totally forget the from in which he was sitting and exercising quasi-judicial function as envisaged by s. 246, r/w s. 251 of the IT Act. We may perhaps be failing in our duty if we do not observe that the Commissioner(A) to have taken upon him the performance of a task which he could not carry as an appellate authority. If we were siting as a Commissioner [not Commissioner(A)] and exercising power as envisaged by s. 263 or s. 264 of the Act, it would have been a different matter altogether. Not alone this, even when the show cause notice was issued by the Commissioner(A) and the app ..... X X X X Extracts X X X X X X X X Extracts X X X X
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