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TMI Blog2010 (6) TMI 163X X X X Extracts X X X X X X X X Extracts X X X X ..... rship firm, not only the firm pays tax on the income of the firm but also a partner thereof pays tax on his share of income from the firm. Thus, the Tribunal erred in law in applying the provisions of section 3(1)(f) of the Act to the case of the assessee who was a member of association of persons. It appears from the materials on records that the assessee in its return for the year 1983-84 disclosed the added amount as its income and such return was submitted on August 17, 1983 whereas the search and seizure of Contemporary Tea Co. Ltd. was made on November 21, 1983. Therefore, it was wrong to allege that the suppression was detected at the time of search and seizure. Decision if favor of assessee, ITAT order set aside. - 15 and 16 of 2002 - - - Dated:- 14-6-2010 - BHASKAR BHATTACHARYA, PRASENJIT MANDAL JJ J.P. Khaitan, P. Sanchiti and S. Bhowmik for the appellant. Bhowmik for the respondent. JUDGMENT Bhaskar Bhattacharya J.- These two appeals under section 260A of the Income-tax Act, 1961 (hereinafter referred to as the Act) were heard together and we propose to deliver this common judgment for the disposal of the two appeals. 2. I. T. A. No. 15 of 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rprises-Service Department at Siliguri on April 1, 1981. The remuneration received from Contemporary Tea Company Ltd. was Rs. 45,000 a month. The said branch incurred various types of expenses for earning the said income and in respect of the business of the said branch, which was treated by M/s. Sancheti Enterprises as a separate source of income, it adopted the financial year as the previous year. (4) Ashoke Sancheti retired from Sancheti Enterprises with effect from December 31, 1981 and thus, the assessee became the sole proprietor from January 1, 1982 and from that day, M/s. Sancheti Enterprises became the sole proprietary concern of the assessee with the previous year as the calendar year and that of the branch business as the financial year. (5) M/s. Sancheti Enterprises, whose previous year ended on December 31, 1981, was separately assessed in the status of association of persons for the assessment year 1982-83. In the said assessment year, M/s. Sancheti Enterprises did not include the income of its branch office business, the previous year of which, it alleged, ended on March 31, 1982, which is sub-sequent to the close of the previous year of M/s. Sancheti Enterprises ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e., before the close of the accounts of the service department for the first time on March 31, 1982. The result of the service department which has been taken over by M/s. Pradeep Trust has been disclosed in the return of M/s. Pradeep Trust in the assessment for 1983-84. This was done as per return filed on August 17, 1983 before the search in the case of M/s. C.T.C. Ltd. on November 22, 1983. The appellant's contention that an assessee is permitted to have two separate accounting years for separate depart-ments and branches is supported by the decisions of the Supreme Court and the Allahabad High Court relied upon by the appellant. It is seen that M/s. Pradeep Trust, which has taken over the service department has accounted for the entire receipts from M/s. C.T.C Ltd. in its assessments for the assessment years 1983-84 and 1984-85. The return of income in this regard was filed by M/s. Pradeep Trust before the search in the case of M/s. C.T.C Ltd. Therefore, the ITO's decision that the claim is nothing but a fabrication after the search operation to hide the fact of non-disclosure of the income cannot be supported. On these facts, I find that since the entire receipts for servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount. (14) The Revenue preferred a separate appeal before the Tribunal in respect of the assessment year 1983-84. (15) The Tribunal by the orders impugned in these appeals has allowed the appeals of the Revenue by upholding the order of reassess-ment. 5. Mr. Khaitan, the learned senior advocate appearing on behalf of the appellant, at the very outset, contended that the learned Tribunal erred in law in holding that the appellant had only one source of income viz. M/s. Sancheti Enterprises. Mr. Khaitan points out that M/s. Sancheti Enterprises, in respect of branch business, which was regarded as separate source of income, had a separate previous year i.e. financial year and the order passed by the Tribunal that the assessee had only one source of income is contrary to the assessment order dated March 31, 1995 where the Assess-ing Officer accepted that the branch business was a separate source of income. 6. According to Mr. Khaitan, under the provisions of section 3 of the Act prior to its amendment with effect from April 1, 1989, it was permissible for the assessee to have different previous years in respect of separate source of income as provided in sub-section (3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed reason by the Commissioner of Income-tax, WB-IV/Cal as the said income escaped the notice of the Assessing Officer for non-disclosure in the relevant return. Mr. Bhowmik submits that after search and seizure, it was found that Sancheti Enterprises service department which was a wing of M/s. Sancheti Enterprises had income of Rs. 5,40,000 and the assessee had shown that income in the next year only for avoiding penalty. 12. Mr. Bhowmik further contends that although the assessee is assessed as association of persons, yet, there is no material difference between a part-ner and an association of persons, both being engaged in business for sharing profit of business on agreement, particularly when the assessee had the only source of income from M/s. Sancheti Enterprises. Mr. Bhowmik, therefore, prays for answering the framed issues against the assessee. 13. Therefore, the first question that arises for determination in these appeals is whether in the facts and circumstances of the case the Tribunal was right in law in holding that section 3(1)(f) of the Income-tax Act is applicable on the association of persons borne from the joint venture agreement instead of the right sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Act read with section 43 of the Life Insurance Corporation Act, 1956 (31 of 1956). (2) Where an assessee has newly set up a business or profession in the said financial year and his accounts are made up to a date in the assessment year in respect of a period not exceeding twelve months from the date of such setting up, then, notwithstanding anything contained in sub-clause (iii) of clause (d) of sub-section (1), the assessee shall, in respect of that business or profession, at his option, be deemed to have no previous year for the said assessment year under that clause and such option shall, in relation to the immediately succeeding assessment year, have effect as an option exercised under sub-clause (i) of clause (e) of sub-section (1). (3) Subject to the other provisions of this section, an assessee may have different previous years in respect of separate sources of his income. (4) Where in respect of a particular source of income or in respect of a business or profession newly set up, an assessee has once exercised the option under clause (b) or sub-clause (ii) of clause (d) or sub-clause (i) of clause (e) of sub-section (1) or has once been assessed, then, he shall not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable to a case where the assessee was a partnership firm and such firm was assessed as such. In the case before us, until December 31, 1981, M/s. Sancheti Enterprise was an association of persons and thereafter, it became a proprietary concern of the assessee. Section 3(1)(f) of the Act is not at all applicable to a case where the asses-see is a member of the association of persons. At the relevant period, in case of income of association of persons, it was only such association, which was to be assessed, and there was no question of taxation on share of income of the association in the hands of any member of the association. On the other hand, in the case of registered partnership firm, not only the firm pays tax on the income of the firm but also a partner thereof pays tax on his share of income from the firm. Thus, the Tribunal erred in law in applying the provisions of section 3(1)(f) of the Act to the case of the asses-see who was a member of association of persons. 19. The two decisions relied upon by Mr. Bhowmik, viz. CIT v. Mckenzies Ltd. [1980] 121 ITR 458 (Bom) and CIT v. Greenham Estates P. Ltd. [2006] 285 ITR 345 (Mad), referred to situations where the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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