9911796707
TMI Blog1987 (3) TMI 141X X X X Extracts X X X X X X X X Extracts X X X X ..... tain relevant facts are now stated. The assessee is a firm, which dealt in Diesel Engines and Tractors and Auto spares in the accounting year ended on 31st March, 1984. It consisted of four partners, two of whom Shri B.L. Kalra and Shri A.L. Kalra were brothers and the other two Shri Sudesh Kumar Sharma and Randhir Chand Rana were not related to them. On 24th Jan., 1978, all the four partners opened Recurring Deposit Accounts with the Central Bank of India, Phagwara of Rs. 1,000 per month for a period of 61 months. The accounts were in the joint names of the partner and his wife. These Recurring Deposit accounts matured on 1st March, 1983, a date falling in the asst. yr. 1983-84, and on maturity, a lumpsum payment of Rs. 79,740, Rs. 61,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtners in their individual returns on accrual basis and assessments had been duly made on the partners on the interest income disclosed for each year. It is also a fact that obviously on account of limitation the CIT has passed the order under s. 263 for the last year of the running of R.D. accounts, which falls in the asst. yr. 1983-84 and that CIT had both in the show cause notice and in para 3 of his order has expressed the opinion that the whole of the interest income of Rs. 74,960 belonged to the assessee and the interest income constituted its income for the asst. yr. 1983-84. The assessee's counsel, Shri N.K. Sud, also stated at the hearing that the ITO had framed an assessment after the order of the CIT including the whole income of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est earned was credited to the capital account of each partner. Reliance was placed on the Andhra Pradesh High Court decision in the case of CIT vs. Jethalal Nanji Bros. (1987) 59 CTR (AP) 52 : (1987) 167 ITR 191 (AP) in which the High Court had gone by the intention of partners and reference was made to observations at pages 690 and 691. Attention was also invited to the facts of that case and the facts of the assessee's case being comparable. Another argument in the alternative was also raised that the entire amount of the interest could not be included in the assessment of the assessee firm for the asst. yr. 1983-84 when the system of accounting followed by the assessee was mercantile and the interest income was being disclosed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posits in R.D. accounts. It was also stated that the assessee is no longer disputing the fact that Home Savings Fund Account No. 1660 with the Central Bank of India in the names of four partners was the account of the firm and had the funds belonging to the firm. It was argued that considering the issue in the proper perspective no inference adverse to the assessee can be possibly drawn. 4. The departmental representative relied on the reasons given in the order of the CIT. He particularly emphasised that any asset appearing on the asset side of the balance sheet of the firm was apparently the property of the firm and since the R.D. accounts of the partners figured on the asset side these belonged to the firm. Secondly, it was submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same test to the evidence brought on record. In the instant case, we find force in the submissions of the assessee's counsel noted above, which bring out the relevant facts and conduct of the partners of the assessee-firm to show that the R.D. accounts were intended by the partners to belong to them personally and not to the firm. It is significant that the R.D. accounts were opened by each partner not only in his own name but in joint names of himself and his wife. The partners had no intention to show act as benami of the firm or to act on behalf of the firm to open these R.D. accounts. The CIT in para 6 of his order is wrong when he observes that apparent is to be taken as the real state of affairs by merely taking note of the entrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of double taxation as far as possible has to be avoided as it is contrary to the scheme of the Income-tax law. The CIT, in our opinion, without any sufficient reasons has assumed that income in the R.D. accounts would not accrue from year to year and the assessee could not choose that course. The course actually chosen is offering of interest income on accrual basis as is apparent from the conduct of the partners while filing their individual returns of income which conduct has been accepted by the Revenue in the case of the partners. Considering the entirety of facts and the circumstances of the case, we are not inclined to uphold the action of the CIT(A) and set aside his order under s. 263 of the Act and restore the assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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