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TMI Blog1985 (8) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... ha Gupta 9. Smt. Bimla Garg 10. Shri Ashwani Kumar On 1st July, 1970, last four partners i.e. Smt. Parkash Vati, Smt. Anuradha Gupta, Smt. Bimla Garg and Shri Ashwani Kumar, went out of the said firm and where paid a sum of Rs. 60,000 each i.e. a total sum of Rs. 2,40,000 as per terms and conditions of a dissolution deed and after the firm was dissolved the continuing six partners effecting the change in their profit sharing ration continued the business of the said firm after reconstitution. The business of the firm was those contractors and it was firm which was started only in 1975. 3. Each of the four out-going partners were credited with a sum of Rs. 60,000 under the narration "by goodwill received for leaving the partnership of M/s Raj Kishan Co. In course of assessment proceedings, the IAC(Asst.), who framed the assessment, disallowed the sum of Rs. 2,40,000 which was claimed to be deductible by the assessee on the strength of Punjab Haryana High Court decision in the case of Kartar Singh Dugal. Since the said case was neither reported nor made available to the IAC(Asst) by the assessee, contention of the assessee for deduction of the said amount of Rs. 2,40, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case was finally heard on 23rd July, 1985. As a matter of fact, written note was required to be filed before the Bench for assistance and simplification of the matter but as usual in the types of this dispute, the ld. counsel for the assessee covered 36 foolscap pages in form of its written arguments in response of which the ld. Departmental Representative was good enough only to cover six pages in reply to which the rejoinder was again presented by the ld. counsel for the assessee covering five foolscap pages. 6. We could come to a conclusion by going through written submissions by both the parties made by the ld. Departmental Representative once and by the ld. counsel for the assessee twice but since what came from both the sides were not only written notes on the issue but from long winding arguments, sometimes at the cost even of repetition, both the parties were required to address the Bench summarising their arguments on the strength of written notes placed before us. The ld. counsel for the assessee at the very outset said that in case written arguments are read through, there would hardly be any need for saying anything orally yet to summarise. He first of all attac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e compilation wherein this Bench adopted the doctrine of merger on the basis of partial merger, and not full merger. Another decision of Madhya Pradesh High Court was relied upon by the ld. Departmental Representative which is also reported as CIT vs. R. S. Banwarilal (1982) 28 CTR (MP) 59 (FB) : (1983) 140 ITR 3 (MP) (FB). The ld. Departmental Representative regardig that issue that in the hight of Punjab and Haryana High Court in the case of Kartar Singh Dugal there was a mistake rectifiable and placed his reliance on (1984) 154 ITR 583. He also submitted regarding the first facet of arguments raised by the ld. counsel for the assessee distinguishing between the position of ITO and IAC (Asst.) that as per s. 125A(4), IAC is an ITO so far as assessment is concerned unambiguously. The ld. Departmental Representative relied on the Supreme Court decision Jogendra nath Naskar vs. CIT (1969) 74 ITR 33 (SC) especially on the portion of the report available in page 41 that Explanation added to s. 263 is clarificatory. He also placed his reliance on CIT vs. Bijoy Kumar Aimal (1977) 106 ITR 743 (Cal) and Varghese, K. P. vs. ITO (1981) 24 CTR (SC) 358 : (1981) 131 ITR 597 (SC). He submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny rule." This should make clear and unambiguous and any restrictive interpretation as such by the learned counsel for the assessee shall be out. We are unable to appreciate the submission of the ld. counsel for the assessee that said section has created any absurd or anomalous situation. In this connection, the ld. counsel for the assessee had relied on the well known case of Varghese, K. P. vs. ITO (1981) 24 CTR (SC) 358 : (1981) 131 ITR 597 (SC). We are unable to appreciate the contention of the ld. counsel for the assessee that by s. 125A(4) the IAC (Asst.) was only given the powers to exercise the function of an ITO and he was out so far as jurisdiction of CIT was concerned. The instances given by the ld. counsel for the assessee for comparison are heterogeneous. According to us, no redundancy can be attributed to the legislature once words references in the Act or in any rule made thereunder are included in the said sub-section. According to us, there is nothing absurd about it. There cannot be anything wrong with an officer with dual capacity under an Act. What is material and relevant to be seen as to where from does he derive his powers. Once IAC(Asst) is functioning as an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation was placed by the ld. counsel for the assessee in his arguments in the following words: "The words of statute when there is doubt about their meaning are to be understood to the sense in which they best harmonise with the subject of the enactment. Their meaning is found not so much in a strictly grammetical or etymological propriety of language nor even in its popular, as in the subject or in the occasion of which they are used and object to be attained." If we go through the above observations, it supports the contention that of the Revenue. Actually once the IAC(Asst.) is equated to ITO for purposes of assessment it results into doctrine of subrogation. The IAC while making assessment steps into the shoes of the ITO and in this regard the reliance of the ld. Departmental Representative was rightly placed on Be Be Rubber Estate Ltd. vs. Addl. CIT (1982) 29 CTR (Ker) 132 : (1982) 136 ITR 675 (Ker) where their Lordships held that once a person is authorised to utilise the powers, he steps into his shoes for all practical purposes. 13. Even we have Special Bench decision of this Tribunal in the case of East Coast Marine Product (P) Ltd. vs. ITO (1983) 4 ITD 73 (Hyd) in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o get rid of the same that the said Explanation was added. The first fact therefore, pertaining to jurisdiction of CIT is adjudicated against the assessee. 14. Coming to the merger part, this Bench had an occasion to deal with the issue in case of Punjab Financial Corporation ITA No. 144/79 dt. 19th Dec., 1980 and after dealing with catena of judgments including the Supreme Court decision in the case of Amritlal Bhogilal and Madurai Mills with several other judgement had come to the conclusion that order of assessment of ITO merged in the order of the AAC insofar as it relates to items considered and decided by the AAC. However, that part of the assessment which relates to items not forming the subject matter of the appellate order which is left untouched does not merge in the order of the AAC. On the basis of consistency of the views of this Bench, we are unable to accept the contention of the ld. counsel for the assessee. The contentions of the ld. counsel for the assessee are very strange in respect of this facet, At one stage, it was submitted before the CIT and also reiterated before us that two additions were made by IAC(Asst.) in original assessment proceedings, one regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tgoing partners, it is mentioned that the payments are made on account of goodwill but it is undoubtedly a payment to the outgoing partners. Then the firm was also started only a year or two before and in a case of contractors firm, the payment was made because of certain pending words which were taken by the old firm which were now to be completed by the continuing partners. It was on the basis on these facts that the outgoing partners made payments. There is no distinction according to us in the assessee's own case and case of Kartar Singh Dugol which is placed on assessee's compilation on pages 19 t0 30 in IT Ref. No. 14 of 1968 dt. 4th Nov., 1970. Almost on all fours the said case is applicable and the IAC(Asst.) was justified in rectifying the matter under s. 154. Here we get support from another Punjab and Haryana High Court decision in the case of CIT vs. Mohan Lal Kansal (1978) 114 ITR 583, (P H) which was also a case of contractors and it was held by their Lordships as under: "Held, that the IT authorities situated within the jurisdiction of a particular High Court are bound by its decision. Therefore, in the present case, it could not be said that the mistake was not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtners and it was remaining part of the contract which was to be executed which was actually executed by the continuing six partners. 18. From perusal of the partnership deed comprising of ten partners and the second one comprising of six partners and looking to the contract works which were in the hands of both the firm started by the former and completed by the second one. It is apparent that the outgoing partners were paid sum of Rs. 66,000 each which was on account of future profits. Since the issue is covered by Punjab and Haryana High Court decision as narrated above in the case of Kartar Singh Dugal, the IAC(Asst.) was justified in granting the relief to the assessee in 154 proceedings and the CIT was not justified in resorting to s. 263 proceedings because once there is a Punjab and Haryana High Court decision that is binding as per Mr. Kansal's case narrated above on authorities, and theory of two opinions on the issue would not make it debatable because of the judgment of the High Court of the State in which assessee is based. 19. In the result, dismissing the two facets pertaining to legal issues in the appeal of the assessee pertaining to jurisdiction and merger, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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