COMMISSIONER OF INCOME TAX Vs. P K ABOOBACKER

JUDGEMENT

(1.) THE firm of which the respondent before us is the managing partner was assessed for the assessment years 1986-87, 1987-88 and 1988-89 as an unregistered firm. THE Commissioner of Income-tax in exercise of his power under Section 263 of the Income-tax Act, 1961, set aside the order of the Assessing Officer and directed the Assessing Officer to assess the firm after assigning it the status of a registered firm as provided under Section 183(b) of the Act. THEre was also a direction to reconsider the question of depreciation. We are not concerned with that aspect here.

(2.) THE Assessing Officer, pursuant to the direction of the Commissioner of Income-tax issued under Section 263 of the Act, completed the assessment of the firm. THEreupon, he issued notice to the respondent herein under Section 155 of the Income-tax Act proposing that the share of income of the respondent in the firm be properly included in the assessment of the respondent under the Income-tax Act. No objection was filed by the respondent to that notice. But in response to the notice the assessee appeared before the Assessing Officer through an advocate. THE representative of the assessee did not object and requested to adopt the correct share of the income. This is what is recorded by the Assessing Officer :

(3.) IT is argued by learned counsel for the Revenue that when the firm which was originally assessed as an unregistered firm, was directed to be assigned the status of a registered firm by the Commissioner of Income-tax, in exercise of his jurisdiction under Section 263 of the Act which was not in question, the consequences of carrying out the directions of the Commissioner of Income-tax should follow and one of the essential consequences was that the share of the partner from the firm to which the registered status had been assigned, was liable to be taxed at his hands. Counsel therefore, submitted that the Assessing Officer was well within his jurisdiction in completing the assessment of the firm as also the respondent who was the managing partner of that firm on the basis of the share of income derived by him from the firm. Counsel for the assessee, on the other hand, submitted that while exercising power under Section 263 of the Act, the Commissioner of Income-tax had only directed a fresh assessment of the firm and had not touched the orders of assessment against the partners and in view of this, the Assessing Officer did not get any authority to reopen the assessments of the partners and to complete the assessment afresh. Counsel submitted that an assessment made pursuant to an order under Section 263 of the Act was not a regular assessment and consequently Section 155(1)(a) could not also be invoked. According to him Section 155(1)(b) also could not be invoked in view of the fact that there was no reduction or enhancement in the assessment of the firm but only a change in the status of the firm.