COMMISSIONER OF INCOME TAX Vs. BIJU VARGHESE

JUDGEMENT

(1.) THE related appeals filed by the Revenue pertain to the income -tax assessments of the respondent -assessees who were partners of M/s Mangalam Publications, a firm which is engaged in the business of publication of periodicals. The assessments involved are for the years 1988 -89 to 1993 -94. It is the admitted fact that the partnership firm of which respondent -assessees were partners, did not maintain any books of accounts and therefore, the original assessments of the firm itself was completed on estimation basis. Following the said assessments of the firm, income was assessed in the hands of the partners. However, the Department later found that the firm had furnished balance sheet for the period ended 31st Dec, 1985 and 31st March, 1993 before the bank which disclosed massive credit balance in the current and capital accounts of the partners. Based on this and other information, the assessments of the firm were reopened and reassessments were completed under Section 147 of the IT Act. Following the information collected from the firm's accounts and assessments later completed, the assessments of the partners were also reopened and completed under Section 147 of the IT Act. The appeals were filed both by the firm and by the partners against reassessments contending that such assessments were barred by limitation as limitation according to the assessees was available only upto four years from the end of the assessment year. However, it is the conceded position that if reopening of the assessment is on account of suppression of material facts necessary for assessment, then the limitation for assessment of escaped income is ten years. In this case, the Department's claim is that the assessee had not disclosed material facts necessary for the completion of assessments and therefore, reassessments are based on disclosures made by the firm to the bank and other materials collected from unexplained investments by the assessees. However, in first appeals, the appellate authority accepted the contention of the assessees and cancelled the assessments as time barred, against which second appeals filed by the Department were unsuccessful

(2.) ONE of the assessees, Sri M.C. Varghese, is no more. However, counsel appearing for the remaining assessees who are actually legal heirs of Sri M.C. Varghese, filed impleading application in these appeals for one of the legal heirs. We do not think there is any necessity to implead the other legal heirs also on record for disposing of the appeals because in the first place, we are not deciding the case on merits. Further, in the connected appeals very same legal heirs are raising the same contentions applicable in the case of late assessee as well. Therefore, we proceed to dispose of those appeals also after hearing the counsel appearing for one of the legal heirs of the deceased assessee

(3.) THE Department is challenging the finding of the CIT(A) confirmed by the Tribunal that the reassessments are time barred. We have in similar circumstances in the case of connected appeals filed by the Department against the firm of which respondent -assessees are partners i.e., in IT Appeal Nos. 400, 557 and 558 of 2009, held that reassessments completed under Section 147 are within time and the findings of the first appellate authority as well as of the Tribunal to the contrary are not tenable. The facts are exactly similar in as much as the assessments of the respondent -assessees are completed based on materials available from the balance sheet furnished by the firm which showed substantial credit balance in the current account and capital accounts of the partners in the course of time. In fact, the AO has dealt with unexplained investments and expenditure made by the assessees during the years from out of records and assessments of the firm. It is proved beyond.doubt that assessees have not disclosed all material facts required for completion of their original assessments. In fact, admittedly the income of the respondent -assessees were in the form of withdrawals from the partnership firm, Mangalam Publications, of which they are partners, which admittedly carried on business without maintaining books of accounts. Therefore, failure by the firm and its partners to disclose materials required for assessment stands proved. Following our judgment in the firm's case above -referred, we hold that reassessments completed under Section 147 in the case of respondent -assessees are within time and consequently allow the appeals by vacating the orders of the Tribunal and that of the first appellate authority. However, the matter will stand remanded to the first appellate authority for deciding the appeals on merits pertaining to the addition made in the assessments. Since additions are based on data gathered from the accounts of the firm for same years, we feel the first appellate authority should take up the matter afresh after Tribunal decides the appeals in the hands of the firm after remand.