COMMISSIONER OF INCOME TAX Vs. AMY COLABAWALA

JUDGEMENT

(1.) Accepting prayer for reference under S.256(1) of the Income Tax Act, 1961 (in short 'the Act'), following questions have been referred for opinion of this Court by the Income Tax Appellate Tribunal, Cochin Bench, Cochin (in short 'the Tribunal'):

(2.) Factual position as set out in the Statement of Case is as follows:- Gool C. Dalal and Perin C. Dalal, two sisters, were coowners of an agricultural estate which was sold resulting in realisation of some surplus. Such surplus was taxed by the income tax authorities in the hands of an Association of Persons (in short 'A. O. P.') styled as "M/s. Gool C. Dalal & Perin C. Dalal". When the matter was finally adjudicated by Tribunal on said A. O. P.'s appeal, it came to hold that the two sisters were merely coowners of the property and they had not done anything with the purpose of generating income which is sine qua non for being treated as an A. O. P. and therefore could not be assessed as an A. O. P. While disposing of the matter, certain observations were made. Treating the observations to be in the nature of a finding/direction, assessing officer initiated action under S.148 of the Act against both the sisters by issuance of notices under S.148. According to assessing officer, same was necessary to give effect to the order of the Tribunal. In response to the notices, the sisters filed returns and therein the income as originally returned was disclosed. It was contended that the time limit for reopening the assessment was clearly over and no assistance could be sought under S. 150 as made out by the revenue. It was their stand that there was no valid direction from the Tribunal. Mere observation that the surplus realised from the land belonged to the members of the A. O. P. could not be construed as a direction within the meaning given to that expression under S.150(2) of the Act. Such submissions were rejected by assessing officer. The matter was carried in appeal before the Deputy Commissioner of Income Tax (Appeals), Calicut (in short 'Dy. C.I.T. (A)') without success. But in second appeal, Tribunal accepted the stand with the following observations:

(3.) According to learned counsel for the revenue, both the conclusions of the Tribunal are erroneous. Having accepted that the observation of the Tribunal was in the nature of a finding, it was not open to Tribunal to come to a conclusion that there was no valid notice to the parties whose interests were adversely affected. The earlier appeal before the Tribunal was filed by both the sisters and as an A. O. P. It was not the case of A. O. P. before the Tribunal in the earlier case that they had no knowledge of the proceedings. Learned counsel for the assessee, on the other hand, submitted that even if the earlier appeal was filed by both sisters and it is presumed that they had opportunity of knowing the contents of the order, yet the observation made by Tribunal in the earlier case cannot be construed to be a direction or a finding. It is submitted that in order to constitute a finding or a direction, the observation must be clearly linked with subject matter of issue and must be necessary for adjudication of the dispute.