COMMISSIONER OF INCOME TAX Vs. S.C. SHAH

JUDGEMENT

(1.) THE Tribunal, Ahmedabad Bench, has referred the following two questions under Section 256(1) of the IT Act, 1961, (the Act), at the instance of the CIT, Gujarat -III, Ahmedabad :

(2.) THE assessment year is 1982 -83 and the relevant accounting period is the year ended on 30th June, 1981. The assessee filed its return of income in the status of BOI and the AO accepted the same while framing assessment under Section 143(3) on 29th Feb., 1984. The CIT initiated revisional proceedings under Section 263 of the Act after issuing show -cause notice to the assessee. The CIT did not accept the explanation tendered by the assessee and set aside the assessment order directing the AO to adopt the status of the assessee as that of AOP and levy tax in accordance with law vide his order dt. 27th March, 1986.

(3.) MR . B.B. Naik, learned standing counsel appearing on behalf of the applicant -Revenue, submitted that the Tribunal had erred in accepting the stand of the assessee. That as per declaration of the donor, executed on 21st June, 1981, the donees were only entitled to distribute amongst themselves the gifted property. The moment the donees came together to earn income from the gifted amount, their action gave rise to a situation whereunder they were required to be assessed under the Act in the status of AOP. He, therefore, urged that the order of the CIT be upheld. In support of the submission, reliance was placed on the decision in the case of Meera and Company v. CIT : [1997]224ITR635(SC) to contend that once there was an organised activity jointly carried on to produce income, it was a clear case of a joint business venture of a few individuals entitling the Revenue to assess the said person in the status of AOP.