BALASUBRAMANIA TRADERS Vs. ASSISTANT COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE petitioner is a partnership firm constituted under a deed of partnership dated January 30, 1987, and the firm consisted of several persons including persons outside the family and when some difference of opinion arose, according to the petitioner, a memo of understanding was reached and under the said memo, the firm suspended its business on October 31, 1987, and handed over the movable assets and liabilities as per the schedule recorded in the books which were taken over by one Karthikeyan, son of Krishnan, one of the partners, on November 1, 1987. THE said Karthikeyan was permitted to continue the trading business in the name and style of the petitioner firm.

(2.) THE writ petition relates to the assessment year 1990-91. THE Assistant Commissioner of Income-tax (Assessing Officer) for the assessment year 1988-89 took the view that the memo of understanding entered into between the petitioner and the said Karthikeyan indicated that the business was not abandoned, nor the firm dissolved and the arrangement was revocable and in that view of the matter, he invoked the provisions of Section 61 of the Income-tax Act, 1961 (hereinafter to be referred to as "the Act"), and held that the income arising out of the business run by the said Karthikeyan accrued to the petitioner firm. THE Assessing Officer proceeded on the basis that the firm was not dissolved and the firm had the right to resume the business. THE petitioner challenged the order for the assessment year 1988-89 before the Commissioner of Income-tax (Appeals) and it must be stated here that the assessment year 1988-89 is the first year of dispute. THE Commissioner of Income-tax (Appeals) held that there was no power to revoke the transfer to support the inclusion of income in the hands of the petitioner firm and he therefore directed the Assessing Officer to exclude the amount included in the assessable income of the petitioner firm relating to the assessment year 1988-89, In this connection, it is relevant to notice that there were five different firms in which most of the family members and also strangers were partners and similar transactions also took place in the other firms as well and similar tax treatment also took place with reference to the said five firms. For the assessment year 1990-91, the present assessment year, the Assessing Officer followed his earlier order made for the assessment year 1988-89 and in the order of assessment, he mentioned that C. Krishnan took over the assets and liabilities, but it was only K. Karthikeyan, son of C. Krishnan, who took over the assets and liabilities as there was no memo of understanding entered into with C. Krishnan. THE Assessing Officer also made a remark that the business was not closed and it was revocable and invoking the provisions of Section 61 of the Act, he included the income in the hands of the petitioner firm.

(3.) THE further question that arises is whether the writ petition is maintainable against an order passed by the Appellate Tribunal. No doubt, there is a procedure for reference available under Section 256 of the Act. Though it may be open to the petitioner to question the findings rendered by the Appellate Tribunal on the question of genuineness of transactions in such reference proceedings, in my view, the question whether the procedure adopted by the Appellate Tribunal in allowing the appeal is correct or not cannot be gone into by this court in reference proceedings in view of the limited jurisdiction of the court under Section 256 of the Act and on the scope of the question that may be referred by this court by the Appellate Tribunal. In my view, once this court has come to the conclusion that there is a blatant violation of the principles of natural justice in passing the. impugned order, this court sitting under article 226 of the Constitution of India has the necessary powers and jurisdiction to interfere with the order of the Tribunal.