KALANI S R Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference made to this Court by the Tribunal, Indore, referring the following questions of law:

(2.) THE statement of the case submitted by the Tribunal indicates that the assessment years involved are 1963-64 and 1964-65 for which the accounting periods ended on 31st March, 1963, and 31st March, 1964, respectively. THE assessee claimed to be a firm of two partners, Shri. S.R. Kalani and his widowed mother, Badami Bai. It was claimed that a firm had come into existence w.e.f. 17th Aug., 1961, on which date there was a partition between Shri S.R. Kalani and his widowed mother, Badami Bai. This question was also raised in the asst. yr. 1962-63 and the ITO did not accept the claim for partition on the ground that the widowed mother Badami Bai, became a widow prior to 1937 and, therefore, she is not entitled to claim a share on partition of the HUF property as she was only entitled to maintenance. Consequently, it was held that the claim of partition is not genuine and, therefore, the firm so constituted also is not genuine. THE ITO, therefore accepted the status of the assessee as AOP. He also, therefore, rejected the claim of registration under s. 185 of the IT Act, 1961, and completed the assessment of the assessee for each of the year under s. 144 of the Act. THE best judgment assessment under s. 144 was done as the assessee failed to produce the books of account of M/s Kalani and Co. When the matter pertaining to these two years was pending before the AAC in appeals the Tribunal had decided ITA No. 671/69-70 for the asst. yr. 1962-63 and the Tribunal, in the appeal arising out of the assessment case of 1962-63 remanded the case to the ITO with a direction to make a fresh assessment after giving an opportunity to the assessee to substantiate the claim that the business of S.R. Kalani and Co. ceased to belong to the HUF. THE AAC in the appeals of these two years where also the question of the registration of the firm was involved, followed the order of the Tribunal and set aside the assessment made by the ITO refusing to register the firm and directed the ITO to make a fresh assessment in accordance with law and according to the direction given by the Tribunal. Against this order of the AAC, the Department went up in appeal before the Tribunal and challenged the order of the AAC. THE Tribunal on hearing this appeal felt that the AAC was competent while hearing this appeal to confirm or set aside the assessment, but could not give a direction by remanding the case which would give the assessee an opportunity although the default for which the best judgment assessment was made continues. Because, according to the Tribunal, so long as the assessee does not apply under s. 146 of the Act and get an ex parte assessment set aside, he could not be given an opportunity when the order of best judgment assessment stands which has not been set aside as required under s. 146 of the Act. THE Tribunal, therefore, modified the order of the AAC by holding that the order shall be treated to be an order of remand requiring the ITO to submit his remand report within three months on the question as to whether the business of S.R. Kalani and Co. ceased to be the business of the HUF and with these directions the Tribunal directed that the appeals be restored to the AAC.

(3.) THE orders against which the assessee has a right of appeal before the AAC have been provided for in s. 246 of the IT Act, 1961. THE relevant part of this section runs: