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2015 (2) TMI 1333 - KARNATAKA HIGH COURTStatus of the assessee as AOP as against its claim as firm - completing the assessment on the assessee as an Association of Persons - failure to comply with the requirements of Section 144 - HELD THAT:- While rationalizing the provisions relating to assessment of firms it is made clear that, only in the event of a best judgment assessment is made for failure to comply with Section 144 the benefit which is available to a firm u/s 28 can be denied. If a best judgment assessment under Section 144 of the Act is not made, no disallowance u/s 184(5) can be made. No doubt this explanatory note is not in conformity with Section 184(5) of the Act. But, when the CBDT issued the said explanatory note, it is giving relaxation and benefit to the assessee which the statute has not provided. Such a power is vested in the CBDT by virtue of Section 119. Once such a benefit is conferred by way of a circular, the authorities are bound by the same. They cannot sit in judgment over the said explanation and deny the benefit to the assessee. Even though this Court can interpret the said provision and note that there is inconsistency between the provision and the explanation offered, but when the CBDT issued such instruction granting that benefit to the assessee that has to be respected. In that view of the matter, the approach of the three authorities in denying the benefit to the assessee was not justified. It is contrary to the said explanation found in the circular which the CBDT wanted to extend to the assessee in order to overcome the hardship by virtue of the said statutory provision. Therefore, the impugned orders cannot be sustained. As contended that, when the partnership deed was not enclosed to the return filed, there is non-compliance of Section 184(2) and, therefore, the consequences mentioned in Section 184 has to follow. But, it is on record before the assessment, a partnership deed duly certified and signed by all the partners were produced before the assessing authority. There is substantial compliance with sub-section (2) of Section 184. As could be seen from the language employed in Section 185, if there is non-compliance with the provisions of Section 184, the firm shall be so assessed and no deduction would be granted. It is at the time of assessment, if the authority is not given the partnership deed, the firm would be given the benefit. But, at the time of assessment, if the partnership deed was produced, certainly the authorities have to look into the partnership deed and if it is a firm which satisfies the other requirements, then the firm would be entitled to other benefits. Under such circumstances, Section 185 is not attracted.
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