1982 (2) TMI 87 - AT - Income Tax

Summary

Issues:
- Rectification of assessments under Section 154 for HUFs regarding salary income paid to individuals by a firm.
- Whether salary income included in individual assessments can be taxed again in the hands of HUFs.

Analysis:
1. The appeals were filed by the assessees, who are HUFs, against the orders of the AAC rejecting their applications for rectification of assessments under Section 154. The issue revolved around the inclusion of salary income paid to individuals by a firm in the assessments of both individuals and HUFs for the same amount.

2. The contention of the assessees was that the salary paid to individuals by the firm was mistakenly added to the income of the HUFs, even though it had already been included in the individual assessments. They argued that the salary belonged to the individuals and could not be taxed twice. They relied on the Supreme Court decision in Mahendra Mills Ltd. v. P.B. Desai, AAC [1975] 99 ITR 135 to support their claim.

3. The departmental representative argued that there were no apparent mistakes in the records. They maintained that the salary income had to be included in the assessments of the HUFs as the assessees were partners in the firm. The representative contended that the records of individuals and HUFs were separate, and the Supreme Court decision cited by the assessees was not applicable in this case.

4. The Tribunal analyzed the submissions and found that the revenue's stance was overly technical. The firm had clearly indicated that the salary paid to the individuals was in their individual capacity. The assessments of the individuals already included the salary income. The Tribunal held that the records of the firm, HUFs, and individuals should be considered as one, as they are interconnected. Citing the principle from Mahendra Mills' case, the Tribunal concluded that the mistake was apparent from the record, directing the deletion of the salary amounts added to the HUFs.

5. Ultimately, the Tribunal allowed the appeals, ruling in favor of the assessees. The decision highlighted the interconnected nature of assessments of individuals, HUFs, and firms, emphasizing that the salary income could not be taxed twice based on the same facts.