TMI Blog1997 (1) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... n mind the background of the case. The appellant before us is an AOP which, according to the Revenue, was constituted of the following as members: (i) Shanti Vijay Co., 52, Janpath,New Delhi; (ii) Lalji Co. of Bombay; and (iii) Maharaj Kumar Pratap Singh of Alwar. 4. Shanti Vijay Co. was a partnership carrying on business in jewellery ( partnership for short). In the case of the partnership assessment for asst. yr. 1972-73 was framed under s. 143(3) on26th March, 1975, at an income of Rs.29,30,010 as under: . Rs. (a) Business income 4,93,513 (b) Income from undisclosed sources 8,15,000 (c) Disallowance of interest on the above 21,497 (d) Income representing unexplained investment in the form of alleged advances made by M.K. Pratap Singh 16,00,000 4.1 An appeal was filed against the order of assessment to the Asstt. CIT, Spl. Range-5, who disposed of the appeal on 21st May, 1976 (Appeal No. 194/75-76) deleting the additions of Rs. 8,15,000 and Rs. 16 lakhs, beside a sum of Rs. 21,497 disallowed on account of interest liability. Against this order the Department came in appeal before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal directed the AO to consider the genuineness of the joint venture between the three parties, i.e., the partnership, Lalji Co. and Maharaj Kumar Pratap Singh and in doing so he shall treat the loan of Rs. 8,15,000 as unproved loan. 5. In the meantime penalty levied under s. 271(1)(c) vide order dt.24th June, 1981, was cancelled in appeal by the CIT(A) in his order dt.29th April, 1982. The appeal of Department against the order of the CIT(A) was dismissed by the Tribunal in its order dt.7th Feb., 1983in ITA No. 3570/Del/82. The Tribunal also held that if the penalty was leviable it could only be done in the case of the AOP. 6. As will be seen the assessment in the case of the partnership was repeatedly completed by including three amounts, namely, Rs. 8,15,000, Rs. 21,497 and Rs. 16 lakhs and every time the first appellate and subsequently the Tribunal had set aside the assessment. In the various appellate proceedings the authorities directed that genuineness of the joint venture between the partnership, Lalji Co. and Maharaj Kumar Pratap Singh is to be adjudicated. 7. The AO initiated action under s. 147(a) r/w s. 150(1) in the case of the AOP for the asst. yr. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he additions made as also interest charged. The learned CIT(A) did not accept any of the submissions made by the appellant when she held that the order of the learned CIT(A)-IV contained a conclusive finding that the profits arising from the transaction did not represent income of the firm but the same of an AOP constituted of the firm, Lalji Co. and M.K. Pratap Singh. According to the learned CIT(A) the issue of status attained finality only by said order of the CIT(A). She further held that as no return was filed in the status of AOP, action under s. 147(a) r/w s. 150(1), as taken by the AO, was justified. She further held action under s. 147(a) was initiated to give effect to the finding and directions contained in the order dt.26th Oct., 1987, of the learned CIT(A)-IV and, therefore, time limit prescribed under s. 149 did not operate and the provisions of s. 150(1) became applicable and the provisions of s. 150(2) of the Act did not stand in the way of initiation of these proceedings. According to the CIT(A) the order dt. 26th Oct., 1987, of the then CIT(A) recorded a finding that the impugned income belong to the joint venture consisting of the firm, Lallji Co. and M.K. Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings on the basis of which the assessment has been framed are lawfully initiated. He submitted that the provisions of sub-s. (1) of s. 150 of the IT Act are not applicable on the facts of the case. Advancing his arguments the learned authorised representative referred to Expln. (3) of s. 153(3) of the Act and submitted that it provides that where income is excluded from the total income of one person and held to be the income of another person, then assessment of such income on such other person shall, for the purposes of ss. 150 and 150(3) deem to be one made in consequence or to give effect to any finding or direction contained in the said order, provided such other person was given an opportunity of being heard before the said order was passed. He submitted that no such opportunity was given to the appellant-AOP in the appeal of the firm and order dt.26th Oct., 1987, of the learned CIT(A) based on which jurisdiction is sought by the AO under sub-s. (1) of s. 150. Accordingly, it was submitted that the Revenue could not apply s. 150(1) r/w s. 153(3), Expln. (3). In support of his proposition he referred to judgment of Hon ble Allahabad High Court in the case of Gupta Traders v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 8,15,000 appears as recorded between 1st Feb., 1971, and 8th Feb., 1971, the amount of Rs. 16,50,000 is recorded between 25th Jan., 1971, and 2nd Feb., 1971, which in the case of the appellant could not be brought to charge in the assessment year under appeal, the financial year being the previous year in the case of the appellant. 9.3 The learned authorised representative also argued that there was no valid service of notice under s. 148 of the IT Act, which is a precondition for lawful initiation of reassessment proceedings. The learned authorised representative also challenged the levy of interest under ss. 139(8)/217/215 of the Act. 9.4 On the other hand, the learned Departmental Representative duly supported the order of the learned CIT(A) and submitted that what the assessee has pleaded before us already stands discussed and decided against it by the learned CIT(A) and, therefore, no relief is available to the appellant. The Departmental Representative, in other words, mainly relied on the order of the learned CIT(A). 10. We have heard the learned representatives of the parties and have also perused the relevant record. We have also taken note of the judgments cit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he must be given an opportunity of being heard on that question. All these features must be borne out by records. Held , that, in the instant case, there was an appeal by the firm in which the petitioner was a partner before the Tribunal for the asst. yr. 1981-82 and there findings had been given that the impugned transactions were those of the partner and not those of the firm. Consequently, notice under s. 148, had been issued to the partner. There was no presumption that the partner was aware of the appellate proceedings. There was no evidence to show that the partner represented the cause of the firm before the Tribunal in consequence of whose finding alone the present proceedings for assessment of escaped income were stated to have been initiated. Even if he had so represented, that position could not be straightaway equated to participation in the proceedings pursuant to an opportunity being afforded on the question before the order is passed, within the meaning of Expln. 3 to s. 153. The notice was invalid and was liable to be quashed." Manifestly, the facts in appellant s case are identical to the same as prevailed in the case of A.P. Parikh. 10.2 In the case of Gupt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been proper sanction for issue of notice we have looked into the relevant provisions as contained in s. 151 of the IT Act inserted by Direct Tax (Laws) Amendment Act, 1987, w.e.f.1st April, 1989, laying down a procedural law and plainly the provisions of sub-s. (2) of s. 150 are applicable in this case; whereas the AO, i.e., the ITO to the specific exclusion of sub-s. (2) of s. 150 obtained sanction of the prescribed authority under sub-s. (1) of s. 150, i.e., of the CIT, whereas under sub-s. (2) the prescribed authority is Dy. CIT. There has, therefore, been a failure to obtain previous sanction of the prescribed authority, thus, vitiating, the assessment. We are not impressed with the submission made by the learned Departmental Representative that the Dy. CIT, being subordinate to the CIT, the sanction could be treated as having been accorded by the Dy. CIT. Two distinct authorities for according sanction have been prescribed for the purposes of obtaining sanction under sub-s. (1) and sub-s. (2) and there can be no intermingling, no transgression since the very foundation of the assumption of jurisdiction to issue notice under s. 148 is grant of sanction by the prescribed auth ..... X X X X Extracts X X X X X X X X Extracts X X X X
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