TMI Blog1990 (2) TMI 118X X X X Extracts X X X X X X X X Extracts X X X X ..... ted u/s. 143(1) of the Act. Perusing the records, the learned Commissioner found that the assessments were erroneous in so far as they are prejudicial to the interests of the revenue. On a notice issued to the assessee available at page 3 of the paper book stating that the Income-tax Officer had not considered the question of applicability of the provisions of section 40(b) with reference to the interest paid to certain concerns in a sum of Rs. 1,03,587 and Rs. 1,31,960 respectively for these two assessment years, the assessee filed its reply (available at pages 5 to 7 of the paper book) justifying the action of the Income-tax Officer. The Commissioner, however, not satisfied set aside both the assessments directing the Income-tax Officer w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 143(1); secondly the assessee's own reply to notice u/s. 263 and form 12A filed by them went a long way to suggest that all or at least 4 out of its five partners were not partners of the firm in their individual capacity but representing someone else; and thirdly that the assessment order was wholly silent on the applicability of section 40(b) of the Act and last but not the least the order u/s. 263 had left the matter wide open for the examination, consideration and adjudication of the entire issue with opportunity to the assessee to put forth its claim and, therefore, needed to be sustained. 7. In reply reiterating his stand, the learned counsel for the assessee contended that the reticence of the Income-tax Officer on the 40(b) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... along with the names of the real partners and signed a declaration unreservedly that the partners were benamidars during the previous year ending on 31-3-1984. Similar declaration has been made by the assessee in respect of the next year. Without making comments, we find ourselves unable to be persuaded by the learned counsel that the aforesaid two factors are not admitted facts and that they do not have any adverse effect on the assessee's plea. Since we are upholding the action initiated by the learned Commissioner u/s. 263 of the Act, we refrain ourselves from making any comments so that the issue is decided by the Income-tax Officer as directed by the learned Commissioner in accordance with the provisions of law after providing the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a representative capacity and interest paid by the firm to the person so represented or by the person so represented to the firm, shall be taken into account for the purposes of this clause. " As is evident the assessee's case, presuming for a moment that the partners are benamidars (which issue, as observed by us, is still open) appears to fall squarely in clause (ii) of the aforesaid Explanation as the interest would then have to be taken as paid by the firm to such individual as partner in a representative capacity and to a person who so represented. 10. Now to the objection that Explanation 2 inserted by the Taxation Laws (Amendment) Act, 1984 only with effect from 1-4-1985 and, therefore, the first assessment year 1984-85 was safe, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opinion, Explanations 2 and 3 are merely clarificatory in character and must, therefore, govern the assessments prior to the assessment year 1985-86 also. 11. Lastly, the objection taken by the learned counsel justifying the reticence of the Income-tax Officer in the assessment year in view of the Appellate Asst. Commissioner's order dated 18-10-1984 for the assessment year 1978-79 available at pages 27 to 31 of the paper book, the answer is that Explanation 2 referred to above upsets this factual state of affairs which the Income-tax Officer failed to take into account. In fact there is some force in the submission made by the learned departmental representative that the assessment orders were passed by the Income-tax Officer u/s. 143(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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