TMI Blog1991 (12) TMI 112X X X X Extracts X X X X X X X X Extracts X X X X ..... er Rs. 4 lakhs in the previous year relevant to assessment year 1982-83. He therefore, issued a notice under section 263 on 24-2-1986 and set aside the assessment made by the ITO under section 143(1) and directed the ITO to bring the said amount of capital gains to assessment in the hands of the AOP. As the amount of capital gain was allegedly offered and taxed in the hands of the individual members, their assessments were also set aside likewise. 3. Facts are that S/Shri Ghewarchand Surana, Dwarkadas Maheshwari, Champalal Jain and Praveenchandra Batavia acquired a property known as Oil Extraction factory by contributing proportionately as co-owners. The said property was purchased for a sum of Rs. 1,10,000 on 13-7-1967. These four co-owners executed a partnership deed and business was treated to be letting out the premises which they have purchased and to earn rent out of it. The co-owners of the property filed firm's return of income for assessment year 1970-71, i.e., for the previous year ending 9-11-1969 declaring a total income of Rs. 4,435. The Income-tax Officer vide his order dated 2nd January, 1971 held that since the shares of the co-owners were ascertained, the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operty was assessed in the hands of the co-owners directly, though in accordance with the provisions of section 26, and hence income on sale of the property cannot be assessed in the hands of the AOP. His submission is that the Commissioner of Income-tax ought to have appreciated that the property was purchased and owned by the co-owners in their respective shares which were definite and ascertained and that there was no joint management or efforts to constitute as AOP, nor was there any joint business or venture. In this connection, he referred to a decision of the Calcutta High Court in Gora Chand Sen v. CIT [1985] 154 ITR 435 and the decisions of the Supreme Court in CIT v. Simon Carves Ltd. [1976] 105 ITR 212 and in CIT v. Kanpur Coal Syndicate [1964] 53 ITR 225, (3) that having exercised option to assess the capital gains in the hands of the individual co-owners, the Department cannot now assess the same in the hands of the AOP and therefore the Commissioner was not right in cancelling the order made by the ITO. He submitted that when two options are open and the ITO exercised one of them, there could not be error in his order, so as to entitle the CIT to revise the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st question to be considered is about the limitation. The matter appears to be covered against the assessee by the jurisdictional High Court of Madhya Pradesh in the matter of Veerbhandas Purswani. It was a case of time limit for the purpose of levy of penalty under section 18(1)(c) of the Wealth-tax Act, wherein also the time limit as contained section 18(5) of the Act was enlarged from two years from the date of completion of the proceedings in the course of which proceedings for imposition of penalty have been commenced to two years from the end of the financial year in which the proceedings, in the course of which action for imposition of penalty have been initiated. The assessment order in that case was passed on 27-2-1970 and two years therefrom expired on 26-2-1972 and two years from the end of the financial year in which assessment was made expired on 31-3-1972. Penalty order having been passed on 27-3-1972, was held to be not barred by limitation. Their lordships of the Madhya Pradesh High Court held that ' it is a settled law that any amendment of the Act, though effected after the close of the assessment year but before the assessment is made, would still be given retr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il v. Lal Co. [1964] 53 ITR 231 and the decision in J.P. Jani, ITO v. Induprasad Devshanker Bhatt [1969] 72 ITR 595 (SC), wherein it has been held that if a remedy has already been lost by efflux of time, it cannot be availed of with the aid of the new provisions which enables otherwise to do, at the time when the new Act came into force. Their lordships noted with approval the decision of the Calcutta High Court in the case of ITO v. Calcutta Discount Co. Ltd. [1953] 23 ITR 471, wherein it was held that the plain effect of the substitution of the new section 34 with effect from 30-3-1948 is that from that date the Income-tax Act is to be read as including the new section as a part thereof, and if it is to be so read, the further effect of the express language of the section is that so far as cases coming within clause (a) of sub-section (1) are concerned all assessment year ending within eight years from 30-3-1948, and from subsequent dates, are within its purview and it would apply to them, provided the notice contemplated is given within such eight years. What is not within the purview of the section is an assessment year which ended before eight years from 30-3-1948. Their Lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat it was difficult to draw an inference that two or more share-holders functioned as an " Association of Persons " from the mere fact that they jointly own one or more shares and jointly receive the dividends declared. These circumstances do not by themselves go to show that they acted as an " association of persons ". In the case of CIT v. Smt. Saraswati Bai [1982] 137 ITR 656, the Punjab and Haryana High Court held that capital gain arising on the sale of land was not assessable in the hands of the AOP. In that case, a piece of land was purchased by three ladies jointly and subsequently they sold. Profit on the sale of land was included in the individual returns of the ladies as capital gains and assessed as such. Subsequently, the ITO issued notice of reassessment on the grounds that the assessee constituted an association of persons and the transaction amounted to an adventure in the nature of trade. The facts and circumstances of the present case are more or less similar. Here also, four persons have purchased a property jointly by contributing proportionately. They have purchased the property as co-owners. They have received rent for the property which was assessed in the r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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