TMI Blog2005 (9) TMI 267X X X X Extracts X X X X X X X X Extracts X X X X ..... 44 of the Act. The situational difference has to be noted while applying the failures while making assessment u/s 144 and while applying them for the purposes of s. 184(5) of the Act. While making an assessment u/s 144, due to non-compliance, the AO may find it difficult to determine the exact income of the assessee and, therefore, may have to resort to best judgment. However, while applying those failures for the purpose of s. 184(5), the failure has to be complete, because that would give rise to the presumption that the firm is not genuine and, hence, cannot be treated and assessed as such. Mere non-co-operation on the part of the assessee, cannot render the firm to be non-genuine. In the present case, the several failures to comply with the notices may have rendered the determination of the correct income of the assessee, but that certainly does not lead to the conclusion that the firm is not genuine and, therefore, has to be assessed as an AOP. In the light of this discussion, we hold that the AO was not justified in treating the assessee as an AOP and direct the AO to treat it as a firm. In the result, the appeal of the assessee is allowed. Addition u/s 68 - Merely on the bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO, the assessee failed to avail of the opportunity and hence, the assessment was completed under Section 144 of the Act at a total income of Rs. 12,81,500. Since the assessment was completed under Section 144, the status of the assessee was taken as AOP in terms of Section 184(5) of the Act. Consequently, no deduction on account of remuneration and interest to partners was allowed The learned CIT(A) confirmed the action of the AO. 4. The submission of the learned counsel was that admittedly no books were maintained by the assessee and, in fact, a letter was sent in response to the notice under Section 148 of the Act requesting the AO to treat the original return as filed in consequence to notice under Section 148 of the Act. However, since the assessee could not substantiate this claim, it was held that the assessee had failed to respond to the notice under Section 148. With regard to the several notices issued under Section 142(1). it was submitted that it is true that certain earlier notices were not complied with, but subsequently there was sufficient compliance and the assessee did participate in the proceedings before the AO. The contention of the learned counsel was that Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee, there may be justification on the part of the AO to make the assessment under Section 144 of the Act. However, Section 184(5) does not come into operation automatically when the assessment is made under Section 144 of the Act. Had that been the case, then the provisions would have been worded somewhat in this manner: Where an assessment is made under Section 144 of the Act, the firm shall not be assessed as such for the said assessment year and, thereupon, the firm shall be assessed in the same manner as an AOP, and all the provisions of this Act shall apply accordingly. However, this is not the situation. Sec. 184(5) comes into play only when there is a complete failure as mentioned in Section 144 of the Act. The situational difference has to be noted while applying the failures while making assessment under Section 144 and while applying them for the purposes of Section 184(5) of the Act. While making an assessment under Section 144, due to non-compliance, the AO may find it difficult to determine the exact income of the assessee and, therefore, may have to resort to best judgment. However, while applying those failures for the purpose of Section 184(5), the failure has to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO held the entire contribution to be unexplained and added the sum of Rs. 8,60,000 to the total income of the assessee-firm. 13. The learned CIT(A) referred to the judgment of the Allahabad High Court in the case of Surendra Mohan Seth vs. CIT (1996) 221 ITR 239 (All) and following the same held that since this was the first year of the assessee's business and since the deposits were made on the first day, when the partnership was entered into, the AO was not justified in making the addition to the total income. 14. The submission of the learned Departmental Representative that the assessee never furnished any confirmation, details of the sources or evidence regarding the land holdings of the partners. It was submitted that the CIT(A) deleted the addition on the ground that Section 68 was not applicable in the absence of any books. However, as per the partnership deed, the partners had agreed to maintain the books of account and that they were to be maintained on mercantile system. Therefore, it could be presumed that the partners must have acted as per the terms of the partnership deed and hence, now they cannot turn back to say that no books were maintained. Moreover, in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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