TMI Blog1988 (8) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... and correctly. The Income-tax Officer initiated, on that ground, action under section 147(a) of the Act by issue of a notice to the applicant for reassessment in the status of individual. The Income-tax Officer completed the reassessment proceedings holding that trucks bearing Nos. MEL 5389 and MYL 5428 belong to the applicant though apparently they are shown to be owned by his two brothers, Ibrahim and Sabeer. The applicant preferred three appeals against the orders of reassessment for the three years on various grounds. The Appellate Assistant Commissioner of Income-tax held that the applicant and his brothers have together carried on the business by pooling their resources and agreeing to share the profits and the two brothers of the applicant were his employees or benamidars. He also held that they were all joint proprietors of the same business. He rejected the contentions raised in relation to the validity of the action initiated under section 147 of the Act. Having come to the conclusion, the Appellate Assistant Commissioner observed : "7 .... that the business jointly organised and conducted attracted assessment in their hands as an association of persons. In this view o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without giving the concerned persons an opportunity of being heard in respect of such proposed action." On the first question, the contention raised on behalf of the assessee is that the Income-tax Officer had reopened the assessment (i) on grounds which were non-existent and (ii) that he had not recorded that the applicant had failed to disclose fully and truly all materials necessary for assessment, and hence initiation of action under section 147 of the Act is invalid. It was submitted that there was no warrant for the Income-tax Officer to proceed on the basis that the applicant had admitted before the excise authorities that all the trucks belong to him even though some of them were purchased in his brothers names. On a perusal of the entire statement of the applicant before the excise authorities, it cannot be said that the Income-tax Officer could not have drawn the inference that the trucks belong to him although some were purchased in his brothers' names. It is clear from the said statement that the applicant had given his savings to his brothers for the purchase of lorries, although it is also stated that, in addition, they had themselves raised finance on their own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dure. He further submitted that in the J922 Act, if a return is filed in one status, the same could not be altered by the Income-tax Officer and treating the status different from the one returned, although he had powers to take any other action under other provisions such as calling upon the assessee to file return in the correct status and on his failure to do so, to proceed in, accordance with law for ex parte assessment. The present scheme is that if the Income-tax Officer is not satisfied with the status as shown in the return, it was permissible for him to serve a notice under section 143(2) or 139(2) of the Act and complete the proceeding in a different status. However, under section 143(1) of the Act, if an assessment had been completed in a wrong status, it was permissible for the Income-tax Officer to set it right by resorting to procedure under section 143(2) of the Act. Inasmuch as the status also could be the subject-matter of appeal, the Appellate Assistant Commissioner could deal with this aspect of the matter and since his powers are co-extensive with that of the Income-tax Officer, what could have been done by him, the appellate authority also could do, that is, to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as required under section 148(1) of the Act and the reasons that could be recorded as required under section 148(2) of the Act, in the two cases will be entirely different and will have a bearing upon the status of the assessee in respect of whom the assessment is sought to be reopened. Hence, we are clear in our mind that if a notice under section 148 is issued to a wrong person, reassessment cannot be completed by merely hanging the status to that of the correct person. Whatever may be the situation in relation to the original assessment, in the case of reassessment, the principle laid down in K. Adinarayana Murthy's case [1967] 65 ITR 607 (SC) still holds good and the contention to the contrary, viz., to depend upon the scheme of the Act in relation to the powers of the Income-tax Officer to change the status in certain cases of original assessment would be wholly irrelevant and misleading. Thus, the Income-tax Officer has no jurisdiction to change the status of an assessee in reassessment proceedings. The result is that what the Income-tax Officer could not validly do, the Appellate Assistant Commissioner also cannot do it in an appeal. Hence, the Appellate Assistant Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as reached the conclusion that the transport business was not that of the applicant alone, but incidentally found the same to be that of an association of persons. Hence, to give a finding that it was the income of the association of persons and to bring to tax the income in its hands is not a finding or direction necessary for the disposal of the case, in view of the categorical and clear ratio of the decision of the Supreme Court referred to above, and more so, when the Appellate Assistant Commissioner was not dealing with a case of an association of persons at all and which was not before him in any manner. Having realised that the association of persons was not there before him in any manner, the Appellate Assistant Commissioner adopted very strange reasoning, viz., that rules of natural justice were complied with by reason of representation of the same counsel in respect of the three individuals (who constituted the association of persons), though in their individual status. Such a course is too naive to merit acceptance. Therefore, the only conclusion we have to draw on the second question is that the Tribunal was wrong in holding that the appellate authority could convert an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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