9911796707
TMI Blog1981 (4) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... hu Nath Barick, Sarojendra Nath Barick and Sachindra Nath Barick, jointly purchased a house property situated at No. 84, Cornwallis Street, Calcutta. The purchase deed mentioned the three persons as joint owners. After the purchase of the property, a portion of it was demolished and in its place a cinema house was constructed and the machinery etc., were installed in the course of a few years. , The cinema hall was opened for exhibition in 1954. During the period of construction, a cash book was maintained in the name of M/s. Barick Screen Corporation and accounts were audited by M/s. Green & Co. Subsequently, a partnership deed was executed on June 11, 1954, by which a partnership in the name of M/s. Barick Screen Corporation was formed to run the cinema hall. Since, in the opinion of the ITO, the income of M/s. Barick Screen Corporation had escaped assessment for the assessment year 1952-53, he intended to initiate reassessment proceedings against it. For this purpose, a proposal for issuing notice under s. 34(1)(a) of the Indian I.T. Act, 1922, was submitted by the ITO, Cinema Circle, A-Ward, to the CIT. It would be necessary to set out the name in which the action was sought fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the partners and was dated August 1, 1960. The partners of the firm as shown in the return were (1) Sambhu Nath Barick, (2) Sarojendra Nath Barick, and (3) Sachindra Nath Barick. Each partner was shown as having one third share. The return showed nil income. On August 9, 1960, the authorised advocate of M/s. Barick Screen Corporation again wrote to the ITO that his client no longer disputed as to the actual date of the establishment of the firm and, therefore, it had filed the returns called for under s. 34 of the Act for the assessment years 1951-52 to 1954-55 which might be treated as final compliance with the ITO's letter dated July 1, 1960. Subsequently, further investigation was made by the ITO and in the course of the assessment proceedings, a partner of the firm, Sambhu Nath Barick, addressed to the ITO, a letter which reads as follows: "We, the partners of Barick Screen Corporation, try to point out the following facts in respect of 1952-53 assessment year, proceedings for which you have initiated under s. 34 against us: Our business-name came into existence in 1954, when we formed partnership; a copy of the instrument of partnership is already in your records. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . One of the grounds urged before the Tribunal was that the condition precedent to the proceedings under s. 34 of the Indian I.T. Act, 1922, did not exist in this case and, hence, the assessment made was illegal and ultra vires. It was submitted on behalf of the assessee that for the initiation of proceedings under s. 34, service of a valid notice on the assessee was a pre-requisite. It was submitted that in the instant case that had not been done and further there was no waiver in the instant case and as such the assessment made was illegal and was liable to be quashed. The Tribunal, after noting the relevant contentions, was of the view that the notice was addressed to Barick Screen Corporation which did not mention the status. The Tribunal further noted that the approval of the Commissioner was obtained for initiating the proceedings under s. 34 in respect of M/s. Barick Screen Corporation, in the status of an unregistered firm. The Tribunal further stated that the return was filed in the name of Barick Screen Corporation in the status of a firm and the assessment order gave a clear finding that the assessment was made on Barick Screen Corporation as an association of persons. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cated as unregistered firm while the assessment was made on the association of persons. The question is, does the alteration of this status alter the identity of the assessee against whom the sanction was obtained. In our opinion, it is clear, it does not. Status is a matter which has to be determined in the assessment proceedings, specially when an assessment is being made, for the first time. Reliance in this connection, was placed on behalf of the assessee on the decision of the Supreme Court in the case of CIT v. K. Adinarayana Murthy [1967] 65 ITR 607. In that case, there were two different assessees and it was held that since the correct status of the respondent was that of an HUF, the first notice issued in the status of an individual was illegal and without jurisdiction and could not have been validly acted upon, according to the Supreme Court. There, the facts were, the respondent was an HUF. Subsequent to the original assessment, the ITO had an information that the respondent had done some procurement business and earned large profits which had escaped assessment for the assessment year 1949-50. Since the assessment year 1954-55, the ITO had taken the status of the respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is proposition in a Bench decision of this court in the case of Mahabir Pd. Poddar v. ITO [1976] 102 ITR 478. There, it was contended that for reassessment a valid notice under s.148 of the I.T. Act, 1961, indicating to whom it was issued, whether to an individual or to an HUF, was a necessity and that, as the notice under s. 148, in that case, did not indicate in what capacity the notice was issued, the assessment was invalid. It was found in that case, that where the question was of first assessment, as in the instant case before us, and M, the person responsible for filing the return, in his own showing, had first indicated that the assessee was an individual and, thereafter, indicated that it was an HUF and the reassessment was made by a notice served on M and, without indicating any official capacity the notice had been given, it could not be said that the assessment made, in that case, was without jurisdiction. It was reiterated that it was not obligatory to indicate before the service of the notice under s. 139 under what capacity the notice was served but in a case of reopening it was emphasised that the obligation of an assessee would arise on the service of the notice and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated by the decision of the Allahabad High Court in the case of Kanodia Brothers v. ITO [1965] 57 ITR 765 and the observations of the Supreme Court in the case of Manji Daga v. CIT [1966] 60 ITR 582.There the Supreme Court reiterated that there was nothing in the Act which precluded the ITO from coming to conclusion that, even though in the previous year the assessment was made on the footing that the assessee was an HUF, but there was, in fact, no HUF, and so the income for the purpose of assessment belonged to an individual, and on that footing to make an order of assessment. It was also open to the ITO to come to a conclusion, notwithstanding the terms of s. 25A(3), that the income sought to be assessed was not the income of the HUF and on that footing to assess such income as that of an individual. Mr. Justice Shah observed at page 585 of the report as follows " It is only where such family existed and the income earned was of the family that the Income-tax Officer is obliged to assess the income of the members of the family in the status of a Hindu undivided family, notwithstanding a plea that a partition has taken place among the members. But there is nothing in the Act whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld by the Division Bench of the Bombay High Court that where a notice of reassessment under s. 34(1)(a) was issued to the assessee in the status of a firm and no valid notice was issued to the assessee in the status of an HUF and, accordingly, the assessment in the status of an HUF would not be valid. As we have mentioned before, in case, there was a previous assessment in one status, thereafter the issue, of the notice would indicate a particular status in order to identify the assessee ; but in the facts of this case, that principle would not be attracted. Similarly, in the case of Bhagwan Devi Saraogi v. ITO [1979] 118 ITR 906 (Cal), Mr. Justice A. N. Sen observed that if no valid notice of reassessment had been given or if the notice issued was illegal or invalid, the entire reassessment proceedings would be without jurisdiction. There were two assessees and the status of the assessee had to be indicated, as to whom the notice had been given and in respect of whose assessment, the assessment was sought to be reopened. To a similar effect is the observation of mine in the case of Madan Lal Chowdhury v. ITO [1979] 119 ITR 351 (Cal). There were two HUFs-one bigger HUF and the ot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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