TMI Blog1980 (7) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... d under section 185(1)(b) directing him to decide the cases afresh ?" Income-tax References Nos. 107 and 108 of 1975. " (1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that Shri Sohan Lal, son of Shri Bakshi Ram, deceased, was competent to file an appeal before the Appellate Assistant Commissioner under section 246 of the Income-tax Act, 1961, against the order of the Income-tax Officer ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in upholding the order of the Appellate Assistant Commissioner setting aside the orders passed by the Income-tax Officer under section 143(3) and under section 185(1)(b) and directing him to decide the cases afresh ?" The facts giving rise to these references are that the firm known as M/s. Amin Chand and Sons, Phillaur, in I.T.Rs. Nos. 105 and 106 of 1975, and the firm known as M/s. Landro Engineering Foundry Works, Phillaur, in I.T.Rs. Nos. 107 and 108 of 1975, had Shri Bakshi Ram as one of their partners. Sh. Bakshi Ram served a notice of dissolution of the firms on January 30, 1967, and., thereafter, filed a suit on October 3, 1967, against the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tnership deed dated March 12, 1968, was never acted upon and so it did not claim any registration on the basis of that partnership deed. However, the assessee set up alternative claims for registration on the basis of its application dated March 28, 1968, filed on May 16, 1969, in Form No. 11-A and the declaration dated February 10, 1971, under s. 184(7) of the I.T. Act, 1961. The ITO rejected the first claim of the assessee on the ground that no fresh partnership deed was executed after the death of Shri Bakshi Ram on February 4, 1968. He did not accept the claim of the assessee for continuation of registration on the ground that there was a change in the constitution of the firm with the death of Shri Bakshi Ram and as such the provisions of s. 184(7) did not apply to the case. The ITO, consequently, assessed the firm in the status of an unregistered firm. The ITO, vide his orders dated March 16, 1972, under ss. 143(3) and 185(1)(b), completed the assessment of the firm accordingly. Against the aforesaid orders of the ITO passed under ss. 143(3) and 185(1)(b), the assessee-firm filed two appeals before the AAC. Sohan Lal, legal representative of Bakshi Ram, also filed an ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under sections 143(3) and 185(1)(b) are set aside with the direction that the same be made de novo. Before making these orders, the Income-tax Officer would: (i) give all opportunity to both the parties to prove their point of view, (ii) bring the evidence produced by one party to the notice of the other party to enable it to rebut the evidence produced by other party, (iii) also give facility of cross-examination to the opposite party, to each of the party. The Income-tax Officer would reframe the assessment and also pass an order under section 185(1) afresh in the light of the proceedings referred to above. Lastly, it was argued before me by Shri R. K. Bansal, C.A., counsel for Shri Shiv Dayal and Kishan Chand, that unless the legal heirs were determined by the competent court, they could not intervene in the proceedings as legal heirs of Shri Bakshi Ram nor could they file appeals as legal heirs of Shri Bakshi Ram. Appeal No. 35-A/1972-73, Jullundur, has been filed in this case by Shri Sohan Lal, son of Shri Bakshi Ram. I am satisfied that Shri Sohan Lal was a legal heir of Shri Bakshi Ram and he was competent to file the appeal. Accordingly, the objection raised by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct him to pass a fresh order after giving an opportunity to Shri Sohan Lal to produce evidence to prove his contention that he was not a partner of the assessee-firm. This contention is also without any substance. It is clear from the facts stated above that Shri Bakshi Ram served a notice of dissolution on the other partners of the firm on 20th January, 1967, and claimed that the firm had already been dissolved with effect from 1st February, 1967. He also filed a suit on 3rd October, 1967, against the other partners for rendition of accounts. The dispute was referred by the Senior Sub-judge, Jullundur, to the arbitrators and the matter is still pending before the umpire. If the contention of Shri Bakshi Ram is finally accepted, it would mean that the firm had already been dissolved with effect from 1st February, 1967, and in that event, there would be no firm during the relevant accounting period, i. e., 1st April, 1967, to 31st March, 1968. In such a situation, the question of granting registration to this firm for the assessment year 1968-69, relevant to the accounting period from 1st April, 1967, to 31st March, 1968, would not arise. In other words, the basic issue whether the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee-firm had already stood dissolved with effect from 1st February, 1967. 14. In view of the above discussion, we conclude that the Appellate Assistant Commissioner was legally competent to pass the impugned order and that he has exercised his discretion under section 251(1)(c) judicially and not arbitrarily. We do not, therefore, see any good reason to interfere with his order. The same is accordingly upheld. " From what has been stated above, it is clear that the order of the ITO which has been set aside by the AAC did fasten the liability of tax on Sohan Lal. In this view of the matter and keeping in view the provisions of s. 142 of the I.T. Act, we have no reason to differ from the view taken by the Tribunal that Sohan Lal who was affected by the impugned order of the ITO has a right to file an appeal before the AAC. Nothing could be shown by the learned counsel for the opposite side to take the contrary view. Their Lordships of the Supreme Court in CIT v. Ambala Flour Mills [1970] 78 ITR 256, held that if a person is fastened with the liability of tax, he has a right of appeal so as to challenge the liability with which he is sought to be fastened. In this view of the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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