Commissioner of Income Tax vs Shri Ram Niwas

Following question of law has been referred for opinion of this Court by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar arising

out of its order dated 30-4-1990 passed in I.T.A. Nos. 608 to 611 / ASR./1990, in respect of the assessment year 1977-78.

Whether on the facts and in the circumstance of the case, the Tribunal was right in law in interpreting the word ""reduction"" and ""enhancement"" as

provided in Section 155(1)(fe) as not to include such cases which are upheld by the Appellate Authority and thereby holding that action taken by

the Income Tax Officer u/s 154/155 is time barred ?

The assessing officer made assessments u/s 143(1) of the "" Income Tax Act, 1961 in case of the assessees subject to rectification in relation to

their share income from M/s. Mahavir Cotton Ginning and Pressing Factory, New Delhi. The assessment of the said firm was made on 4-12-

1979. As a result thereof, the assessing officer rectified the share of income of the assessees vide its order dated 23-11-1987. On appeal before

the Commissioner (Appeals) objection raised was that order of rectification beyond 4 years from the end of the financial year in which order in

case of the firm was passed was beyond limitation. The Commissioner (Appeals) accepted this objection which view was upheld by the Tribunal

rejecting the objection on behalf of the revenue that finalisation of the assessment of the firm by the Commissioner (Appeals) wason 17-8-1987

and limitation should be counted from that date. The Commissioner (Appeals)held that limitation for rectification was to be counted from the date

of original assessment unless rectification was as a result of enhancement or reduction.

From plain language of Section 155 of the Act, it is clear that in case rectification is carried out as a result of the assessment of the firm, period

of limitation starts from that date and not from the date of the appellate order. The appellate order will have no relevance to rectification carried out

with reference to the original order of assessment. We, thus, agree with the view taken by the Commissioner (Appeals), which was affirmed by the

Tribunal with the following observations:

I have given my careful consideration to the rival submissions. Section 155(1) at the material time was to the following effects:

155(1) where in respect of any assessment of a partner in a firm it is found:

(a) on the assessment or reassessment of the firm, or

(b) on any reduction or enhancement made in the income of the firm under this Section, Section 154, Section 250, Section 254, Section 260,

Section 262, Section 263 or Section 264, that the share of the partner in the income of the firm has not been included in the assessment of the

partner, or, if included, is not correct, the Income Tax Officermay amend the order of assessment of the partner with a view tothe inclusion of the

share in the assessment or the correctionthereof, the case may be and the provisions of Section 154 shall, sofar as may be apply thereto, the

period of four years specified in Sub-section (7) of that Section being reckoned from the date of thefinal order passed in the case of the firm.

It provides that the assessment of a partner in respect of his share income from a firm can be rectified within a period of four years from the end of

the financial year in which assessment or re-assessment order was passed in the case of the firm or where there was any reduction or enhancement

made in the income of the firm under Sections 155, 154, Section 250, or Section 254, 260, 262, 263 or Section 264 then within four years from

the end of the financial year in which such order was passed by the appellate or revisionary authority etc. was passed. The extended jurisdiction

under Clause (b) of Sub-section (1) of Section 155 is available only in such cases where the income of the firm was reduced or enhanced. By the

appellate order of the Commissioner (Appeals), Ludhiana passed on 15-2-1989 in the case of the firm (copy placed in records), there is no

variation in the income. The extended period as provided in Clause (b)aforesaid in my opinion, is, therefore, not available to the Income Tax

Officer for passing rectificatory order u/s 155(1)/154. I, therefore, do not find any merit in these appeals by the revenue.

Counsel for the revenue has not been able to persuade this Court to take a view contrary to what has been taken by the Tribunal.

In view of the above, the question referred is answered against the revenue and in favour of the assessees.