Gutta Anjaneyulu & Co. Rep. by Shri Balusu Pitchaiah V. Commissioner of Income-Tax, Vijayawada

ITTA/17/2000

AI Insights

The case involves M/s. Gutta Anjaneyulu & Co., represented by Shri Balusu Pitchaiah, who appealed against the order of the Income Tax Appellate Tribunal (Tribunal) concerning the assessment year 1972-73. The primary legal issue was whether the CIT could modify the status of the assessee from AOP to BOI without issuing a fresh notice under Section 148 of the Income Tax Act, 1961, after obtaining the necessary approval from the CBDT, especially given that more than 35 years had elapsed since the original assessment. The High Court, referencing decisions from both the Full Bench of the Andhra Pradesh High Court and the Supreme Court, concluded that the CIT's action was not in conformity with the law, leading to the setting aside of the assessment proceedings.

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 796431 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 09-02-2012
• Assessment Year: misc
• Other Referred Cases: PANNABAI v. COMMISSIONER OF INCOME-TAX, COMMISSIONER OF INCOME-TAX, ANDHRA PRADESH v. K.ADINARAYANA MURTHY
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: S R ASHOK
• Assessee Lawyers: Y RATNAKAR
• Keywords: Income Tax; Notice under section 148; Re-assessment; Status of AOP to BOI; CBDT approval
• Section: 148; 260A; 151(1)

Judgement Text

"HONOURABLE THE CHIEF JUSTICE SHRI MADAN B.LOKUR AND HONOURABLE SHRI JUSTICE SANJAY KUMAR ITTA NO.17 OF 2000 DATED 9TH FEBRUARY, 2012 Between M/s.Gutta Anjaneyulu & Co. Rep. by Shri Balusu Pitchaiah, Powerpet, Eluru. …Appellant AND Commissioner of Income-Tax, Vijayawada. …Respondent HONOURABLE THE CHIEF JUSTICE SHRI MADAN B.LOKUR AND HONOURABLE SHRI JUSTICE SANJAY KUMAR ITTA NO.17 OF 2000 JUDGMENT: (PER HON’BLE THE CHIEF JUSTICE SHRI MADAN B.LOKUR) The assessee is aggrieved by an order of the Tribunal dated 02.08.1999 in ITA No.1656(Hyd)/1992 relating for the assessment year 1972-73. The order has been passed by the Income Tax Appellate Tribunal Bench ‘B’, Hyderabad, (hereinafter referred to as ‘the Tribunal’). 2. In this appeal under Section 260A of the Income Tax Act, 1961 (for short, ‘the Act’) the following substantial questions of law have been framed for our consideration: “1) Whether the Tribunal’s approach that the assessee has to prove the non-service of notice under Sec.148 of the Act and the “department has to prove the negative”, is in conformity with law? 2) Whether, on the facts and in the circumstances of the case, it can be said that the re-assessment proceedings have been concluded without service of notice on the assessee? 3) Whether on the facts and in the circumstances of the case, for the purpose of making an assessment on the body of individuals where an assessment was reopened in the status of association of persons, fresh notice u/s.148 is necessary in the altered status and whether such notice should be approved by the Central Board of Direct Taxes before issuing the same.” 3. Learned counsel for the parties agreed that if question No.3 is answered in favour of the assessee, then there is no necessity of answering question Nos.1 and 2 framed above. Accordingly, we heard learned counsel for the parties on question No.3 mentioned above. 4. The facts of the case are somewhat detailed in as much as it appears from the record that initially an assessment was completed on 28.02.1975 in respect of the assessee in the status of Association Of Persons (AOP) comprising 18 persons in the name of ‘Gutta Anjaneyulu & Co.’. 5. The assessee filed an appeal before the Appellate Assistant Commissioner of Income Tax (AAC) and it was held by an order dated 17.12.1975 that there is no entity by the name ‘Gutta Anajaneyulu & Co.’ as an AOP. 6. In view of the decision given by the AAC, the assessment was reopened by the Income Tax Officer (ITO) by issuing a notice under Section 148 of the Act to the assessee in the status of an unregistered firm. After this notice, a fresh assessment was made on 11.08.1980 in the status of an unregistered firm, this time comprising of 20 persons. Feeling aggrieved by the assessment order, the assessee preferred an appeal to the Commissioner of Income Tax (CIT) who held that there was no entity in the status of an unregistered firm comprising of 20 persons. 7. The matter was then again reopened by the ITO by issuing a notice under Section 148 of the Act after obtaining the approval of the Central Board of Direct Taxes (CBDT). This approval was necessary in view of the fact that more than 8 years had elapsed after the original assessment and so under the provisions of Section 151(1) of the Act as it then stood, the approval of the CBDT was necessary. 8. After the CBDT granted its approval, notice was issued by the ITO to the assessee in the status of AOP, this time comprising 3 persons. 9. Pursuant to the notice issued to the assessee an assessment order was made on 21.02.1992 in respect of the assessee as an AOP comprising of 3 persons. Feeling aggrieved, the assessee preferred an appeal before the CIT who passed an order on 25.06.1992. It is mentioned in the order of the CIT that after going through the facts of the case he would ‘merely modify the status from AOP to BOI (Body Of Individuals)’. It was held by the CIT that this BOI comprises of 2 persons. 10. The order passed by the CIT on 25.06.1992 was upheld by the Tribunal under appeal. Hence the present appeal. 11. Learned counsel for the assessee has drawn our attention to a decision of the Full Bench of this Court in PANNABAI v. COMMISSIONER OF INCOME-TAX[1]. While summing up the matter, the Full Bench held at page 625 as follows: “To sum up, the Tribunal having held that Smt.Panna Bai could not be assessed to tax in the status of an “individual” on the income derived from the firm erred in modifying the assessment in the status of a “body of individuals” consisting of Smt. Panna Bai and her minor children. The Tribunal should have annulled the assessment with liberty to the ITO to assess the income in the status of a body of individuals, if permitted by law, after issuing notice to that body of individuals to submit a return as required by s.139(2) of the I.T. Act.” 12. The decision of the Full Bench is quite clear that if the status of the assessee is required to be modified, the only option available to the ITO is to assess the income in the appropriate status, if permitted by law, by issuing a notice to the assessee in that particular status. 13. On the facts of the case before us, it is quire clear, after applying the law laid down by the Full Bench that for modifying the status of the AOP consisting of 3 persons to a BOI consisting of 2 persons, that the CIT could not have acted on his own. The only option available to him was to set aside the assessment proceedings and remand the matter back to the ITO/Assessing Officer giving him the liberty of issuing a notice to the assessee in the status of a BOI comprising of two persons, if it was otherwise permissible in law and after obtaining the approval of the CBDT, if necessary. 14. Apart from the decision of the Full Bench on this subject, our attention has also been drawn to a decision of the Supreme Court in COMMISSIONER OF INCOME-TAX, ANDHRA PRADESH v. K.ADINARAYANA MURTHY[2]. That case pertained to the status of the assessee either as an individual or as a Hindu Undivided Family. While dealing with the question of the status of the assessee, the Supreme Court held as follows: “Under the scheme of the Income-tax Act the “individual” and the “Hindu undivided family” are treated as separate units of assessment and if a notice under section 34 of the Act is wrongly issued to the assessee in the status of an “individual” and not in the correct status of “Hindu undivided family” the notice is illegal and all proceedings taken under that notice are ultra vires and without jurisdiction” 15. In our opinion, therefore, there is no doubt that the order passed by the CIT which was upheld by the Tribunal whereby the status of the assessee was “merely” modified from AOP to BOI is not sustainable. The assessment proceedings are required to be set aside and we do so. Liberty is granted to the Revenue to issue a fresh notice to the assessee according to law. This notice can be issued only after obtaining the approval of the CBDT since more than 35 years have gone by from the date of the original assessment made on 28.02.1975. 16. Under the circumstances, we answer the question in the affirmative, in favour of the assessee and against the Revenue. We however make it clear that the approval of the CBDT postulated by the question is only with regard to the period of time and not with regard to the alteration in the status of the assessee. 17. In view of our decision rendered above, we remand the matter to the Assessing Officer to take appropriate steps, if necessary, but only in accordance with law. 18. Accordingly, the Appeal stands disposed of. ( MADAN B.LOKUR, CJ ) ( SANJAY KUMAR, J ) 9TH FEBRUARY, 2012. Note: L.R.Copy to be marked. B/O VGSR *HONOURABLE THE CHIEF JUSTICE SHRI MADAN B.LOKUR AND HONOURABLE SHRI JUSTICE SANJAY KUMAR +ITTA NO.17 OF 2000 % 09-02-2012 # M/s.Gutta Anjaneyulu & Co. Rep. by Shri Balusu Pitchaiah, Powerpet, Eluru. …Appellant Vs. $ Commissioner of Income-Tax, Vijayawada. …Respondent HEAD NOTE: ! Counsel for Appellant : Sri Y.Ratnakar ^ Counsel for respondents : Sri S.R.Ashok ? CASES REFERRED: 1) (1985) 153 ITR 608 (AP) (FB) 2) (1967) 65 ITR 67 (SC) [1] (1985) 153 ITR 608 (AP) (FB) [2] (1967) 65 ITR 67 (SC) "