L.S. Prabhakar (HUF), Bangalore V. ITO, Bangalore

ITA 261/BANG/2016

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0270 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 22-06-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 26-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SWAPNA DAS
• Assessee Lawyers: S RAMASUBRAMANIAN
• Keywords: Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRI BUNAL BANGALORE BENCH C, BANGALORE BEFORE SHRI A.K.GARODIA, AM (SMC) ITA NOS.261 & 262(B)/2016 (ASSESSMENT YEARS : 2006-07) SHRI L.S.PRABHAKAR, F1 SREEKANTHA KRUPA, NO.16, RAILWAY PARALLEL ROAD, NEHRUNAGAR, BANGALORE-560 020 PAN NO.AAAHP 5740G APPELLANT VS THE INCOME TAX OFFICER, WARD-6(3), BANGALORE RESPONDENT ASSESSEE BY : SHRI S.RAMAS UBRAMANIAN, CA REVENUE BY : SMT. SWAPNA DAS, JCIT DATE OF HEARING : 05-07-2016 DATE OF PRONOUNCEMENT : 15-07 -2016 O R D E R PER SHRI A.K.GARODIA, AM: BOTH THESE APPEALS ARE FILED BY THE ASSESSEE WHO A RE INTERCONNECTED BEING THE SAME PERSON IN HIS INDIVID UAL CAPACITY AS WELL AS IN HUF CAPACITY. BOTH THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF COMMON ORDER FOR THE SA KE OF CONVENIENCE. 2. THE GROUNDS RAISED BY THE ASSESSEE IN BOTH THESE APPEALS ARE AS UNDER; IN ITA NO.261(B)/2016 (AY: 2006-07) 1. THAT THE ORD E R OF T H E LE AR N E D COMMI SS IONER OF INCOME-T AX ( A PPEALS) IN SO F A R IT IS PREJUDICIAL TO THE INTERESTS OF THE APPELLANT IS BAD AND ERRONEOUS IN LAW ITA NOS.261& 262(B)/2016 2 AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE . 2. THAT THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN LAW AND ON FACTS IN TREATING THE RETURN OF INCOME OF THE FIRM AS RETURN OF INCOME OF HUF . 3. THAT THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN LAW AND ON FACTS IN CHANGING THE STATUS TO HUF WITHOUT GI V ING OPPORTUNITY OF BEING HEARD TO THE APPELLANT . 4 . THAT THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HA V E HELD THAT THE STATUS IS A FIRM AND THE ASSESSMENT SHOULD HAVE BEEN DONE IN THE NAME OF M / S. SESHA & COMPANY . 5 . THAT THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE ALLOWED THE SET OFF OF THE CARRIED FORWARD LOSS TO THE EXTENT OF RS.6 , 91 , 273 / - AGAINST THE INCOME OF M / S . SESHA & COMPANY. 6 . THAT THE ORDER PASSED BY THE LEARNED ASSESSING OFFICER IN THE STATUS OF INDIVIDUAL IS LIABLE TO AN NULLED AND CANCELLED . EACH OF THE ABOVE GROUNDS IS WITHOUT PREJUDICE TO O NE ANOTHER AND THE APPELLANT CRAVES LEAVE OF THE HON ' BLE INCOME TA X APPELLATE TRIBUNAL , BANGALORE TO ADD , DELETE , AMEND OR OTHERWISE MODIFY ONE OR MORE OF THE ABOVE GROUNDS EITHER BEFORE OR THE TIME OF HEARING O F THIS APPEAL . IN ITA NO.261(B)/2016 (AY: 2006-07) 1. THAT THE ORDER OF THE LEARNED COMMISSIONER OF INCOM E- TAX (APPEALS) IN SO FAR IT IS PREJUDICIAL TO THE IN TERESTS OF THE APPELLANT IS BAD AND ERRONEOUS IN LAW AND AGAIN ST THE FACTS AND CIRCUMSTANCES OF THE CASE. ITA NOS.261& 262(B)/2016 3 2. THAT THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL S) OUGHT TO HAVE HELD THAT THE STATUS IS A FIRM AND TH E ASSESSMENT SHOULD HAVE BEEN DONE IN THE NAME OF M / S . SESHA & COMPANY. 3. THAT THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL S) OUGHT TO HAVE ALLOWED THE SET OFF OF THE CARRIED FO RWARD LOSS TO THE EXTENT OF RS.6,91,273/- AGAINST THE INC OME OF M / S. SESHA & COMPANY. 4. THAT THE ORDER PASSED BY THE LEARNED ASSESSING OFFI CER IN THE STATUS OF INDIVIDUAL IS LIABLE TO ANNULLED A ND CANCELLED. EACH OF THE ABOVE GROUNDS IS WITHOUT PREJUDICE TO O NE ANOTHER AND THE APPELLANT CRAVES LEAVE OF THE HON'B LE INCOME TAX APPELLATE TRIBUNAL, BANGALORE TO ADD, DE LETE, AMEND OR OTHERWISE MODIFY ONE OR MORE OF THE ABOVE GROUNDS EITHER BEFORE OR THE TIME OF HEARING OF THI S APPEAL. 3. AT THE VERY OUTSET, IT WAS SUBMITTED BY THE LD.A R OF THE ASSESSEE THAT IN THE PRESENT CASE, THE BUSINESS WAS BEING CARRIED ON BY A PARTNERSHIP FIRM IN THE NAME OF M/S SESHA & COMPA NY AND TILL ASSESSMENT YEAR 2004-05, THE RETURN WAS FILED BY TH E FIRM WITH THE PAN NUMBER OF THE FIRM AND THERE WAS NO DISPUTE. IT WAS ALSO SUBMITTED THAT COPY OF THE RETURN FILED BY THE FIRM FOR AY: 2 002-03 IS AVAILABLE ON PAGE NO.25, FOR THE AY: 2003-04 IS AVAILABLE ON PAG E-26 AND FOR THE AY: 2005-06 IS AVAILABLE ON PAGE-27 OF THE PAPER BOOK. FOR AY: 2005-06, COPY OF THE RETURN FILED IS AVAILABLE ON PAGE NO.28 OF THE PAPER BOOK AND IN THIS YEAR, A MISTAKE WAS COMMITTED AND THE RETUR N WAS FILED IN THE ITA NOS.261& 262(B)/2016 4 NAME OF SHRI L.S.PRABHAKAR, PROP: M/S SESHA & COMPA NY AND PAN GIVEN IN THE RETURN OF INCOME IS THE PAN OF SHRI S. K.PRABHAKAR IN HUF CAPACITY. IN SPITE OF THIS, THERE WAS NO DISPUTE I N THAT YEAR BECAUSE THERE WAS NO SCRUTINY ASSESSMENT IN THAT YEAR. COP Y OF THE RETURN OF INCOME FILED BY THE ASSESSEE FOR THE PRESENT YEAR I .E. AY: 2006-07 IS AVAILABLE ON PAGE-18 OF THE PAPER BOOK AND IN THIS YEAR ALSO, THE RETURN WAS FILED WITH THE SAME MISTAKE IN THE NAME OF SHRI S.K.PRABHAKAR PROP: M/S SESHA & COMPANY WITH THE PAN OF SHRI L.S. PRABHAKAR (HUF). HE FURTHER SUBMITTED THAT IN THE PRESENT YEAR, THE AO HAS COMPLETED THE ASSESSMENT IN THE NAME OF SHRI L.S.PRABHAKAR IN HIS INDIVIDUAL CAPACITY AND ALTHOUGH THE INCOME IS ASSESSED AT THE SAME AMOUNT AS DECLARED IN THE RETURN OF INCOME I.E. RS.6,91,273/- BUT THE SET OFF OF BROUGHT FORWARD LOSSES WAS NOT ALLOWED BECAUSE BRO UGHT FORWARD LOSSES WERE BELONGING TO THE PARTNERSHIP FIRM. WHE N THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD.CIT(A), IT WAS HELD BY THE LD.CIT(A) THAT SINCE THE PAN GIVEN IN THE RETURN OF INCOME IS THE PAN OF HUF, THE INCOME SHOULD BE ASSESSED IN THE NAME OF T HE ASSESSEE IN HIS HUF CAPACITY. HE SUBMITTED THAT UNDER THESE FACTS, THE MATTER MAY BE RESTORED BACK TO THE FILE OF THE AO FOR FRESH DECIS ION AFTER EXAMINING WHETHER THE INCOME IN FACT BELONGS TO PARTNERSHIP F IRM OR THE INDIVIDUAL OR TO THE HUF BECAUSE IT IS SETTLED PROPOSITION OF LAW THAT INCOME SHOULD BE ASSESSED IN CORRECT HANDS AND MERELY FOR THIS REASON THAT IN THE RETURN OF INCOME FILED BY THE ASSESSEE, THE NAM E OF THE PARTNER OF THE FIRM WAS MENTIONED WRONGLY INSTEAD OF THE NAME OF THE FIRM AND THE ITA NOS.261& 262(B)/2016 5 PAN OF HUF WAS GIVEN BY MISTAKE, IT CANNOT BE SAID THAT INCOME BELONGING TO THE FIRM WAS THE INCOME OF THE INDIVI DUAL OR HUF. 4. THE LD. DR OF THE REVENUE SUPPORTED THE ORDER O F THE LD.CIT(A). 5. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAV E GONE THROUGH THE MATERIAL ON RECORD. I FIND THAT AS PER THE PRO FIT & LOSS ACCOUNT AND THE BALANCE SHEET AVAILABLE ON PAGE-19 & 20 OF THE PAPER BOOK, THE SAME IS OF M/S SESHA & COMPANY. ON PAGE-22 OF THE PAPER BOOK IS THE CAPITAL ACCOUNT OF SHRI L.S.PRABHAKAR AND AS PER TH E SAME, IT IS SEEN THAT THE ENTIRE AMOUNT OF PROFIT SHOWN IN THE P&L A CCOUNT BEING THE AMOUNT OF RS.6,91,273/- HAS BEEN CREDITED TO HIS CA PITAL ACCOUNT. IF IT IS ACCEPTED THAT THE INCOME IN QUESTION IS OF THE P ARTNERSHIP FIRM AND SHRI L.S.PRABHAKAR IS NOT THE PROPRIETOR OF M/S SES HA & COMPANY, THEN THE ENTIRE INCOME OF THE FIRM CANNOT BE CREDITED TO THE CAPITAL ACCOUNT OF ONE PERSON BECAUSE TO CONSTITUTE A PARTNERSHIP F IRM, THERE HAS TO BE MINIMUM TWO PERSONS AND PROFIT OF THE FIRM HAS TO B E SHARED BY THOSE PARTNERS IN THEIR PROFIT SHARING RATIO AND HENCE, I T CANNOT BE TAKEN IN FULL BY ONE PERSON. THIS FACT SUGGESTS THAT M/S SES HA & COMPANY IS NOT A PARTNERSHIP FIRM IN THE PRESENT YEAR AT LEAST. BUT SINCE THERE IS NO CLEAR CUT FINDING ON THIS ASPECT BY ANY OF THE AUTH ORITIES BELOW AND IT IS ALSO NOT CLEAR AS TO WHETHER SHRI L.S.PRABHAKAR IS A PARTNER/PROP OF THE CONCERN I.E. M/S SESHA & COMPANY IN HIS INDIVIDUAL CAPACITY OR HUF CAPACITY, I FEEL IT PROPER THAT THIS MATTER SHOULD GO BACK TO THE FILE OF THE ITA NOS.261& 262(B)/2016 6 AO FOR A FRESH DECISION AND HENCE, I SET ASIDE THE ORDER OF THE LD,. CIT(A) AND RESTORE THE MATTER BACK TO THE FILE OF THE AO F OR FRESH DECISION WITH A DIRECTION THAT HE SHOULD EXAMINE AS TO WHETHER TH E CONCERN M/S SESHA & COMPANY IS A PROPRIETORSHIP CONCERN OR PART NERSHIP FIRM IN THE PRESENT YEAR IN THE LIGHT OF FACTS NOTED ABOVE THAT ENTIRE PROFIT IS CREDITED TO THE CAPITAL ACCOUNT OF ONE PERSON. IF IT IS A PARTNERSHIP FIRM THEN HE HAS TO FIND OUT WHO ARE THE PARTNERS OF THE FIRM AND IF ONE PARTNER IS SHRI L.S.PRABHAKAR THEN WHETHER IN INDIV IDUAL CAPACITY OR HUF CAPACITY AND WHILE DOING SO, HE SHOULD PROVIDE ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. IF IT IS FOUND THAT THIS IS A PROPRIETORSHIP CONCERN THEN TO FIND OUT WHO IS THE PROPRIETOR AND IN WHICH CAPACITY I.E. IN INDIVIDUAL CAPACITY OR HUF CAPACITY. I ALSO WANT TO MAKE IT CLEAR THE BURDEN IS ON THE ASSESSEE TO E STABLISH THAT THE CONCERN M/S SESHA & COMPANY IS A PARTNERSHIP CONCER N IN THE PRESENT YEAR. FOR THIS PURPOSE, HE MAY ALSO FURNISH A CERT IFICATE FROM THE BANK BECAUSE AS PER THE RETURN OF INCOME FILED BY THE AS SESSEE IN THE PRESENT YEAR AVAILABLE ON PAGE-18 OF THE PAPER BOOK, THE AS SESSEE HAS GIVEN PARTICULARS OF BANK ACCOUNT BEING CURRENT ACCOUNT W ITH SBI A/C NO.10323661290. AS PER THE SAME FORM NO.2 IN THE I NCOME TAX RETURN AVAILABLE ON PAGE-18 OF THE PAPER BOOK, IT IS STATE D BY THE ASSESSEE THAT HE IS FURNISHING AUDIT REPORT IN FORM NO.3CD, BUT I N THE PAPER BOOK, THE AUDIT REPORT IS NOT MADE AVAILABLE. IN FACT, THE TR ADING AND P& L ACCOUNT AND BALANCE SHEET ETC. AVAILABLE ON PAGE-19 TO 23 OF THE PAPER BOOK ARE UN-AUDITED. THE ASSESSEE SHOULD BRING ON RECORD THE AUDIT ITA NOS.261& 262(B)/2016 7 REPORT ALSO AS STATED IN THE RETURN OF INCOME AND I T WILL HELP IN DECIDING THE ISSUE AS THE WHETHER SESHA & COMPANY IS A PARTN ERSHIP FIRM OR PROPRIETORSHIP. HE SHOULD BRING ON RECORD THE PAR TNERSHIP DEED ALSO AND HE SHOULD PRODUCE THE OTHER PARTNERS AS PER THE PARTNERSHIP DEED IF ANY, BROUGHT ON RECORD BY THE ASSESSEE. THE AO SHO ULD PASS NECESSARY ORDER AS PER LAW AFTER PROVIDING ADEQUATE OPPORTUNI TY OF BEING HEARD TO THE ASSESSEE. 6. IN THE RESULT, BOTH THE APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MEN TIONED IN THE CAPTIONED ORDER. SD/- (A.K.GARODIA) ACCOUNTANT MEMBER D A T E D : 15- 07-2016 PLACE: BANGALORE AM COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A) BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER AR, ITAT, BANGALORE ITA NOS.261& 262(B)/2016 8 1. DATE OF DICTATION .. 2. DATE ON W HICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P. S. .. 4 DATE ON WHICH THE ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT .. 5. DATE ON WHICH THE ORDER COMES BACK TO THE SR. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE .. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO . 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DATE ON WHICH ORDER DOES FOR XEROX & ENDORSEMENT . 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK. 11 THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER. 12 THE DATE ON WHICH THE FILE GOES TO THE DISPATCH SEC TION FOR DISPATCH OF THE TRIBUNAL ORDER 13 DATE OF DISPATCH OF ORDER