Decided on June 30,1972



Sriramulu, J. - (1.) AT the instance of the Commissioner of Income-tax, Andhra Pradesh, Hyderabad, the following two questions of law have been referred to this court for our decision, under Section 66(1) of the Indian Income-tax Act of 1922, by the Hyderabad Bench of the Income-tax Appellate Tribunal; " (1) Whether, on the facts and in the circumstances of the case, the assessments made by the Income-tax Officer on the Hindu undivided family of Sri Kapoorchand Shrimal, for the years under reference, without passing an order under Section 25A, were valid in law ? (2) Whether, on the facts and in the circumstances of the case, the sum of Rs. 42,009 was a trading loss deductible in the assessment for the year 1958-59?"
(2.) THE material facts, so far as they are relevant for answering the above questions, may briefly be stated. THE assessment years concerned are 1955-56, 1957-58 to 1961-62, the relevant accounting years being the years ending Deepavali except for the cloth business. THE assessee is a Hindu undivided family named "Kapoorchand Shrimal". In the course of the assessments for these years, by its letters dated October 10, 1960, January 16, 1961, and March 11, 1962, the assessee brought to the notice of the Income-tax Officer, that all the movable and immovable properties of the Hindu undivided family were partitioned by metes and bounds on July 10, 1960, and the Hindu undivided family had become disrupted and extinct and requested him to pass an order recording complete partition under Section 25A of the Indian Income-tax Act, 1922 (hereinafter called "the Act"). In his letter dated March 17, 1962, the Income-tax Officer acknowledged receipt of the assessee's letter dated March 11, 1962, on March 12, 1962, and intimated the assessee that the matter was receiving his attention and that it would be disposed of in accordance with law. In their letter dated March 21, 1962, the assessee's chartered accountants, M/s. S.G. Dastagir and Company, invited the attention of the Income-tax Officer to the earlier letters and raised a contention that an order under Section 25A has to be passed before the completion of the assessment for the year 1957-58, and that the assessment made without first disposing of the assessee's application under Section 25A would be invalid in law. For diverse reasons, the Income-tax Officer did not dispose of the said application made by the assessee under Section 25A before he could complete the assessments for those years. The Income-tax Officer completed the assessments for the aforesaid assessment years between August 31, 1962, and March 26, 1966. The Income-tax Officer, thereafter, started an enquiry under Section 25A of the Act and, ultimately, by his order dated March 30, 1965, refused to record the partition under Section 25A of the Act. Aggrieved by the order of the Income-tax Officer refusing to record the partition under Section 25A of the Act, the assessee preferred an appeal to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner, by his order dated November 8, 1967, allowed the appeal and directed the Income-tax Officer to record the partition under Section 25A of the Act as on July 10, 1960. The order of the Appellate Assistant Commissioner accepting the partition of the assessee's family on July 10, 1960, has become final, since the department did not challenge the correctness of that order before the Income-tax Appellate Tribunal.
(3.) AGGRIEVED by the assessments so made by the Income-tax Officer, the assessee preferred first appeals to the Appellate Assistant Commissioner. The assessee, inter alia, challenged the validity of those assessments on the ground that it was incumbent upon the Income-tax Officer to pass an order on the assessee's application under Section 25A of the Act, before he completed the assessments and not having done so in this case, all the assessments for the assessment years under reference were invalid in law. The Appellate Assistant Commissioner rejected that contention and held that all the assessments were quite valid in law. In disposing of the appeals against the assessment for the assessment year 1955-56, the Appellate Assistant Commissioner rejected the assessee's aforesaid contention on two grounds : (i) the original assessment for the year 1955-56, made on September 30, 1959, was cancelled by the Appellate Assistant Commissioner in appeal on March 24, 1962, and, therefore, the assessee's letters dated October 10, 1960, January 16, 1961, or March 11, 1962, which dates fell during the period when the assessments stood cancelled, could not be said to be a claim for partition made at the time of making an assessment under Section 23 of the Act for that year; and (ii) the assessments did not become invalid or illegal by reason of the omission of the Income-tax Officer to make an order under Section 25A(1) of the Act for the reasons stated by him in the assessment order for the year 1957-58.;

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