M.V.R. Prasad, A.M. - (1.) THIS is an appeal filed by the revenue. It is directed against the order of the Commissioner (Appeals)-I, Hyderabad, dated 13-11-1996 for the assessment year 1990-91. By the said order dated 13-11-1996, the Commissioner (Appeals) cancelled the order dated 17-11-1995 passed by the assessing officer under section 154, allocating the income of the assessee-firm among the partners. The said order of the assessing officer, passed under section 154 reads as under : "For the assessment year 1990-91, the assessment was completed on an income of Rs. 7,43,110 under section 143(3) of the income-tax on 30-12-1991. While completing the assessment under section 143(3), the income computed was not allocated amongst the partners of the firm since this is a mistake apparent from record, the same is rectified under section 154 of the Act as under judgement_5514_tlit0_20010.htm   judgement_5514_tlit0_20011.htm
(2.) It was contended before the Commissioner (Appeals) that there was no rectifiable or apparent mistake in the assessment order dated 30-12-1991, passed by the assessing officer, and as such, the order under section 154 was beyond the scope of the provisions of the Act, and it was invalid. It was also argued that an order under section 158 in terms of which the allocation of income of the firm among the partners has to be effected, is co-extensive with an order of assessment under section 143, and consequently, such an order under section 158 could not be passed beyond the period of limitation stipulated under section 153 for passing the assessment. As the assessment year involved is 1990-91, it was contended that the time-limit for the passing of the said order under section 158, which was coterminus with the time-limit for the passing of the assessment order under section 143(3), was 31-3-1993. Since the impugned order under section 154 was passed only on 17-11-1995, it was claimed that the said order was time-barred and hence invalid. The Commissioner (Appeals) observed, relying on the decision of the Allahabad High Court in CIT v. Kailashpat Jutha Lal (1980) 125 ITR 11 (All) that in the case of a registered firm, the process of assessment is complete only when the total income of the firm is determined and apportioned amongst the several partners. He also observed "Therefore, it is an imperative necessity that the assessing officer must not only determine the firms income by passing an assessment order under section 143(3) of the Act and the tax payable thereon, but he must also pass a separate and independent order under section 158 of the Act apportioning the firms income amongst the partners according to their profit-sharing ratio...." After making the above observations, which apparently are not in favour of the assessee, the Commissioner (Appeals) felt constrained to allow the appeal of the assessee and cancel the impugned order under section 154 because, according to him, the entire issue was of a debatable nature, and hence beyond the scope of provisions of section 154. His concluding observations in the impugned order are as under ". . . In the present case, admittedly no separate order had been passed under section 158 of the Act allocating the firms income along the partners. The said omission cannot be rectified by passing an order under section 154 of the Act. I concur with the contention of the appellants learned authorised representative that the assessment order for the assessment year 1990-91 does not contain any obvious or apparent mistake which can be corrected-under section 154 of the Act. Further, the question whether an order under section 158 can be construed as an extension or part of the assessment order passed under section 143(3) of the Act and whether it is subject to the limitation as specified for completion of an assessment are highly debatable issues which cannot be brought within the realm of rectification under the provisions of section 154 of the Act. Therefore, having regard to all the facts and circumstances of the case, I hold that the order passed under section 154 dated 17-11-1995 allocating the firms income among the partners is erroneous in law and has to be cancelled." Before us, the learned Departmental Representative argued that the allocation of the income of the firm among the partners is mandatory under section 158 of the Act, and the omission to have effected such an allocation is a mistake apparent from record, which could be rectified under section 154 of the Act. He argued that the matter can be viewed in either of the two ways, i.e. as part of the assessment order or as an independent one. If, as per the departmental practice, it is viewed as a part of the assessment order, the omission to have effected the allocation is a mistake apparent from record, and consequently could be rectified within the time limit provided under section 154, i.e. four years from the date of passing of the assessment order. He submitted that it is exactly the same that is done in the present case. Even if it is viewed as a separate order in terms of section 158, he pleaded, there is no time-limit prescribed for the passing of an order under section 158, and as such, if it is passed within a reasonable time period after the passing of the assessment order under section 143(3), it is valid. What is reasonable time, is a matter of discretion of the assessing officer or the courts, depending upon the facts and circumstances of the case. As the impugned order effecting the allocation of income of the firm among the partners, has been passed in the present case, within four years from the passing of the assessment order, it is claimed that it was passed within a reasonable period of time and hence not barred by limitation. In short, the contention of the learned Departmental Representative was that in either view of the matter, as mentioned above, the order effecting the allocation of the income of the firm among the partners is legal and valid and deserves to be upheld.
(3.) ON the other hand, reiterating the contentions urged before the first appellate authority, the learned counsel for the assessee, submitted that the order under section 158 has to be treated as part of the assessment order, but being coterminus with the assessment order. It has to be passed within the time-limit stipulated under section 153 of the Act, i.e. within two years from the end of the assessment year. In the instant case, as the order allocating the income of the firm among the partners, was not passed within the above time limit stipulated under section 153, he submitted that the impugned order was barred by limitation. In any event, he submitted, since the matter involves debatable issues, the Commissioner (Appeals) was correct in cancelling the order passed by the assessing officer under section 154 of the Act.;