Rakesh Garg, J. - (1.) THE Revenue has filed the present appeal under Section 260A of the Income Tax Act, 1961, challenging the order of the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar, passed in I. T. A. No. 54(ASR)/2004, dated September 19, 2006 (annexure P -6) which has allowed the appeal of the assessee for the assessment year 1996 -97. It has raised the following substantial questions of law: 1. Whether, on the facts and circumstances of the case, the learned Income Tax Appellate Tribunal was right in law in implying that Section 154(1A) of the Income Tax Act, 1961, which refers to an order passed under Section 154(1), also covers an order passed under Section 144 of the Income Tax Act, 1961?
(2.) WHETHER , on the facts and circumstances of the case, the learned Income Tax Appellate Tribunal was right in law in implying that interest and salary to members of an association of persons (AOP) were admissible, keeping in view the provisions of Section 184(5) of the Income Tax Act, 1961, even as they stood prior to amendment by the Finance Act, 2003, with effect from April 1, 2004? Whether, on the facts and circumstances of the case, the learned Income Tax Appellate Tribunal was right in law in implying that the mistake in making the assessment as a firm and not as an association of persons (AOP) while resorting to the provisions of Section 144 is not a mistake of law apparent from the record, keeping in view the specific provisions of Section 184(5) of the Income Tax Act, 1961? 2. The brief facts giving rise to this appeal are as under: 3. The facts of the case are that the assessee filed the original return of income on October 31, 1996, in the status of a registered firm. However, while completing the assessment under Section 144, the Assessing Officer did not allow the deduction of interest and salary paid to the partners. The assessee filed an appeal before the Commissioner of Income Tax (Appeals) where the action of the Assessing Officer for not allowing the deduction in respect of interest and salary paid to the partners was, inter alia, challenged. It was argued before the Commissioner of Income Tax (Appeals) that the assessee was entitled to the deduction of interest and salary paid to the partners even though income was computed by applying the net profit rate.
(3.) ACCEPTING the contention of the assessee, the learned Commissioner of Income Tax (Appeals) partly allowed the claim of the assessee for deduction of interest and salary paid to the partners. The Revenue challenged the order of the Commissioner of Income Tax (Appeals) in appeal before the Tribunal. The Income Tax Appellate Tribunal, vide its order dated November 13, 2003 (annexure A -3) in I. T. A. No. 135/ASR/2000 for the assessment year 1996 -97 upheld the order of the Commissioner of Income Tax (Appeals) by relying on the judgment of the Rajasthan High Court in the case of CIT v. held that the assessee was entitled to the deduction in salary and interest to the partners up to the limit specified in Section 40(b) of the Act.;