Section 253 of the Income-tax Act, 1961

IN THE ITAT, HYDERABAD BENCH ‘A’ SMC Income-tax Officer v. Amrutha Wines d. manmohan, judicial member IT appeal Nos.850 and 851 (Hyd.) of 2007 [Assessment years 2001-02 and 2002-03] October 12, 2007 Section 253 of the Income-tax Act, 1961 - Appellate Tribunal - Appeal to - Assessment years 2001-02 and 2002-03 - Against orders of Commissioner (Appeals), revenue filed appeals before Tribunal - Whether since revenue effect in these appeals was below Rs. 2 lakhs filing of appeals by revenue was against policy decision taken by CBDT vide Notification No.1985, dated 29-6-2000/lnstruction No.2 of 2005 as revised by Instruction No.5, dated 16-7-2007 - Held, yes - Whether, therefore, impugned appeals filed by revenue deserved to be dismissed as unadmitted - Held, yes Section 184 read with section 185 of the Income-tax Act, 1961 - Firm - Assessed as such - Assessment years 2001-02 and 2002-03 - Whether as per provisions of section 184, as amended with effect from 1-4-1993 whereby norms for granting status as a firm to assessees were modified, Assessing Officer is not empowered to alter status of assessee without changing status of assessee in first year of its claim falling after 1-4-1993 - Held, yes - Assessee, a partnership firm, carried on business in status of a firm and it was treated as a firm in earlier years - For relevant assessment years, Assessing Officer refused registration to assessee-firm on ground that assessee obtained liquor licence in name of an individual partner and framed assessments in status of AOP - Whether since there was no change in constitution of firm on sharing ratio of partners in years under consideration and further since in first year of seeking status as a firm assessee had complied with formalities and it was treated as a firm, Assessing Officer was wrong in treating assessee as an AOP - Held, yes Circulars and Notifications Notification No.1989, dated 29-6-2000 Instruction No. 2 of 2005 Instruction No.5, dated 16-7-2007 FACTS The assessee, a partnership firm, carried on business in liquor along with other partners in the status of a firm and it was treated as a firm in the earlier years. For the relevant assessment years, the Assessing Officer refused registration to the assessee-firm on the ground that the assessee obtained liquor licence in the name of an individual partner and framed the assessments of the firm in the status of an AOP. On appeals, the Commissioner (Appeals) allowed the assessee’s appeals and, accordingly, directed the Assessing Officer to treat the assessee as a firm. On revenues, appeals to the Tribunal: HELD The revenue effect in these appeals was below Rs. 2 lakhs and, thus, filing of the appeals by the Revenue was against the policy decision taken by the CBDT vide Notification No.1985, dated 29-6-2000/lnstruction No.2 of 2005 as revised by Instruction No.5, dated 16-7-2007. The Hyderabad Bench of the Tribunal in the case of Dy. CWT v. Nb. Syed Jaffarali Khan (2005) 94 ITD 21 had considered the circulars issued by the Board from time to time with regard to the monetary limits for preferring an appeal by the revenue and held that circulars are issued under section 119 to set things on course by eliminating avoidable wastage of time, talent and energy of the Assessing Officers discharging the onerous public duty of collection of revenue. Further the Amritsar Bench of the Tribunal in the case of ITO v. Bir Engg. Works (2005) 94 ITD 164 (SB) held that instructions issued by the Board including those prescribing the monetary limit of tax effect for filing the appeals before the Tribunal, High court and Supreme Court are binding on the Income tax authorities and it is the duty of every officer working in the department to follow the same more so when these have the statutory backing/force. [Para 6] Therefore, the appeals filed by the revenue deserved to be dismissed as unadmitted, as they were filed contrary to the policy decision taken by the CBDT through its circulars issued from time to time. [Para 7] The provisions of section 184, as amended with effect from 1-4-1993 whereby norms for granting the status as a firm to assessees were modified, provide that, so long as a partnership is evidenced by an instrument and the individual shares of the partners are specified in this instrument, the status has to be treated as a firm. The provisions of the said section applicable prior to 1-4-1993 empower the Assessing Officer to enquire into the genuineness of the firm and its constitution as specified in the instrument of partnership and if it is found that no genuine firm is in existence, he was entitled to refuse registration to the firm under section 185. However, the amended provisions do not confer such power to the Assessing Officer. In other words, so long as an assessee complies with the provisions of section 184(1) and furnishes a certified copy of the instrument of partnership along with the return of income, the Assessing Officer is duty bound to grant the status of firm to the assessee. Further, under section 184(3), if a firm is assessed as such for any assessment year, it has to be assessed in the same capacity for the subsequent years unless there is any change in the constitution of the firm or the sharing ratio of the partners. In the instant case, there was no such change in the years under consideration. It was also not in dispute that in the first year of seeking the status as a firm, the assessee had complied with the formalities and the assessee was treated as a firm. Such being the case, the assessing officer was wrong in treating the assessee as an AOP as per sections 184/185 as amended with effect from 1-4-1993. Therefore, the Commissioner (Appeals) was justified in his view. [Para 9] CONCLUSION As per section 184(3), the Assessing Officer is not empowered to alter the status of the assessee without changing the status of the assessee in the first year of its claim falling after dated 1-4-1993. [Para 10] CASE REVIEW Dy. CWT v. Nb Syed Jaffarali Khan (2005) 94 ITD 21 (Hyd.) ITO v. Bir Engg. Works (2005) 94 ITD 164 (Asr) (SB) followed ITO v. Raaga Wines Khammam IT Appeal Nos.1189 to 1192 of 2006, dated 4-4-2007. CIT v. Circar Enterprises (1998) 234 ITR 628 (AP) Ranjitsing Virk v. Pramila Srivastava, lTO (1996) 217 ITR 741 [1995] 82 Taxman 290 (SC) CIT v. Rangila Ram [2002] 254 ITR 230/122 Taxman 709 (SC)- distinguished