2000 (4) TMI 25 - HC - Income Tax

Changing firm status to AOP for missing certified partnership deed: s.185 can't be invoked via s.143(1)(a) intimation.

The dominant issue was whether the AO could invoke s.185 of the Income-tax Act, 1961 to change the assessee's status from firm to AOP through an ... Application for registration - failure on the part of the assessee to furnish along with the return of income a certified copy of the partnership deed - Whether, the Assessing Officer can change the status of an assessee to 'association of persons' ('AOP') which can be done under section 185 of the Income-tax Act, 1961, at the time of assessment, while passing an order under section 143(1)(a) of the Act ? - HELD THAT:- Section 143(1)(c) deals with cases where the assessee is a partner of a firm or an association of persons or body of individuals and consequential action to be taken as a result of adjustments made under the first proviso to clause (a) of sub-section (1). Sections 184 and 185 deal with registration of firms and procedure in respect of applications. The significance of registration of a partnership firm under the Act lies in the fact that after registration, it would be liable to assessment of income-tax at a lower rate than what otherwise would be income-tax of an unregistered firm. The provisions contained in sections 184 and 185 relating to assessment of partnership firms have been amended by the Finance Act, 1992, with effect from April 1, 1993. It is provided in section 185 that a firm which does not comply with the provisions of section 184 for any assessment year shall be assessed for that assessment year in the same manner as an association of persons. Section 185 can be applied only in making the assessment of the firm. The expression 'assessment', is clearly referable to sections 143, 144 and 147 of the Act. A proceeding under sections 143(1)(a) does not result in an order of assessment. For the purpose of section 154, 246 and 264, the proceeding under section 143(1)(a) is treated as an order by the assessing authority. The intimation given under section 143(1)(a) cannot be treated to be an order of assessment, It is only to be deemed as an order for the limited purpose of sections 246 and 264 of the Act. Under section 143(1)(a)(i), the intimation is deemed to be a notice of demand under section 156 of the Act. It is not treated as an order of assessment, The two are conceptually different. Except intimation, no other order is contemplated under section 143(1)(a). Section 156 provides that when any tax, interest, penalty, fine or any other sum is payable in consequence of any order passed under the Act, the Assessing Officer shall serve upon the assessee a notice of demand in the prescribed form. That clearly brings about the distinction between an order of assessment and a notice of demand. As indicated above, intimation under section 143(1)(a) is deemed to-be the latter. Under section 246 also, a clear distinction is made between an intimation and an order of assessment. The Tribunal was, therefore, justified in holding that the change of status as done by the Assessing Officer was impermissible under section 143(1)(a) of the Act. The appeal is without merit and it is accordingly dismissed. Issues Involved:1. Whether the Tribunal was right in interfering with the order of the Assessing Officer u/s 143(1)(a) determining the status of an association of persons u/s 185 due to non-furnishing of a certified copy of the partnership deed.2. Whether the Assessing Officer exceeded jurisdiction u/s 143(1)(a) by changing the status of the assessee to an association of persons.3. Whether an order u/s 143(1)(a) constitutes an assessment and if the status change can be made in such an order.Summary:Issue 1: Tribunal's Interference with Assessing Officer's OrderThe Revenue questioned whether the Tribunal was correct in interfering with the Assessing Officer's order u/s 143(1)(a) which determined the status of the assessee as an association of persons (AOP) u/s 185 due to the failure of the assessee to furnish a certified copy of the partnership deed along with the return of income. The Tribunal observed that the adjustment envisaged u/s 143(1)(a) did not encompass a change of status.Issue 2: Jurisdiction of Assessing Officer u/s 143(1)(a)The Tribunal held that the Assessing Officer exceeded his jurisdiction u/s 143(1)(a) by changing the status of the assessee to an AOP, which could only be done u/s 185 at the time of assessment. The Tribunal concluded that such a change in status could not be made while processing the return of income u/s 143(1)(a).Issue 3: Nature of Order u/s 143(1)(a)The Tribunal and the court noted that an order u/s 143(1)(a) is not an assessment order but an intimation. The court explained that the intimation given u/s 143(1)(a) cannot be treated as an order of assessment and is only deemed as an order for limited purposes under sections 154, 246, and 264 of the Act. The court emphasized that the intimation u/s 143(1)(a) is conceptually different from an order of assessment and does not result in an assessment order.Conclusion:The court upheld the Tribunal's decision, stating that the change of status by the Assessing Officer was impermissible under section 143(1)(a) of the Act. The appeal by the Revenue was dismissed as without merit.