2014 (2) TMI 1121 - HC - Income Tax

High Court overturns ITAT's dismissal, orders rehearing for 1992-93 tax assessment.

The High Court set aside the ITAT's order dismissing the appellant's appeal for the assessment year 1992-93. The court directed a rehearing, emphasizing ... Validity of Miscellaneous application filed by stranger – Held that:- The Assessee rightly contended that ITAT entertained the application from a stranger and reviewed it resultantly passed an order without the notice to the appellant which is contrary to law - The order passed by the Tribunal set aside with a direction to rehear the application moved by Sheshnarayan – Decided in favour of Assessee. Issues:1. Validity of the order passed by the Income Tax Appellate Tribunal.2. Entertaining a miscellaneous application by a stranger without notice to the appellant.3. Tax liability on income generated from funds devolved on the appellant from a larger HUF.Analysis:Issue 1: The appellant challenged the order of the Income Tax Appellate Tribunal (ITAT) dated 22.07.2007, which dismissed the appeal bearing No.ITA/630/IND/1997 for the assessment year 1992-93. The ITAT allowed the appeal of the appellant on the grounds that the income generated from certain funds should be assessed in the hands of the larger HUF and not the individual appellant or his HUF. The ITAT set aside the order of the CIT (Appeals) and directed the assessment to be done at the hands of the larger HUF.Issue 2: The appellant raised concerns regarding the ITAT permitting a stranger, Sheshnarayan Bhagat, to intervene in the matter by filing a miscellaneous application without providing notice to the appellant. The ITAT entertained the application and decided to rehear the appeal without the appellant's involvement, resulting in the dismissal of the appellant's appeal for various assessment years. The appellant contended that reviewing the order without notice and remanding the matter back to the ITAT was against the law.Issue 3: The appellant questioned the tax liability on the income generated from funds received through a partial partition from a larger HUF. The appellant argued that the income should be taxed in the hands of the larger HUF and not the individual. The court directed the ITAT to rehear the application from Sheshnarayan, involving the appellant, and make a decision on whether the appellant's appeal for the assessment year 1992-93 should be heard again. The court emphasized that the decision on tax liability should be made after hearing both the appellant and the Revenue afresh.In conclusion, the High Court set aside the ITAT's order passed at the instance of Sheshnarayan and provided specific directions for rehearing the application and the appellant's appeal. The court instructed the ITAT to make a decision within six months and suspended the impugned order until the appeal is resolved.