2001 (11) TMI 218 - AT - Income Tax

Tax Appeals Allowed Due to Valid Reason for Delay, AOP Income Assessed, Section 148 Not Addressed

JANAK RAJ CHAUHAN & ORS. Versus ASSISTANT COMMISSIONER OF INCOME TAX.

JANAK RAJ CHAUHAN & ORS. Versus ASSISTANT COMMISSIONER OF INCOME TAX. - TTJ 075, 260, Issues Involved:1. Liability to pay interest under sections 139(8) and 215/217 of the IT Act, 1961.2. Assessment of income in the hands of the AOP versus individual members.3. Validity of initiation of proceedings and issuance of notice under section 148.Issue-wise Detailed Analysis:1. Liability to Pay Interest under Sections 139(8) and 215/217 of the IT Act, 1961:The primary contention of the assessee was that they were not liable to pay interest under sections 139(8) and 215/217 of the IT Act, 1961. The AO charged interest for the assessment years 1987-88 and 1988-89. The CIT(A) upheld the AO's decision, justifying the imposition of interest. However, the Tribunal found that the AO had not provided an opportunity for the assessee to be heard before charging the interest. The Tribunal cited the Supreme Court's decision in Central Provinces Manganese Ore Co. Ltd. vs. CIT, which allowed disputing the levy of interest in appeal if the assessee claims they are not liable for it. The Tribunal concluded that the assessee was prevented by sufficient cause from filing the returns on time due to the change in legal interpretation following the Supreme Court's decision in ITO vs. Ch. Attchaiah. Consequently, the Tribunal held that interest under sections 139(8) and 215/217 was not leviable and reversed the CIT(A)'s findings.2. Assessment of Income in the Hands of the AOP versus Individual Members:The AO initially assessed the income from the sale of agricultural land in the hands of individual members. However, the CIT(A) directed the AO to assess the income in the hands of the AOP, following the Supreme Court's ruling in ITO vs. Ch. Attchaiah, which mandated that if the income belonged to an AOP, it must be taxed in the hands of the AOP alone. The Tribunal supported this view, noting that the AO issued notice under section 148 to the AOP after the CIT(A)'s direction and the Supreme Court's judgment. The Tribunal emphasized that the assessee (AOP) was prevented by sufficient cause from filing returns on time due to the change in legal interpretation and thus could not be held liable for interest.3. Validity of Initiation of Proceedings and Issuance of Notice under Section 148:The assessee argued that the initiation of proceedings and issuance of notice under section 148 was without jurisdiction and void ab initio. They also contended that the notice was issued without proper sanction from the authority as required under section 151. The Tribunal, however, did not provide specific findings on this legal issue, as the appeals were allowed on merits regarding the interest liability.Conclusion:The Tribunal allowed the appeals, holding that the assessee was not liable for interest under sections 139(8) and 215/217 of the IT Act, 1961, due to sufficient cause for delayed filing of returns. The Tribunal upheld the CIT(A)'s direction to assess the income in the hands of the AOP, aligning with the Supreme Court's judgment in ITO vs. Ch. Attchaiah. The legal issue concerning the validity of proceedings under section 148 was not addressed, as the appeals were resolved on other grounds.