TaxTMI 
TaxTMI 
2007 (11) TMI 356
X X X X Extracts X X X X
X X X X Extracts X X X X
....red in applying the provisions of s. 150(1) as the subject-matter before the Tribunal was the firm and not the partner i.e. the appellant. For this contention the case law relied upon was ITO vs. Murlidhar Bhagwan Das (1964) 52 ITR 335 (SC). 3. Facts in brief as emerged from the corresponding assessment order passed under s. 143(3) r/w s. 147. dt. 14th Oct., 2005 was that the assessee is assessed in the status of an individual. He is a partner in a firm viz., M/s Micro Metal Industries. In the case of the firm certain deposits/investments amounting to Rs. 3,64,000 were treated as unexplained investment by invoking s. 68 of the IT Act. This amount was added back to the total income of the firm. Out of the said total amount, the amount in question pertaining to this appellant in the capacity of a partner was Rs. 1,50,000. 4. The background of this issue is that the said firm has challenged the addition. The matter reached upto SMC, Tribunal, Pune, and vide an order dt. 20th July, 2004 in ITA No. 1378/Pn/2002, asst. yr. 1992-93 has held as under: "After going through the entire material placed on record and also considering the decisions relied upon by the learned counsel for....
X X X X Extracts X X X X
X X X X Extracts X X X X
....see was recorded by the AO in the impugned assessment order as under: "With reference to your notice I would like to bring to your kind notice that I have filed my IT return for asst. yr. 1992-93 within the time-limit, specified in the Act. The decision of Tribunal, Pune has not set aside the case fully or partly. The order of Tribunal has given clear decision for the partnership firm and not for the partners. Sec. 150(2) of the IT Act, 1961 has made it clear that such notices should be issued with the subject-matter of the appeal. In this case the subject-matter of the appeal is a partnership firm and not the partners. Secondly, the notice is also issued beyond the time-limiting factor and therefore the notice issued is bad in law." However, few relevant observations of the AO were that the Tribunal has given a finding that "in the instant case also, it is an admitted position that the amounts standing to the credit of some of the partners of the assessee firm were actually brought in by them from different parties". With the result, the AO has applied s. 150(1) to give effect of the appellate order to add the said sum concerning this assessee in view of the clear finding....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pressing this view. 8.1 Sec. 150 is the provision for cases where an assessment is to be made in pursuance of an order on appeal. This section gives jurisdiction to the AO to issue a notice under s. 148 at any time for the purpose of making an assessment or reassessment or recomputation 'in consequence of' or to 'give effect' to any 'finding' or 'direction' contained in an order passed by any authority in any proceedings by way of appeal, reference or revision. So the question to be answered is that whether in a case of a firm where an addition under s. 68 is deleted on the ground that the capital introduced by the partner had the responsibility of explanation of introduction of the cash in his capital account, then in consequence upon that order of the Tribunal, the AO has jurisdiction to invoke s. 148 in the case of the said partner to assess in his hands the impugned capital under s. 68 of the Act. 8.2 The foremost condition is that the "finding" or the "direction" should be within the jurisdiction of the authority or the Court giving it. In the present appeal, the Tribunal has relied on the decision of CIT vs. Metachem Industries (2000) 161 CTR (MP) 444 : (2000) 245 ITR 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....zance of the term 'any person' used in this Explanation and held that the context has to be read in a restricted sense, i.e. it means a person who is intimately connected with the assessment and who would be liable to be assessed for the whole or a part of the income which is the subject-matter of the assessment under appeal. May the said Other person is not eo-nomine party to the appeal but the assessment happened to depend upon the assessment on the former. This interpretation is broadly supported by the Hon'ble Courts that if the finding or direction is given against a person other than the assessee, it would be valid, provided the person is intimately connected and the finding is necessary for the disposal of the appeal. Naturally, as regards persons other than the assessee, who are not intimately connected with the assessment, no valid finding can be given at all against him. 8.5 Upto this extent, I hope the learned Authorised Representative should also have no opposition since the statute and the Hon'ble Courts have expressed unilaterally. One of the main objections of the learned Authorised Representative is that the impugned order of the Tribunal was silent as far as any....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r the Act by way of appeal, reference or revision or by a Court in any proceedings under any other law. While construing similar provisions contained in the 1922 Act. the apex Court in the case of ITO vs. Murlidhar Bhagwan Das (1964) 52 ITR 335 (SC) held that the word 'finding' can be only that which is necessary for the disposal of an appeal in respect of an assessment of a particular year. The apex Court further held that the appellate authority may incidentally find that the income belongs to another year. but that is not a finding necessary for the disposal of an appeal in respect of the assessment year in question. Similarly, the expression 'direction' has been construed by the apex Court that a direction which the appellate or revisional authority as the case may be, is empowered to give under the sections mentioned therein. In the present case, the CIT(A) has neither given a finding to the effect that the income chargeable to tax has escaped assessment nor given any direction to the ITO to initiate reassessment proceedings for the block period by issuing notices under s. 148 of the Act. The clear finding recorded by the CIT(A) is that there is no evidence or any material fou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d there is no direction to the ITO to initiate reassessment proceedings, hence, direction to reopen the assessment was not accepted. The question posed before us is slightly different because the natural consequence of the appellate order was to assess the income in the hands of the partner which was not subjected to tax as per law in the hands of the firm. In such cases where the situation is that a partner is not a eo-nomine party to the appeal but the assessment of such a partner depends upon the outcome of the assessment of the firm, in such a condition any finding or direction in an appellate order of the firm has an intimate connection with the assessment of the partner, therefore, in consequence thereof a suitable action has to be taken in the hands of the partner. We may like to clarify further that the partner cannot be termed as a 'third party' on account of admitted position that his investment in the firm was the only issue decided by the Tribunal in the said appeal of the firm. 8.7 Though I have expressed my opinion in clear terms, however, to further strengthen the same, I want to place reliance on the decision of Hon'ble Kerala High Court in the case of CIT vs. Am....