IN THE HIGH COURT OF JUDICATURE AT MADARAS DATED: 12.6.2006 CORAM: THE HONOURABLE MR.JUSTICE P.D.DINAKARAN and THE HONOURABLE MR.JUSTICE P.P.S.JANARTHANA RAJA T.C.Nos.275 & 276 of 2001 .... Commissioner of Income-tax, Coimbatore ... Applicant vs. Sri K.Rangaswamy Naidu, Coimbatore. ... Respondent in TC.275/2001 Sri K.Damodaraswamy Naidu, Coimbatore. ... Respondent in TC.276/2001 Tax Case References at the instance of the Revenue arising out of the order of the Income-tax Appellate Tribunal, C-Bench, Madras in ITA Nos.2539 & 2540/Mds/90, dated 25.9.1998 for the assessment year 1987-88, against the order of The Commissioner of Income Tax (Appeals) Coimbatore, dated 26.4.1990 in ITA.Nos.692- C/89-90 and 699-C/89-90 and against the order of The Asst. Commissioner of Income Tax Central Circle I, Coimbatore, dated 31.1.1990 P.A.No.49-520-PY-8547/Cent.I/CBE against the order of The Income tAx Appellate Tribunal C Bench Madras dated 17.8.2001 R.A.No.457/Mds/98 and 455/Mds/98. For applicant : Mr.J.Narayanaswamy, Jr.SC. For IT. For respondent : Mr.R.Meenakshisundaram .... JUDGMENT (Delivered by P.D.DINAKARAN,J.) At the instance of the Revenue, the Income-tax Appellate Tribunal has stated a case and referred the following question of law, which is common in both tax cases: https://hcservices.ecourts.gov.in/hcservices/ "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in upholding the order of the Commissioner of Income-tax (Appeals) directing that the assessee's share of loss from the firm be set off against other income, when in fact the return filed in the case of the firm has been treated as non-est, having been filed beyond the time limit prescribed under sec.139(1) of the Act?" 2.1. The assessment year with which we are concerned is 1987- 88. The assessee in each case is a partner in the firm, M/s.Visalakshi Combines, Coimbatore. The claim of the assessee before the assessing officer was that the share of loss from the firm, M/s.Visalakshmi Combines was to be set off against his other income. 2.2. The assessing officer noticed that the due date for filing the return of income by the firm for the assessment year 1987-88 was 31.7.1987, but the return was filed only 9n 29.7.1988, beyond the time limit prescribed under section 139(1) of the Income-tax Act. Therefore, treating the return filed by the firm as non-est, the assessing officer held that there was no assessment made on the firm, nor the share of loss to be allocated to the partners was determined. 2.3. Accordingly, in the assessment of the assessee in each case, as a partner of the firm, no adjustment for the share of loss was made by the assessing officer, though there was claim by the assessee. The assessing officer made the assessment on the assessee taking the share of loss from the firm as 'Nil'. The Commissioner of Income-tax (Appeals), however, accepted the assessee's claim. 2.4. Before the Appellate Tribunal, the Revenue contended that there was no apportionment of loss under section 67 of the Income-tax Act in the case of the firm as the return filed by the firm for the assessment year 1987-88 was treated as non-est. But, the Appellate Tribunal held that the assessment of the individual partner was independent of the assessment of the firm and though the share income of the individual partner might ultimately be determined by the assessing officer on completion of the assessment of the firm, the assessability of the share income would not depend on such allocation. The Appellate Tribunal felt that it was open to the assessing officer to make assessment under section 155 of the Income-tax Act on the completion of assessment of the firm, but such adjustment would not be possible in the present case since the firm itself had filed its return beyond the time limit and the same was accepted and regular assessment order was passed and thus, dismissed the appeal preferred by the Revenue. https://hcservices.ecourts.gov.in/hcservices/ 2.5. The Appellate Tribunal, at the instance of the Revenue, has stated a case and referred the above mentioned question of law. 3. As evident from the records, it is not in dispute that the assessing officer has not ignored the return filed by the firm, but acted on the return and made a regular assessment under section 143(3) of the Income-tax Act and the loss, as submitted by the firm in the return, was also accepted. Since the loss of the firm had been accepted and the assessing officer was directed to set off the share of loss of the assessee in each case, we fail to understand how the return filed by the firm has been treated as non-est as raised in the question of law. Therefore, finding it difficult to hold that the return filed by the firm was treated as non-est, the question of law referred to us in both the tax cases is answered in favour of the assessees. No costs. na. Sd/ Asst.Registrar /true copy/ Sub Asst.Registrar To 1. The Assistant Registrar, Income-tax Appellate Tribunal, Rajaji Bhavan, Besant Nagar, Chennai 600 090 (five copies with records) 2. The Secretary, Central Board of Direct Taxes, New Delhi (3 copies) 3. The Commissioner of Income-tax, Coimbatore. 4. The Commissioner of Income-tax (Appeals), Coimbatore. 5. The Asst. Commr. Of Income-tax, Central Circle-1, Coimbatore. + 1 cc to Mr. Meenakshisundaram, Advocate SR No.24083 + 2 ccs to Mr.N. Muralikumaran, Advocate SR No.24118, 24119 TEJ(CO) SR/4.7.2006 T.C.Nos.275 & 276 of 2001 https://hcservices.ecourts.gov.in/hcservices/