HON'BLE SRI JUSTICE B. PRAKASH RAO AND HON'BLE SRI JUSTICE R. KANTHA RAO R.C.No. 132 of 1996 O R D E R: (per Hon'ble Sri Justice B. Prakash Rao) Heard Sri J.V. Prasad, learned Standing Counsel for the applicant and Sri C. P. Rama Swamy, learned counsel appearing for the respondent. In this reference made under Section 256(2) of the Income Tax Act, 1961, by the Income Tax Appellate Tribunal, for a decision, the question involved is as to whether “In the facts and circumstances, the Income Tax Appellate Tribunal was justified in law in holding that separate assessment should be made in the hands of the firm only instead of a single assessment in the hands of the individual”. The brief facts as narrated in the order of reference while giving the statement of the case requires to be referred on the same lines: “ Department has filed these two applications under Section 256(1) of the Income Tax Act, 1961, to seek reference of the following common question, stated to be of law arising out of the order of the Tribunal dated 29.03.1995 in ITA No. 1543-1544/Hyd/89 for the assessment years 1983-84 and 1984-85, for the opinion of the Hon’ble High Court- “Whether on the facts and circumstances of the case, the I.T.A.T. was justified in law in holding that separate assessment should be made in the hands of the firm only instead of a single assessment in the hands of the individual?” We have heard both sides on these applications. In our considered opinion, a referable question of law does arise out of the order of the Tribunal. We accordingly refer the question proposed, and proceed to draw up a statement of the case herein below. The assessee is a non-resident individual, and he was a minor during the previous years relevant for the assessment years 1983-84 and 1984-85. For the assessment year 1983-84, income tax return was filed on 31.12.1985 by one Kishore, S/o Sri hariram, as the deemed agent of the assessee, declaring an income of Rs.1,26,158/- including therein the share income from M/s Dayal’s, Tilak Road, Hyderabad and from M/s Dayal’s Textiles, Tilak Road, Hyderabad, and the interest income from M/s S.H. Dayal. Subsequently, on 24.06.1985, Shri Kishore, partner in M/s Dayal’s filed a revised return, showing only the assessee’s share income from the firm of M/s Dayal’s amounting to Rs.78,815/-as per the assessment order dated 19.10.1983 of that firm. In this Sri Kishore claimed that in the earlier return filed on 31.12.1983, by oversight, the assessee’s share income from M/s Dayal’s Textiles and the interest income received from M/s S.H. Dayal and from Sri Suresh Dayal had been included, though according to him, as per Section 182(3) of the I.T.Act, only the assessee’s share income in the registered firm of M/s Dayal’s would be assessed in the case of that firm, as per the return filed by the partner, Shri Kishore. The share income received from the other firm and the interest income were claimed to be not assessable with reference to the return filed by Shri Kishore partner of M/s Dayal’s. Similarly, Shri Bhagwandas H. Dayal partner of M/s Dayal’s Textiles had filed a return on 24.06. 1985, as the agent of ithe assessee, claiming that in view of Section 182(3), the assessee’s share income in that firm would be assessable in the firm’s hands. In this return, assessee’s share income of Rs.36,642/- as per the assessment order ofi the firm dated 19.10.1983 for assessment year 1983-84 was declared. In the course of assessment proceedings, it was stated on behalf of the assessee that sine two separate returns were filed on behalf of the non-resident appellant, two separate assessments should be made on these two firms separately under Section 182(3) of the I.T. Act and that both the share income should not be clubbed. However, the assessing officer observed that since M/s Dayal’s had already filed the income tax return as the assessee’s agent, it cold not have any objection to be treated as the assessee’s agent under Section 160 of the Act. Accordingly, he held that the assessment should be made in the case of assessee, as represented by the agent M/s Dayal’s. Accordingly, he assessed the sale income from M/s Dayal’s and M/s Dayal’s Textiles and the interest income from M/s H.S. Dayal together in a single assessment order passed on 28.06.1985, wherein the total income for the assessment year 1983-84 was computed at Rs.,26,760/- as against the incomes returned of Rs.36,642/- and Rs.78,815/- respectively in the separate returns filed by M/s M/s Dayal’s and M/s Dayal’s Textile on behalf of the assessee. For the assessment year 1984-85, two separate income tax returns were filed on 24.06.1985, one by Shri Bhagwandas H. Dayal, partner of M/s Dayal’s Textiles showing the assessee’s share income of Rs.49,212/- and the other by Shri Kishore H. Dayal, partner of M/s dayal’ declaring the assessee’s share income in M/s Dayal’s at Rs.73,299/-. Though the assessee claimed that separate assessments should be made on each firm in respect of assessee’s share income from that firm, the assessing officer for the reasons mentioned in the assessment order for the assessment year 1983-84, made a single assessment by order dated 13.09.1985,clubbing together the assesses’s share income from M/S Dayals’ and from M/s Dayal’s Textiles and determining the total income of the assessee at Rs.1,35,375/-.” From the above chequered events, the matter ultimately went in appeal before the C.I.T(A) where considering the provisions of Section 182 and proviso to Section 24(5)(a)(ii) of the Income Tax Act, 1922, a distinction was drawn in between the decisions cited across the Bar and ultimately, the view taken in the assessment order was confirmed. Thereafter, in further appeal, the Tribunal straight away went on to consider the case only on the principle as laid down in the case of ITO, Circle-I, Hyderabad vs. Shri B.Narasimha Rao in ITA Nos. 194 to 202/Hyd/88 which were for the assessment years 1976-77 to 1984-85, and held that the assessments of the assessee who is a non-resident individual and minor during the previous years relevant to these assessment years should be in the hands of the firms only and the taxes due from the assessee should be collected from the firms only. In view of such a situation, the matter was referred to this Court on the above-mentioned question. After hearing the counsel on either side and also on perusal of the material apart from the decision reported in I.T.A.Nos. 194 to 202/Hyd/88, it has been pointed out that in the very same matter, a reference was made to this Court in R.C.No. 334 of 1991 and the same was disposed of as per its judgment dated 31.01.2003, wherein after taking into consideration the facts and circumstances of that particular case, it proceeded to consider and held as follows: “ It is clear from the reading of Section 182 itself that a non- resident Indian I not intended to be treated as a substantive separate class. There is no separate scheme as such. There is no distinction as such between a non-resident major and a resident major for the purpose of assessment. With the same parity of reasoning it is clears that the Parliament never intended to treat a non-resident minor differently from that of a resident minor for the purposes of computing the total income of an assessee. For the aforesaid reasons, we are of the considered opinion that, in the facts and circumstances of the case, the Income Tax Appellate Tribunal was not justified in law in holding that the hare income of the assesses’ minor children was assessable in the firm under Section 182(3) of the Act. The share income of the assessee’s minor children ought to have been included in the hands of the non-resident assessee in his individual assessment under Section 64(1)(iii) of the Act.” Even going on the facts of the present case, there is a scuttle distinction and the approach which is required to be made in the facts of each case stands on a different footing. Further, the learned counsel appearing for the assessee submits that even otherwise the provision under Section 183 of the Income Tax Act has not been properly kept in view. The above submission of the learned counsel has also been ushered by the learned counsel for the applicant while referring the matter to this Court. Except simply following the judgment in ITA Nos. 194 to 202/Hyd/88, nothing has come up for consideration nor there was any finding. In the above circumstances, we are of the view that the decision referred to in the Appeal in ITA Nos. 194-202/Hyd/88, has absolutely no application to the facts of the present case. Having regard to the facts involved in the matter and the questions arising, necessarily, the matter requires re-consideration afresh on merits and in accordance with law. We leave it open for the assessee to raise all such objections which also can form part of consideration at the time of hearing. For the aforesaid reason, the question referred to stands answered and the matter is remitted to ITI(A),Hyderabad for disposal on merits. ----------------------- (B. PRAKASH RAO,J) ----------------------- (R. KANTHA RAO, J) 19th April 2009 ksld ..... REGISTRAR // TRUE COPY // SECTION OFFICER To 1) 2 CD copies Form-NIC-OGS/WP{BMR}