JAI BHAGWAN OM PRAKASH v. INCOME TAX OFFICER
[Citation -1984-LL-0614-4]

Citation 1984-LL-0614-4
Appellant Name JAI BHAGWAN OM PRAKASH
Respondent Name INCOME TAX OFFICER
Court ITAT
Relevant Act Income-tax
Date of Order 14/06/1984
Assessment Year 1980-81
Judgment View Judgment
Keyword Tags promissory estoppel
Bot Summary: The only other ground that survived for consideration is regarding the addition of Rs. 10,000 made to the total income of the assessee firm on account of low withdrawals by its partners in their household expenses. Counsel for the assessee submitted that t h e addition is uncalled for and cannot be sustained in law because for low withdrawals of the partners addition cannot be made in the hands of the firm as they are two distinct entities under the IT Act. Departmental representative relying upon the following judgments, supported the orders of the authorities below: MMAK Mohideen Thamby Co. vs. CIT36 ITR 481(AP) Harwarmal Onkarmal vs. CIT 102 ITR 779(Pat) CIT vs. Kapur Brothers(1979)10 CTR 280:(1979)118 ITR 741(All) Banta Sinch Kartar Singh vs. CIT125 ITR 239 It was contended that the agreement was clear and understandable to the assessee that there was no misconception and that the assessee could not made any grievance out of it. 1976- 77 decided on 25th March, 1982, since reported in(1982) 1 ITD 706(Chd), the Division Bench of the Tribunal, Chandigarh Bench held that though the firm is not generally anything but a compendious name for its partners, yet for purposes of the Act i.e., the IT Act, 1961, the firm has a separate entity from its partners. The income of the partners cannot be treated as that of the firm unless the statute provides for it. The addition has been made because of low withdrawals of the partners and not because of any credits appearing in their names. A careful perusal of the judgements cited on behalf of the Revenue shows that where the Court justified an addition in the hands of the partner, it was a case where there were credits in the accounts of the partners in the proportion of their profit sharing ratio.


This appeal by assessee is directed against order of AAC dt. 24th Nov., 1982 relating to asst. yr. 1980-81. There are two grounds of appeal but ground No. 1 was withdrawn with permission of Court because ITO has himself given necessary relief to assessee on issue involved in this ground. Therefore, this ground goes out of consideration. only other ground that survived for consideration is regarding addition of Rs. 10,000 made to total income of assessee firm on account of low withdrawals by its partners in their household expenses. I have heard parties. ld. counsel for assessee submitted that t h e addition is uncalled for and cannot be sustained in law because for low withdrawals of partners addition cannot be made in hands of firm as they are two distinct entities under IT Act. statute does not provide that income to of one may be taxed in hands of other and, therefore, so-called agreement for addition made by ITO and sustained by AAC is not bringing as promissory estoppel. He submitted that his arguments find support from judgment of Supreme Court in case of CIT vs. VMRP Firm (1965) 56 ITR 67(SC). On other hand, ld. Departmental representative relying upon following judgments, supported orders of authorities below: (i) MMAK Mohideen Thamby & Co. vs. CIT (1959)36 ITR 481(AP) (ii) Harwarmal Onkarmal vs. CIT (1976) 102 ITR 779(Pat) (iii) CIT vs. Kapur Brothers(1979)10 CTR (All) 280:(1979)118 ITR 741(All)& (iv) Banta Sinch Kartar Singh vs. CIT (1980)125 ITR 239 (P&H) It was contended that agreement was clear and understandable to assessee that there was no misconception and that assessee could not, therefore, made any grievance out of it. I have given careful consideration to rival submissions. I find that in case of VMRP Firm, referred to supra, Hon'ble Supreme Court has held that insofar as income exigible to tax is concerned, either it is exigible to tax under Act as per statute or it is not. If it is not, ITO has no power to impose tax in respect of said income despite concessional agreement by assessee. Thus it is seen that if particular income is not taxable under Act, it could not be taxed on basis of promissory estoppel. In case of ITO vs. Kewal Krishan Sat Pal in ITA No. 650 of 1981 relating to asst. yr. 1976- 77 decided on 25th March, 1982, since reported in(1982) 1 ITD 706(Chd), Division Bench of Tribunal, Chandigarh Bench held that though firm is not generally anything but compendious name for its partners, yet for purposes of Act i.e., IT Act, 1961, firm has separate entity from its partners. income of partners cannot be treated as that of firm unless statute provides for it. It is thus clear that for low withdrawals of partner for which addition has been made in hands of firm, promissory estoppel will work against settled principles of law as contained in statute and relevant authorities. addition has been made because of low withdrawals of partners and not because of any credits appearing in their names. careful perusal of judgements cited on behalf of Revenue shows that where Court justified addition in hands of partner, it was case where there were credits in accounts of partners in proportion of their profit sharing ratio. But case before me is not type which authorities cited by Revenue had decided. Therefore, these authorities cannot come to its aid. As regards judgment of Banta Singh Kartar Singh, it was regarding quantum of penalty which was fixed within statutory limits but on agreement with assessee. Therefore, that case too was distinct on facts. Since in this case addition is in hands of entity different from entity regarding which withdrawals were considered low, it is not justified. It is deleted. Appeal allowed. *** JAI BHAGWAN OM PRAKASH v. INCOME TAX OFFICER
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