1. This is an appeal filed by the Revenue. It is directed against the order of the CIT(A)-I, Hyderabad, dt. 13th Nov., 1996 for the asst. yr.
1990-91. By the said order, dt. 13th Nov.. 1996, the CIT(A) cancelled the order dt. 17th Nov., 1995 passed by the AO under Section 154, allocating the income of the assessee-firm among the partners. The said order of the AO, passed under Section 154 reads as under : "For the asst. yr. 1990-91, the assessment was completed on an income of Rs. 7,43,110 under Section 143(3) of the IT on 30th Dec., 1991. While completing the assessment under Section 143(3), the income computed was not allocated amongst the partners of the firm.
Since this is a mistake apparent from record, the same is rectified under Section 154 of the Act as under : 2. It was contended before the CIT(A0 that there was no rectifiable or apparent mistake in the assessment order, dt. 30th Dec., 1991, passed by the AO, and as such, the order under Section 154 was beyond the scope of the provisions of the Act, and it was invalid. It was also argued that an order under Section 158 in terms of which the allocation of income of the firm among the partners has to be effected, is co-extensive with an order of assessment under Section 143, and consequently, such an order under Section 158 could not be passed beyond the period of limitation stipulated under Section 153 for passing the assessment. As the assessment year involved is 1990-91, it was contended that the time-limit for the passing of the said order under Section 158, which was coterminus with the time-limit for the passing of the assessment order under Section 143(3), was 31st March, 1993. Since the impugned order under Section 154 was passed only on 17th Nov., 1995, it was claimed that the said order was time-barred and hence invalid. The CIT(A) observed, relying on the decision of the Allahabad High Court in CIT v. Kailashpat Jutha Lal (1980) 125 ITR 11 (All) that in the case of a registered firm, the process of assessment is complete only when the total income of the firm is determined and apportioned amongst the several partners. He also observed : "Therefore, it is an imperative necessity that the AO must not only determine the firm's income by passing an assessment order under Section 143(3) of the Act and the tax payable thereon, but he must also pass a separate and independent order under Section 158 of the Act apportioning the firm's income amongst the partners according to their profit-sharing ratio...." After making the above observations, which apparently are not in favour of the assessee, the CIT(A) felt constrained to allow the appeal of the assessee and cancel the impugned order under Section 154 because, according to him, the entire issue was of a debatable nature, and hence beyond the scope of provisions of Section 154. His concluding observations in the impugned order are as under ; "... In the present case, admittedly no separate order had been passed under Section 158 of the Act allocating the firm's income along the partners. The said omission cannot be rectified by passing an order under Section 154 of the Act. I concur with the contention of the appellant's learned authorised representative that the assessment order for the asst. yr. 1990-91 does not contain any obvious or apparent mistake which can be corrected under Section 154 of the Act. Further, the question whether an order under Section 158 can be construed as an extension or part of the assessment order passed under Section 143(3) of the Act and whether it is subject to the limitation as specified for completion of an assessment are highly debatable issues which cannot be brought within the realm of rectification under the provisions of Section 154 of the Act.
Therefore, having regard to all the facts and circumstances of the case, I hold that the order passed under Section 154, dt. 17th Nov., 1995 allocating the firm's income among the partners is erroneous in law and has to be cancelled." 3. Before us, the learned Departmental Representative argued that the allocation of the income of the firm among the partners is mandatory under Section 158 of the. Act, and the omission to have effected such an allocation is a mistake apparent from record, which could be rectified under Section 154 of the Act. He argued that the matter can be viewed in either of the two ways, i.e. as part of the assessment order or as an independent one. If, as per the Departmental practice, it is viewed as a part of the assessment order, the omission to have effected the allocation is a mistake apparent from record, and consequently could be rectified within the time limit provided under Section 154, i.e. four years from the date of passing of the assessment order. He submitted that it is exactly the same that is done in the present case. Even if it is viewed as a separate order in terms of Section 158, he pleaded, there is no time-limit prescribed for the passing of an order under Section 158, and as such, if it is passed within a reasonable time period after the passing of the assessment order under Section 143(3), it is valid. What is reasonable time, is a matter of discretion of the AO or the Courts, depending upon the facts and circumstances of the case. As the impugned order effecting the allocation of income of the firm among the partners, has been passed in the present case, within four years from the passing of the assessment order, it is claimed that it was passed within a reasonable period of time and hence not barred by limitation. In short, the contention of the learned Departmental Representative was that in either view of the matter, as mentioned above, the order effecting the allocation of the income of the firm among the partners is legal and valid and deserves to be upheld.4. On the other hand, reiterating the contentions urged before the first appellate authority, the learned counsel for the assessee, submitted that the order under Section 158 has to be treated as part of the assessment order but being coterminus with the assessment order, it has to be passed within the time-limit stipulated under Section 153 of the Act, i.e. within two years from the end of the assessment year. In the instant case, as the order allocating the income of the firm among the partners, was not passed within the above time-limit stipulated under Section 153, he submitted that the impugned order was barred by limitation. In any event, he submitted, since the matter involves debatable issues, the CIT(A) was correct in cancelling the order passed by the AO under Section 154 of the Act.
5. We find merit in the contentions made out by the learned Departmental Representative. Considering the matter from either of the two angles mentioned by him, we are of the view that the order effecting the allocation of income of the firm among the partners deserves to be upheld. It has been the Departmental practice to effect the allocation of the income among the partners in the assessment order passed under Section 143(3) on the registered firm. If, going by this practice, we examine the matter, the omission on the part of the AO to have effected the allocation of income among the partners was a clear omission, which could be rectified as a mistake apparent from record under Section 154 within four years from the passing of the assessment order That is exactly what has been done by the AO in the present case, by the impugned order under Section 154. Consequently, we have to find that the said order under Section 154 deserves to be upheld.6. If we ignore the Departmental practice and proceed to examine the matter, going entirely by the language of the Act, a separate order allocating the income of the firm among the partners in their profit-sharing ratio, has to be passed in terms of Section 158. For such an order under Section 158 of the Act, no time-limit has been prescribed under the provisions of the Act- However, one thing is clear. That is, an order under Section 158 effecting allocation of the income of the firm among the partners, can be passed only after the determination of the total income of the firm, and tax liability thereon, in an assessment under Section 143(3) of the Act.
7. In the absence of any specific time-limit prescribed for the passing of an order under Section 158, we have to hold that it can be passed within a reasonable period of time, after the passing of the order of assessment. Since an order under Section 158 can be passed only after the passing of an order of assessment, it cannot be said that the period of limitation prescribed for the passing of an assessment order applies even in respect of an order contemplated under Section 158 of the Act. In the circumstances, in the case of an order under Section 158, it has to be passed within a reasonable time after the passing of the order of assessment. In the present case, the impugned order allocating the income of the firm among the partners has been passed on 17th Nov., 1995. Since the said order is passed within four years of the passing of the assessment order, which is the time stipulated for passing an order under Section 154 of the Act, we hold that the impugned order, dt. 17th Nov., 1995 has been passed within a reasonable time, and it is not barred by limitation.
8. The impugned order allocating the income of the firm among the partners has been passed by the AO, in terms of Section 154 of the Act.
On this aspect, we may also mention that it is an established law that 'wrong reference to the power under which an order is made does not per se vitiate the order, if there is some other power under which the order could be lawfully made. The validity of the impugned order has to be decided by reference to the question whether the AO has any power at all to make an order of that nature. If the power is otherwise established, the fact that the source of the power has been incorrectly described would not make the order invalid'.
For this proposition, reference may be made to the Commentary of Sampath Iyenger, 4th Edn. vol. III, page 3408, wherein reference in turn was made to a number of decisions, including the one of apex Court in the case of Hukumchand Mitts v. State of M.P. (1995) 53 JTR 583 (sic) in support of the above principles. Simply because the AO called it an order under Section 154, and has done the allocation of firm's income among the partners as contemplated in Section 158 of the Act, in an order under Section 154, proceeding on the Departmental practice that it should have formed part of the assessment order, and omission to do so constituted a mistake rectifiable under Section 154, it does not mean that the order cannot be related to Section 158 under which the AO is empowered and called upon to make such an allocation.
9. It may also be mentioned that while Section 154 is attracted only in respect of apparent mistakes, which do not involve any elaborate argument in view of the decision of the apex Court in the case of T.S.Balaram, ITO v. Volkart Bros. (1971) 82 ITR 50 (SC), mere complexity of a problem or the fact that some genuine argument is necessary to discover the mistake are not sufficient to oust the jurisdiction of the taxing authority to rectify such a mistake. For this proposition, reference may be made to the decision of Madras High Court in T.S.Rajam v. CED (1968) 69 ITR 342 (Mad). Therefore, simply because certain amount of argument is possible or there is some complexity in the problem, the taxing authorities are not ousted of their jurisdiction under Section 154, if otherwise, there is a patent mistake.
10. In the present case, the omission to have passed an order in terms of Section 158 allocating the income of the firm among the partners either as part of assessment order in accordance with the Departmental practice, or otherwise through a separate order, is a patent mistake.
Without this order of allocation, it is not possible to include the correct share incomes in the hands of the partners. This exercise of allocation of firm's income among the partners in terms of Section 158 is mandatory. Even if there is only a loss in the case of the firm, its allocation among the partners is mandatory, for allowing them the benefit of set off of such a loss against other income in the same year, and for allowing the benefit of carry forward of unabsorbed loss to succeeding years.
11. The CIT(A) himself, as mentioned by us hereinabove, has accepted the position of the Revenue that the allocation of the firm's income among the partners under Section 158 is mandatory, and without such an allocation, even the process of assessment is not complete. However, having reached that point of agreement with the stand of the Department, the CIT(A) felt constrained to cancel the impugned order under Section 154 simply on the ground that certain amount of debate is involved for the consideration of the issue. We are of the view that such doubts, as are entertained by the CIT(A), regarding involvement of debate for the consideration of the issue raised in the appeal, are somewhat unwarranted, in view of the decision of the Madras High Court in the case of T.S. Rajam v. Controller of Estate Duty (supra) wherein it was held that even if there is some complexity is involved, the jurisdiction of the taxing authorities under Section 154 of the Act is not ousted.
12. For the foregoing reasons, we find it difficult to agree with the impugned order of the CIT(A). The CIT(A) in our view, is not justified in cancelling the impugned order of the AO passed under Section 154 allocating the income of the assessee-firm among its partners. We accordingly set aside the order of CIT(A) and restore the order of the AO, dt. 17th Nov., 1995, passed under Section 154 of the Act.