Sarita Vij and Co. vs Commissioner of Income Tax and Another

R.B. Msra, J.—These two IT appeals have been preferred by the appellant u/s 260A of the Income Tax Act, 1961 (in short called ''Act'') against the common order dated 6-1-1999 passed by the Income Tax Appellate Tribunal (''Tribunal''), Chandigarh in IT Case Nos. 2048 and 2049/Chd/1991 in respect of the assessment years 1986-87 and 1987-88, therefore, both these appeals are being disposed of by a common judgment.

While admitting both the appeals, following substantial questions of law were framed by the High Court qua adjudication:

(c) Whether assessment in the status of BOI can be legally sustained especially when the individuals'' share has already been assessed in the hands of co-owners on substantive basis?

(d) Whether the status of BOI can be ascertained, when no return in the status of BOI, nor any notice/letter from the Income Tax Officer regarding his intention to assess the case in the hands of BOI had been issued ?

(e) Whether Section 26 of the Income Tax Act, 1961 applies to the AOP or BOI also ?

(f) Whether in the facts and circumstances of the case the learned Tribunal was right in disallowing the expenses incurred on account of salaries to the persons employed for upkeep of the said property?

For the adjudication of the above questions of law, it is necessary to give brief facts as under:

The appellant is the wife of Mr. N.K. Vij, who was an engineer working in the Traffic Engineering Cell SCO 34-40, Sector-C, Chandigarh, who along with other co-owners, namely, Sonia Vij, Monika Vij, Nisha Vij, Ayesha Vij and Babita, had taken the property bearing description as Sudershan Kothi, The Mall, Dalhausie, District Chamba (Himachal Pradesh) from Smt. Raj Thakur individually made vide lease deed dated 18-1-1984 and collectively made on 22-6-1984. A copy of lease deed between Chamera Hydro Electric Project of M/s National Hydro Electric Power Corpn. Ltd. and M/s Sarita Vij & Co., owners dated 19-11-1984 is attached as Annexure P-2. It appears that prior to entering of the lease deed, the said persons had agreed for lease of the said property to Chamera Hydro Electric Project and others for which income from house property was shown individually in their IT returns from the assessment years 1984-85 to 1988-89. Copies of the agreement between co-owners with National Hydro Electric Power Corpn. Ltd. are annexed as Annexures P-3, P-4 and P-5. It appears the individuals were assessed separately, however, the Income Tax Officer, Palampur issued a notice u/s 148 of the Income Tax Act in the name of M/s Sarita Vij & Co. for the assessment year 1986-87. The appellant was also issued a notice u/s 139(2) of the Income Tax Act for the assessment year 1987-88, in pursuance of which the assessment was completed u/s 143(3) for the assessment year 1987-88 on 24-12-1990 (Annexure P-6), taking total income of Rs. 1,48,960 in the hands of M/s Sarita Vij & Co. in the status of body of individuals (in short ''BOI''). Against the said order, the appellants preferred appeals before the Commissioner (Appeals), Shimla on the ground that since there was no legal entity of the existence of M/s Sarita Vij & Co., Dalhausie, as such, the assessment could not have been framed in the status of ''BOI'' and since the income had already suffered tax in the hands of individuals, therefore, there arose no ground for double taxation for the same income. It appears that the appeals for the assessment years 1986-87 and 1987-88 were disposed of vide order dated 11-10-1991 (Annexure P-8), according to which the assessment of the appellant in the status of ''BOI'' was upheld. Being aggrieved, ITA Nos. 2048 and 2049/Chd/1991 were preferred before the learned Tribunal, which were decided by a common order dated 6-1-1999 (Annexure P-9), however, upholding the assessment status of ''