Law: Income Tax Act, 1961

Section: 28

(a) Income-tax------Income---Firm---Partner---Business---Transfer of business of firm as, a going concern to company---Dissolution of firm---Additional claim for work done by firm---Agreement for division of amounts receivable among erstwhile partners---Realisation of dues did not amount to business--¬Amounts not assessable in hands of firm---Indian Income Tax Act, 1961, S.28. (b) Income-tax--- ----Evasion of tax---Colourable transaction---Effect of Supreme Court decision in McDowells case---Transfer of business as a going concern to company---No evidence that transfer of business was not genuine--¬Dissolution of firm---Agreement for division of amounts receivable by firth among erstwhile partners---Not a device to evade tax. (c) Income-tax-- Discontinuance of business---Firm---Dissolution of firm---Additional claim for work done by firm---Amount realised by partners---Not assessable in hands of firm---Indian Income Tax Act, 1961. Ss.176(3) & 189(1). (d) Income-tax--- ----Assessment---Protective assessment---Doubt regarding assessable entity--¬Protective assessment can be made. (e) Income-tax--- ----Transfer of assets---Transfer of income without transfer of assets--¬Condition precedent for application of Ss.60 & 63---Dissolution of firm¬---Amounts due to firm received by partners---Sections 60 & 63 not applicable---Indian Income Tax Act, 1961, Ss. 60 & 63. CIT v. Star Andheri Estate (1994) 208 ITR 573 (Bom.) dissented from. Where there is doubt or ambiguity about the real entity in whose hands a particular income is to be assessed, the assessing authority is entitled to have recourse to making a protective assessment in the case of one and a regular assessment in the case of other. However, making a protective assessment does not affect the validity of the other assessment inasmuch as if ultimately one of the entities is really found to be liable to the assessment, then, the assessment in the hands of that entity alone remains the effective assessment and the other becomes infructuous. The levy is enforceable only under one assessment and not under both. Hemlata Agarwal (Smt.) v. CIT (1967) 6:1 ITR 428 (All.) and Jagannath Hanumanbux v: 1T0…

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