Law:

Section:

Section 184 of the Income-tax Act, 1961 [Corresponding to section 26A of the Indian Income-tax Act, 1922] - Firm - Position prior to 1-4-1993 - Assessment year 1958-59 and 1959-60 - Whether once an assessment has been made rightly or wrongly in status of a HUF then, unless an order under section 25A of Act, 1922 is passed, assessment will continue to be made in that status by a fiction of law - Held, yes - After death of common ancestor of a HUF his two sons namely "R" and "S" carried on business by forming a partnership firm - In course of assessment proceedings of assessment year 1942-43, assessee claimed partition under section 25A of Act 1922 which was accepted by ITO - Thereafter said two brothers formed another firm - For assessment year 1943-44, ITO also granted registration to that firm and assessed income therefrom in hands of "S" & "R" in their status as individuals and not representing their small HUF - However business of said firm was also discontinued and "S" formed another firm by taking two sons with him and in order that his two sons should also contribute some capital, - 'S' withdraw Rs. 10,000 from his capital account and gifted Rs. 5,000 to each of his two sons - However when said firm applied for registration, ITO disallowed same on ground that "S" was incompetent to make a gift to his sons or to form a partnership with his sons without first effecting a partition between himself and sons - Though AAC allowed registration to assessee, Tribunal restored finding of ITO - Whether since ITO had assessed share income of "S" from firm as his individual income and not income of his smaller HUF and that state of affairs continued for a period of more than 12 years, it could not be doubted that "S" had not taken into his head to make gift of a sum of Rs. 5000 each to his two sons out of share capital which stood in his individual name in books of firm - Held, yes - Whether a period of 12 years was a long time, and department or Tribunal could not brush aside assessment made in status of an individual merely by saying that an error had been committed - Held, yes - Whether since there was conduct of assessee for a period of over 12 years which was…

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