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I.T.A. No.4271/LB of 1985-86, decided on 15th December, 1986.

--S. 59--Self-Assessment Scheme (1984-1985), para. 6(c)--Claim of immunity under para. 6(c) of the Scheme Requirements--Partnership Firm of two partners-- Dissolution-- Income of remaining individual of such firm it subsequent year-- Comparison of income of individual with last assessed income declared by the Firm (before dissolution) on the basis of turnover/ receipts in order to see if the two bear the same proportion as their receipts/ turnover bear inter se--Assessee having worked in the capacity of an individual, income received by him held, could be compared to that he received as a partner and it was not comparable to the income of the firm.

Anwar Raza Naqvi for Appellant.

Muhammad Munir Qureshi, AC, DR, for Respondent.

Date of hearing: 26th November, 1986.

.--The assessee by this appeal regarding charge year 1984-85, is objecting to the order of learned A.A.C. dated 17-12-1985, by which his plea of immunity of the case to be subjected to detailed scrutiny was rejected.

The relevant facts briefly stated are that the assessee was a partner of a firm, along with a lady named Fiza Bano. As such he declared his share income from the firm for 1983-84 at Rs.9,050/ which was accepted. Later the firm suffered dissolution, the lady partner, Fiza Bano, leaving the firm with her share of capital. As a result the assessee became sole proprietor and took over the business as individual continuing to deal in the same goods (hosiery) as before. As an individual for this year he submitted his return. He showed 20% increase over his last assessed income and claimed immunity admissible under the SAS. He disclosed income as under:-

Comparing the above income with his share income for 1983-84 From the firm as a partner, his case appeared to qualify for immunity, but the ITO for comparison did not adopt his share 'income. Instead he took income of the firm based on turnover/ receipts for comparison. That income did not bear, the required ratio to the income declared for this year. Accordingly, he processed the case through detailed scrutiny. Aggrieved, the assessee preferred an appeal which having failed, he came here on further appeal.

As seen, the point falling for consideration here is that of immunity of the case under SAS. To the ITO the case did not appear to qualify for immunity and this view was endorsed by the A.A.C. in appeal. In so finding, both the officers relied on para 6 (c) of the Self-Assessment Scheme. This para is set out below for facility of reference.

6(c) if the income declared for the assessment year 1984-85 is higher by 20 per cent or more as compared with the highest assessed income in any of the three preceding years;

If the income declared for the assessment year 1984-85 Is higher than the income last assessed and the income declared bears the same proportion to the income last assessed is the turnover/ receipts declared fur assessment Near 1984-85 bears to the turnover receipts last assessed whichever is the higher.

It can be seen that latter part of the para. was applied to the case by the said officers. It requires comparison of the Income declared to that of the last assessed, on the basis of turnover/receipts in order to see if the two bear the same proportion as their receipts turnover bear inter se. Admittedly this test the declared income could not stand, the condition of same proportion remaining unsatisfied. But comparison of the receipts was wrongly made. The firm did not exist in the subsequent year. It stood dissolved. In individual capacity the assessee did the business, using his own small capital of Rs.20,000. The income made was his own derived as an individual and not from the firm. It was not comparable therefore to the income of firm. It could be compared only to the earlier share income shown by the assessee as partner of the firm. The receipts could not be compared. The same could have been compared, if the firm has continued to exist. But that was not the case. The firm was dissolved. The assessee worked in the capacity of an individual. The income received by him as such could be compared to that of his received as a partner. To the same it bore the requisite proportion, recording an increase of 20%.

Accordingly, I find the case qualified for immunity and on this finding I reverse the orders of officers below and direct that the income be accepted as declared.

M.B.A./404/T Appeal allowed.

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