BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS)

(UNDER SECTION 246A OF INCOME TAX ACT, 1961)

(Appeal no. ……../2019)

IN THE MATTER OF

MR. A……………………………………………..……………………..APPEALLANT

VERSUS

ASSESSING OFFICER…………………….………………...................RESPONDANT

WRITTEN AND FILED BY THE COUNSEL FOR THE RESPONDANT

MEMORANDUM ON BEHALF OF THE RESPONDANT

CONTENTS
List Of Abbreviations......................................................................................................................2

INDEX OF AUTHORITIES...........................................................................................................3

Statement Of Jurisdiction................................................................................................................4

Statement Of Facts...........................................................................................................................5

Issues Raised....................................................................................................................................6

1|Page
ISSUE 1: WHETHER THE PRESENT APPEAL IS MAINTAINABLE UNDER SECTION
246A OF THE INCOME TAX ACT BEFORE COMMISSIONER OF INCOME TAX
(APPEALS) ?...................................................................................................................................6

Issue 2: Whether Assessing Officer Was Justified in Ascertaining the Tax Liability Of Mr. A?...6

Summary Of Arguments..................................................................................................................7

ISSUE 1: WHETHER THE PRESENT APPEAL IS MAINTAINABLE UNDER SECTION

246A OF THE INCOME TAX ACT BEFORE COMMISSIONER OF INCOME TAX
(APPEALS) ?...................................................................................................................................7

Issue 2: Whether Assessing Officer Was Justified in Ascertaining the Tax Liability Of Mr. A?...7

Arguments Advanced......................................................................................................................8

ISSUE 1: WHETHER THE PRESENT APPEAL IS MAINTAINABLE UNDER SECTION

246A OF THE INCOME TAX ACT BEFORE COMMISSIONER OF INCOME TAX
(APPEALS) ?...................................................................................................................................8

 The Appropriate Forum Upto Appellate Stage For Finalizing The Case:.............................10

 First Appeal :..........................................................................................................................10

 Second Appeal :......................................................................................................................11

 Third Appeal:.........................................................................................................................12

 Final AppeaL:.........................................................................................................................12

Issue 2: Whether Assessing Officer Was Justified in Ascertaining the Tax Liability Of Mr. A?.13

Prayer.............................................................................................................................................18

LIST OF ABBREVIATIONS

& ........................................................................................................................................And

IT………………...…………………………………………………………………Income Tax

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CIT (A)…………………………………………………..Commissioner of Income Tax Appeal

SC…...……………………………………………………………………….…Supreme Court

AIR………………………………………….………………………………All India Reporter

ITR Income Tax Reporter

s. Section

INDEX OF AUTHORITIES

BOOKS REFERRED:

 Taxmann’s Direct Taxation.

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CASES CITED :

1. CIT v. Sakseria Cotton Mills Limited, [1980] 124 ITR 570 (Bom.).

2. CIT v. Khemchand Ramdas, (1938) 6 ITR 414 (PC).
3. District Excise Officer v. Income Tax Officer, (2001) 68 TTJ Del 436.
4. CIT v. Kanpur Coal Syndicate, (1964) 53 ITR 225 (SC).

5. U.P. Pollution Control Board v. Kanoria Industrial Ltd. (2003) 259 ITR 321 (SC).
6. CIT v. A.N. Naik Associates, (2004) 265 ITR 346 (Bom).
7. B.T. Patil and Sons v. CGT, [2001] 247 ITR 588.
8. Malabar Fisheries Co. v. CIT [1979] 120 ITR 49.
9. Suvardhan v. CIT, 2006 156 Taxman 229 (Kar).

WEBSITE REFERRED:

 www.manupatrafast.com
 www.westlawindia.com

STATEMENT OF JURISDICTION

It is humbly submitted before this Commissioner of Income Tax (Appeals ) that the present
Appeal of the is maintainable under Section 246A1 of Income Tax Act, 1961.
1
Appealable orders before Commissioner (Appeals).
246A. (1) Any assessee or any deductor or any collector aggrieved by any of the following orders (whether made
before or after the appointed day) may appeal to the Commissioner (Appeals) against—

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 STATEMENT OF FACTS

 A firm was constituted by two partners by Mr. A and Mr. B in their individual capacity
and after some years one of the two partners Mr. A purchased the share of the other
partner.
 On receipt of the sale considerations, the other partner agreed to dissolve the firm and the
purchaser partner took over the assets and liabilities of the firm.

 (a) an order passed by a Joint Commissioner under clause (ii) of sub-section (3) of section 115VP or an order
against the assessee where the assessee denies his liability to be assessed under this Act or an intimation under sub-
section (1) or sub-section (1B) of section 143 or sub-section (1) of section 200A or sub-section (1) of section
206CB, where the assessee or the deductor or the collector objects to the making of adjustments, or any order of
assessment under sub-section (3) of section 143 except an order passed in pursuance of directions of the Dispute
Resolution Panel or an order referred to in sub-section (12) of section 144BA or section 144, to the income assessed,
or to the amount of tax determined, or to the amount of loss computed, or to the status under which he is assessed.

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  On the question of charge of capital gain tax, the AO held that it was a sheer case of tax
liability in the hand of the Mr.A and initiated proceedings of assessment.

Hence, the present appeal lies.

ISSUES RAISED

ISSUE 1: WHETHER THE PRESENT APPEAL IS MAINTAINABLE UNDER SECTION

246A OF THE INCOME TAX ACT BEFORE COMMISSIONER OF INCOME TAX
(APPEALS) ?

ISSUE 2: WHETHER ASSESSING OFFICER WAS JUSTIFIED IN ASCERTAINING THE TAX

LIABILITY OF MR. A?

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 SUMMARY OF ARGUMENTS

ISSUE 1: WHETHER THE PRESENT APPEAL IS MAINTAINABLE UNDER SECTION

246A OF THE INCOME TAX ACT BEFORE COMMISSIONER OF INCOME TAX
(APPEALS) ?
It is humbly submitted before the Hon’ble Court that the Appellant being aggrevied by the order
of the Assessing officer has filed the appeal before the Commissioner Of Income-Tax (Appeals).
Aggrieved by the order of the Assessing Officer, the assessee can file appeal against the order of
the Assessing Officer before the first appellate authority i.e. the Commissioner Of Income-Tax
(Appeals).

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ISSUE 2: WHETHER ASSESSING OFFICER WAS JUSTIFIED IN ASCERTAINING THE TAX
LIABILITY OF MR. A?

It is humbly submitted before the Commissioner of Income Tax (Appeal) that the Assessing
Officer was justified in coming to the conclusion that the assessee was liable to capital gains
under section 45(4) on the ground that there was transfer or distribution of capital assets on the
dissolution of the partnership firm.

ARGUMENTS ADVANCED

ISSUE 1: WHETHER THE PRESENT APPEAL IS MAINTAINABLE UNDER SECTION

246A OF THE INCOME TAX ACT BEFORE COMMISSIONER OF INCOME TAX
(APPEALS) ?
It is humbly submitted before the Hon’ble Court that the Appellant being aggrevied by the order
of the Assessing officer has filed the appeal before the Commissioner Of Income-Tax (Appeals).
Aggrieved by the order of the Assessing Officer, the assessee can file appeal against the order of
the Assessing Officer before the first appellate authority i.e. the Commissioner Of Income-Tax
(Appeals).

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Section 246A2 of the Income Tax Act specifies the orders against which an appeal can be filed
before the CIT(A).  According to Section 246 A the an appeal can be preferred before the
CIT(A) against the order passed against the taxpayer in a case where the taxpayer denies the
liability to be assessed under Income Tax Act.

In the Case of CIT v. Sakseria Cotton Mills Limited3, the Court held that the entire assessment
proceedings are open before the CIT (A).

The Commissioner of Income Tax has the Jurisdiction under section 246 (1) (a) of the Act as the
case of the appellant falls within it.

The aforesaid sub-clause can be broadly divided in 3 parts. Where the assessee denies his
liability to be assessed, where the objection is raised against an order of assessment under section
143 or 144 of the Act and where an objection is raised against the income assessed, tax
determined or the status under which the same is assessed.4 The first segment is wider in its
compass and jurisdiction. While the word “assessee” is defined in section 2(7) of the Act, there is
no such definition in regard to the assessment which has to be understood in general and normal
terms. In this respect, dictionary meaning can be present into service.

Under the Black- Law Dictionary, 5th Edition, the expression ‘assess’ is given the meaning as
under “To ascertain, fix the value of. To fix the amount of the damages or the value of the thing
to be ascertained. To impose a pecuniary payment upon persons or property. To ascertain, adjust,
and settle the respective shares to be contributed by several persons toward an object beneficial
to them all, in proportion to the benefit. received.Similar meaning has also been assigned to the
expression ‘assess’ in the New Shorter Oxford Dictionary.

2
Appealable orders before Commissioner (Appeals).
246A. (1) Any assessee or any deductor or any collector aggrieved by any of the following orders (whether made
before or after the appointed day) may appeal to the Commissioner (Appeals) against—
 (a) an order passed by a Joint Commissioner under clause (ii) of sub-section (3) of section 115VP or an order
against the assessee where the assessee denies his liability to be assessed under this Act or an intimation under sub-
section (1) or sub-section (1B) of section 143 or sub-section (1) of section 200A or sub-section (1) of section
206CB, where the assessee or the deductor or the collector objects to the making of adjustments, or any order of
assessment under sub-section (3) of section 143 except an order passed in pursuance of directions of the Dispute
Resolution Panel or an order referred to in sub-section (12) of section 144BA or section 144, to the income assessed,
or to the amount of tax determined, or to the amount of loss computed, or to the status under which he is assessed.
3
[1980] 124 ITR 570 (Bom.).
4
District Excise Officer v. Income Tax Officer, (2001) 68 TTJ Del 436.

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Thus, the expression, ‘assessment’ would connote to ‘fix, to ascertain, or fix the value of the
thing or to impose a pecuniary payment upon persons or property. As held in the case of CIT v.
Khemchand Ramdas5, the word ‘assessment’ is used in Income Tax Act as meaning sometimes
the computation of income, sometimes the determination of the amount of tax payable, and
sometimes the procedure laid down in the Act for imposing liability upon the taxpayer. “Thus,
assessment is something which is linked with the denial of liability, So whenever the assessee
denies his liability, the same would be covered under the expression ‘assessment’. The
expression ‘denial of liability’ on the other hand is comprehensive enough to take in not only the
total denial of liability but also the liability to tax under peculiar circumstances. In either case,
the denial is a denial of liability to be assessed under the provisions of the Act.

In the case of CIT v. Kanpur Coal Syndicate6, it was held that it is true that there is no express
provision of appeal under the Act, nevertheless the same is covered under section 246(1)(a) of
the Act which is comprehensive in its scope. Mr. Legal Reporter is an assessee as it is a person
by whom tax or sum of money has been held to be payable under the Act. Liability has been
imposed on the assessee not in regard to the amount recoverable but also interest and penalty. 

An order against the assessee, where the assessee denies his liability to be assessed under
this Act. The above provides for the following prescription 7 :

(a) there is an existence of order.,

(b) it is against the assessee.,

(c) assessee denies his liability to be assessed under the Act.

Therefore, it is humbly submitted that the Commissioner of Income tax (Appeal) has the
jurisdiction in the present case.

 THE APPROPRIATE FORUM UPTO APPELLATE STAGE FOR FINALIZING THE CASE:

Under the Income Tax Act, 1961 two alternatives are available to the assessee if he is not
satisfied with the order passed by the Assessing Officer, one is revision and other is appeal. The

5
(1938) 6 ITR 414 (PC).
6
(1964) 53 ITR 225 (SC).
7
District Excise Officer v. Income Tax Officer, (2001) 68 TTJ Del 436.

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assessee is given a right of appeal by the Income tax Act where he feels aggrieved by the order
of the assessing authority. However, the assessee has no inherent right of appeal unless the
statute specifically provides that a particular order is appealable. 8 There are four stages of appeal
under the Income-tax Act, 1960, the first is Assessment order passed by assessing officer under
section 143(3), 144, 153A, 147 of the Income Tax Act 1960.

If appeal is not preferred, or could not be filed within the time limit allowed, the assessee can
apply under section 264 to the Commissioner of Income Tax for revision of the order of the
assessing officer, called as revision in favour of assessee. CIT can also take up the case suo moto
for revision under s. 264 of the Act.

 FIRST APPEAL :
Under Section 246A the first appeal against the order of the Assessing Officer shall, except in
certain cases lie with the commissioner (Appeals).9 Section 246A of the Act lists down the
category of orders, which can be appealed against.  The List is an exhaustive list and not an
inclusive list. Accordingly, if any order does not find place in any of the clauses of section 246A,
the same becomes a non appealable order. The first appeal can only be made by assessee. The
assessing officer cannot appeal to any higher authority against his own order. Remedy to the
assessing officer is contained in section 154 and s. 147. It is to be field in form no. 35 within 30
days of a.) the date of service of notice of demand relating to assessment or penalty if the appeal
relates to assessment or penalty; or b.) the date of payment of tax, where the appeal is under
s.248; or c.) the date on which the intimation or the order sought to appeal is served if it relates to
any other case.

However, the commissioner (appeal) may condone delay under section 249(3) if he is satisfied
that the appellant had sufficient cause for not presenting it within the time limit prescribed. No
appeal will lie in the following cases;

i.) Order levying interest u/s 234A, 234B, and 234C;

ii.) Revision order u/s 264;
iii.) Order of authority for advance ruling;
iv.) Order of Settlement Commission.

Such an appeal is to be decided within one year from the end of the financial year in which such
appeal is filed.

8
Proffessional Approach to Direct Tax Law and Practice, dr. Girish Ahuja, Dr. Ravi Gupta, 31 st ed. (2016), Bharat
Law House Pvt. Ltd.
9
Section 246 Refusing to grant registration under section 12AA and approval under section 80 G, Income Tax Act
1960.

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  SECOND APPEAL :

If the assesse is not satisfied by the order passed by the Commissioner( Appeals) he can appeal
under section 253(1)10 against the order of the commissioner(appeals) to the Appellate Tribunal
constituted under section 252 of Act. Similarly, the Principal Commissioner or Commissioner
may also direct the assessing officer to file an appeal against that order with the appellate
tribunal if he objects to any order passed by the commissioner (Appeals) under s. 154/250. 11 The
appeal to the Appellate Tribunal shall be filed in form 36 within 60 days of the date on which the
order sought to be appealed against, is communicated to the assessee or to the CIT, as the case
may be.12 The opposite party shall file memorandum of cross objections within 30 days of receipt
of notice of filing appeal against order of Commissioner (Appeals). 13 However, the Appellate
Tribunal may admit an appeal or permit the filing of memorandum of cross objection after the
expiry of the time limit, if satisfied that there was sufficient cause for not presenting it within
prescribed time limit.14

 THIRD APPEAL:
An appeal against the order passed by the Appellate Tribunal shall lie to the High Court under s.
260A of the Act before the date of establishment of National Tax Tribunal, if the High Court is
satisfied that the case involves a substantial question of law. In instances where the power to
appeal is not given by the Act he assesse/commissioner can file writ petition to the High Court.
Even in the absence of specific provision enabling commissioner to file writ petition before High
Court, there is an implied power authorizing him to file writ petition.15

The High Court can determine any issue which is not determined by the tribunal but can decide
only such questions which were raised but not determined by the tribunal. Therefore, it is
necessary that the question sought to be raised ought to have been raised before the Tribunal and
then if it has not determined it, one can say that it has not been determined by the Tribunal and,
therefore, High Court should look into it.16

10
S. 253(1): any assessee may file an appeal before the Appellate Tribunal against the following orders:
a.) an order passed by commissioner (Appeals):
i. under section 250i.e., order passed on the appeal filed before him.
ii. imposing penalty under section 271, 271A, 271AA, 271G and 272A.
iii. under section 154 regarding the ratification of mistake in an order passed under section 250 or in an order
imposing penalty under the above sections, if the ratification has not been done satisfactorily done by him.
b.) an order passed by
11
Section 253(2), Income Tax Act 1960.
12
Section 253(3), Income Tax Act 1960.
13
253(4), Income Tax Act 1960.
14
Section 253(5), Income Tax Act 1960.
15
CIT v. Vyas Bank Ltd., (2010) 194 Taxman 533 (Kar).
16
CIT v. Tata Chemicals Ltd. (2002) 256 ITR 395 (Bomb).

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The Principal Chief Commissioner or Chief Commissioner/ Principal Commissioner or
Commissioner or assessee aggrieved by any order passed by Appellate Tribunal may file an
appeal to the High Court17. The appeal should be filed within 120 days from the date on which
the order appealed against received by the assessee or Principal Chief Commissioner or Chief
Commissioner/ Principal Commissioner or Commissioner. It should be accompanied by such fee
as may be specified in the relevant law relating to court fees filing appeals to high court. It
should be in the form of a memorandum of appeal precisely stating the substantial question of
law involved. However, the High Court may admit an appeal after the 120 days if it is satisfied
that there was sufficient cause for not presenting it within prescribed time limit. 18 The appeal
should be heard by a bench of not less than 2 judges. The High Court has power to recall its
order if sufficient cause is shown and the fact that the order was passed on merits makes no
difference.19

 FINAL APPEAL:
The assessee Principal Commissioner or Commissioner may prefer an appeal to the Supreme
Court from any judgment of the High Court delivered. However, the appeal can lie to the
Supreme Court only if high court certifies the case to be fit for appeal to SC, however aggrieved
party may make an application under article 136 for special leave. The Supreme Court upon
hearing any such case shall decide the question of law rased therein and shall deliver its
judgment thereon containing the ground on which such decision is founded. Where the judgment
of the High Court is varied or reversed in appeal, effect shall be given to the order of the
Supreme Court in the manner provided under section 260A. 20 Supreme Courts decisions are
binding for non-appellants as well. Law declared by SC is binding on all Courts and Tribunals in
view of article 141 of constitution. 21 The cost of appeal is wholly on the discretion of the
Supreme Court.22

ISSUE 2: WHETHER ASSESSING OFFICER WAS JUSTIFIED IN ASCERTAINING THE TAX

LIABILITY OF MR. A?

It is humbly submitted before the Commissioner of Income Tax (Appeal) that the Assessing
Officer was justified in coming to the conclusion that the assessee was liable to capital gains

17
Proffessional Approach to Direct Tax Law and Practice, dr. Girish Ahuja, Dr. Ravi Gupta, 31 st ed. (2016), Bharat
Law House Pvt. Ltd.
18
Section 260A(2A), Income Tax Act 1960.
19
Proffessional Approach to Direct Tax Law and Practice, dr. Girish Ahuja, Dr. Ravi Gupta, 31 st ed. (2016), Bharat
Law House Pvt. Ltd.
20
Section 262, Income Tax Act 1960.
21
U.P. Pollution Control Board v. Kanoria Industrial Ltd. (2003) 259 ITR 321 (SC).
22
Section 262(2), Income Tax Act 1960.

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under section 45(4) on the ground that there was transfer or distribution of capital assets on the
dissolution of the partnership firm.

Section 45(4) of the Income Tax Act, 1961 reads as under:

“ The profits or gains arising from the transfer of a capital asset by way of distribution of capital
assets on the dissolution of a firm or other association of persons or body of individuals (not
being a company or a co-operative society) or otherwise, shall be chargeable to tax as the income
of the firm, association or body, of the previous year in which the said transfer takes place and,
for the purposes of section 48, the fair market value of the asset on the date of such transfer shall
be deemed to be the full value of the consideration received or accruing as a result of the
transfer.”

The expression “otherwise” has to be read with the words “transfer of capital assets” by way of
distribution of capital assets. Thus, it becomes clear that even when a firm is in existence and
there is a transfer of capital assets it comes within the expression “otherwise” as the object of the
amending Act was to remove the loophole which existed whereby capital gain tax was not
chargeable.

A reading of the said provision would show that the profits or gains arising from transfer of
capital assets by way of distribution of capital assets on dissolution of a firm shall be chargeable
to tax as income of the firm in the light of transfer that has taken place. Transfer has been defined
under section 2(47)23 of the Act. The definition of transfer under section 2(47) is inclusive
definition

 A reading of the section 47 of the Act would show that several transactions were considered as
no transfer for the purpose of section 45 of the Act. Prior to amendment section 47(2) read as
under:

23
Section 2(27): transfer", in relation to a capital asset, includes,-
(i) the sale, exchange or relinquishment of the asset; or
(ii) the extinguishment of any rights therein; or
(iii) the compulsory acquisition thereof under any law; or
(iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock- in- trade of a
business carried on by him, such conversion or treatment;] or]
(v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in
part performance of
a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 1 (4 of 1882 ); or
(vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co- operative society,
company or other association of persons or by way of any agreement or any arrangement or in any other manner
whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property.
Explanation.- For the purposes of sub- clauses (v) and (vi)," immovable property" shall have the same meaning as in
clause (d) of section 269UA;]

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“ any distribution of capital assets on the dissolution of a firm, body of individuals or other
association of persons.”

This was omitted by the Finance Act, 1987 with effect from 1988. Therefore, any transaction
resulting in distribution on dissolution of a firm has to be considered as ‘transfer’ in terms
of section 47.

It is humbly submitted that even without the amendment of section 2(47) the

It is humbly submitted that the Bombay High Court in the case of CIT v. A.N. Naik
Associates24 has noticed the effect of Act of 1987. After noticing, the Bombay High Court has
ruled that section 45 of the Income Tax Act is a charging section. “When the Parliament in its
wisdom has chosen to remove a provision, which provided ‘no transfer’, there is no need for any
further amendment to section 2(47) of the Act as argued before us. In our view, despite no
amendment to section 2(47), in the light of removal of clause (ii) to section 47, transaction
certainly would call for tax at the hands of the authorities.”25

The amendment was brought about to remove the mischief occasioned by parties avoiding to pay
tax, considering the law as declared and to plug the loopholes. The expression ‘otherwise’ must
be read to include transfer of capital assets of the assessee to a partner. As the section is a self-
contained code, there was no need to amend the definition of transfer under Section 2(47) of the
Act. The position therefore, will have to be examined in the context of the law as amended after
1988.

In B.T. Patil and Sons v. CGT26, the apex court observed : “In our view, when there is a
dissolution of a partnership or a partner retires and obtains in lieu of his interest in the firm, an
asset of the firm, no transfer is involved .. . But the position is different when, during the
subsistence of a partnership, an asset of the partnership becomes the asset of only one of the
partners thereof ; there is, in such a case, a transfer of that asset by the partnership to the
individual partners.”

Thus, when a subsisting partner receives from the firm an asset then there is a transfer of that
asset from the partnership to the individual partner. In other words, when an asset of the
partnership becomes the asset of one of the partners it amounts to a transfer.27

Moreover, pursuant to the inclusion of Sub-section (4) in Section 45, on the dissolution of a
partnership the profits or gains arising from the transfer of capital asset are chargeable to tax as
income of the firm. By insertion of Section 45(4) what was otherwise not taxable has been made
24
(2004) 265 ITR 346 (Bom).
25
CIT v. A.N. Naik Associates, (2004) 265 ITR 346 (Bom).
26
[2001] 247 ITR 588.
27
B.T. Patil and Sons v. CGT, [2001] 247 ITR 588.

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taxable. Section 45(4) have been introduced with a view to overcome the judgment of the apex
court and various other judgments which took a view that the firm on its own has no right but it
is the partners who own jointly or in common the asset and thereby remedy the mischief
occasioned.28

Distribution of capital assets on dissolution now is subject to capital gains tax unless it does not
fall within the definition of transfer under Section 2(47). Section 45 is a charging section. The
purpose and object of the Act of 1987 was to charge tax arising on distribution of capital assets
of firms which otherwise was not subject to taxation. If the language of Sub-section (4) is
construed to mean that the expression “otherwise” has to partake of the nature of dissolution or
deemed dissolution, then the very object of the amendment could be defeated by the partners, by
distributing the assets to some partners who may retire. The firm then would not be liable to be
taxed thus defeating the very purpose of the Amending Act.29

On a conversion of the partnership assets into individual assets on dissolution or otherwise also
formed part of the same scheme of tax avoidance. To plug this loophole the Finance Act, 1987,
brought on the statute book a new Sub-section (4) in Section 45 of the Act. The effect is that the
profits or gains arising from the transfer of a capital asset by a firm to a partner on dissolution or
otherwise would be chargeable as the firm’s income in the previous year in which the transfer
took place and for the purposes of computation of capital gains, the fair market value of the asset
on the date of transfer would be deemed to be the full value of the consideration received or
accrued as a result of the transfer. Therefore, if the object of the Act is seen and the mischief it
seeks to avoid, it would be clear that the intention of Parliament was to bring into the tax net
transactions whereby assets were brought into a firm or taken out of the firm.30

In the case of Suvardhan v. CIT31 it was held that instead of amending Section 2(47), the
amendment was carried out by the Finance Act, 1987, by omitting Section 47(ii), the result of
which is that distribution of capital assets on the dissolution of a firm would be regarded as
“transfer”.

It is humbly submitted that it is clear from the facts that the partnership stood dissolved. Nil
return was filed, Assessment Officer notices in his order the dissolution deed and also of taking
over of assets and liabilities. Therefore, the conclusion of the Assessing Officer that this is a case
of transfer by way of distribution of capital assets on dissolution of the firm in terms of section
45(4) of the Act, and that the profits or gains there from is chargeable to tax is correct in law.

28
Malabar Fisheries Co. v. CIT [1979] 120 ITR 49
29
CIT v. A.N. Naik Associates, (2004) 265 ITR 346 (Bom).
30
2006 156 Taxman 229 (Kar).
31
Ibid.

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 PRAYER

IT IS HUMBLY SUBMITTED BEFORE THE COMMISSIONER OF INCOME TAX

(APPEALS) THAT:

In the above mentioned facts and circumstances, it is most respectfully prayed

that this CIT(A) may graciously be pleased to adjudge that:
 The present appeal is maintainable before the Commissioner of Income Tax
(Appeals).
The Transaction in the preset case amounts to transfer under section 2(47) Of the
Income Tax Act, 1960.
 The Assessing officer was correct in computing the liability of Mr A.

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 And pass any other order it may deemed to fit in the interest of justice, equity and
good conscience.

ALL OF WHICH IS RESPECTFULLY SUBMITTED

Counsel on behalf of
Respondant

……………………

Sd/-

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