What is the Meaning of “Assessed “?

The meaning of assessed under section 184 to 187 of the Income Tax Act is not defined in the act itself. But we can take guidance from decisions by various high courts. Here are excerpts of courts orders in which the Hon’ble High Court and tried to explain the meaning of assessed.

Meaning of assessed defined by court

The phrase ‘assessed’ used in section 184 to 187 of the Income Tax Act came up before various high courts as detailed under :

1. Hon’ble ITAT-Delhi explained the meaning of ‘assessed’ while delivering judgment in ITO vs. D.M. Enterprises [1998] 67 ITD 123/100 taxman 287(Delhi – Trib.)(SMC) as under :

Section :184 to 187

Meaning : The use of word ‘assessed’ in section 185 clearly indicates that the status of the firm cannot be converted from firm to aop while processing the return under section 143(1)(a), which does not constitute an assessment made under the act.

2. Hon’ble Madras High Court explained the meaning of ‘assessed’ while delivering judgment in CIT vs. N.D. Georgopoules [1980] 125 ITR 630 (Mad.) as under :

Section : 207 to 216

Meaning : The word ‘assessed’ in section 212(3) refers only to the computation of the income or to the determination of the amount of tax payable.

3. Hon’ble Allahabad High Court explained the meaning of ‘assessed’ while delivering judgment in CIT vs. Gyan Chand & Sons [2005] 146 taxman 429 (all.) as under :

Section : 159 to 179

Meaning : Treating the object to be achieved by insertion of sub-section (9) the word ‘assessed’ should not be given literal meaning to mean completed assessment.

Section 184 to 187 of the Income Tax Act

Assessment as a firm.

184. (1) A firm shall be assessed as a firm for the purposes of this Act, if— (i) the partnership is evidenced by an instrument ; and

(ii) the individual shares of the partners are specified in that instrument.

(2) A certified copy of the instrument of partnership referred to in sub-section (1) shall accompany the return of income of the firm of the previous year relevant to the assessment year commencing on or after the 1st day of April, 1993 in respect of which assessment as a firm is first sought.

Explanation.—For the purposes of this sub-section, the copy of the instrument of partnership shall be certified in writing by all the partners (not being minors) or, where the return is made after the dissolution of the firm, by all persons (not being minors) who were partners in the firm immediately before its dissolution and by the legal representative of any such partner who is deceased.

(3) Where a firm is assessed as such for any assessment year, it shall be assessed in the same capacity for every subsequent year if there is no change in the constitution of the firm or the shares of the partners as evidenced by the instrument of partnership on the basis of which the assessment as a firm was first sought.

(4) Where any such change had taken place in the previous year, the firm shall furnish a certified copy of the revised instrument of partnership along with the return of income47 for the assessment year relevant to such previous year and all the provisions of this section shall apply accordingly.

(5) Notwithstanding anything contained in any other provision of this Act, where, in respect of any assessment year, there is on the part of a firm any such failure as is mentioned in section 144, the firm shall be so assessed that no deduction by way of any payment of interest, salary, bonus, commission or remuneration, by whatever name called, made by such firm to any partner of such firm shall be allowed in computing the income chargeable under the head “Profits and gains of business or profession” and such interest, salary, bonus, commission or remuneration shall not be chargeable to income-tax under clause (v) of section 28.

In this article, you can get guidance from high courts on the meaning of assessed under section 184 to 187 of the Income Tax Act.

Updated up to Finance Act 2021