COMMISSIONER OF INCOME TAX Vs. PATEL K R

JUDGEMENT

(1.) A.M. Patel, R. M. Patel and Rambhai M. Patel were the three partners of a firm called Select Pictures Circuit. These three partners had each invested a sum of Rs. 40,000 in the another concern called Cine Syndicate & Traders (P.) Ltd. When the income of the partnership firm was assessed in respect of the assessment year 1950-51 that sum of Rs. 1,20,000 which had been so invested by the partners was treated as the income of the firm by the Income-tax Officer and assessed accordingly. But the appeal preferred by the firm was allowed by the Appellate Assistant Commissioner who recorded a finding that that sum of money was not the income of the firm. He accordingly held that it was not taxable income of the firm.

(2.) BUT the Appellate Assistant Commissioner issued a direction in the appeal to the Income-tax Officer that he should proceed against the individual partners of the firm under the second proviso to section 34(4) of the Income-tax Act, 1922, and consider the assessability or otherwise of the part or the whole of their investment in the Cine Syndicate & Traders (P.) Ltd. On the basis of this direction the Income-tax Officer reopened the assessments of the partners and assessed a sum of Rs. 40,000 in the hands of each of them as income from undisclosed sources for the assessment year 1950-51.

(3.) IT is clear that the answer to the second question depends upon the answer to the first. If the first question has to be answered in favour of the assessee, the second also should be answered in the same way.