SOHAN SINGH Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THESE references under S. 256(1) of the INCOME TAX ACT, 1961, relate to the assessment of Shri Sohan Singh for the asst. yrs. 1963 -64 to 1969 -70. The relevant previous years are the financial years 1962 -63 to 1968 -69.

(2.) TWO common questions of law have been referred for the opinion of this Court. They arise out of the same set of facts. These references can, therefore, be disposed of by a common order. The assessments of Shri Sohan Singh for the asst. yrs. 1963 -64 to 1969 -70 were originally completed by taking into account his income by way of salary from two private limited companies, his income from dealing in shares and also his income by way of interest, the full details of which are not relevant for our present purposes. These assessments have since been reopened under S. 147(a) of the INCOME TAX ACT, 1961, and reassessments have been made by including in the total income of the above assessee, the income ostensibly earned by a firm known as Preetpal Singh and Company. It is the correctness of these reassessments that is being challenged in these references.

(3.) THE first assessment of the firm constituted as above came up for consideration before the ITO, District VIII -B (Addl.), New Delhi, for the asst. year 1963 -64. In the course of these proceedings, the above ITO summoned Shri Surinder Singh Kohli and examined him at length on March 28, 1968. The officer came to the conclusion, for reasons which were set out in the assessment order, that the income of the firm known as Preetpal Singh and Company in fact belonged to Shri Sohan Singh and not to a firm as claimed. However, he also proceeded to frame a protective assessment on the firm in respect of the income shown by it and in the light of this, he also passed an order granting registration to the firm under S. 185 of the INCOME TAX ACT, 1961. Similar assessments of a protective nature on the firm as a registered firm were apparently made for the other assessment years with which we are here concerned. The above information was communicated by the ITO, District VIII - B (Addl.), to the ITO who was in -charge of the assessments of Shri Sohan Singh. On receipt of this information and on examining the assessment order passed in the case of the firm, the ITO assessing Shri Sohan Singh had reason to believe that the assessee had concealed the full particulars of his income in the original returns inasmuch as the income of the firm styled Preetpal Singh & Co. really appeared to belong to his assessee, Shri Sohan Singh. He, therefore, reopened the assessments of Shri Sohan Singh under S. 147(a) with the approval of the CIT. In the course of further proceedings before him, he examined the partnership deeds, recorded statements from Shri Sohan Singh, Shri Gurbachan Singh (the brother of Shri Sohan Singh) and certain brokers Shri Bhagwan Dass Gupta, Shri P. S. Khambate & Co. and Shri H. P. Mehta. He also recorded a statement of Shri Hindpal Singh, an employee of Shri Sohan Singh. Ultimately, he came to the conclusion, for the reasons set out in a detailed order passed in relation to the asst. year 1963 -64, that Preetpal Singh & Co. was only benami concern of Shri Sohan Singh himself and that Shri Sohan Singh was the beneficial owner of the income said to have been earned by the firm. He, therefore, included the income which had been assessed (protectively) in the name of Preetpal Singh & Co. by the officer assessing the firm in the total income of Shri Sohan Singh. Similar orders were passed in relation to the asst. yrs. 1964 -65 to 1969 -70. The appeals of Shri Sohan Singh against these assessment orders having been rejected by the AAC as well as the Tribunal, the following two questions of law have been referred to this Court at the instance of the present assessee, Shri Sohan Singh :