COMMISSIONER OF INCOME TAX Vs. LAKHRAJ AND SONS

JUDGEMENT

(1.) IN pursuance of the direction of this court in T. C. P. Nos. 118 and 119 of 1979, the INcome-tax Appellate Tribunal, has referred the following common question of law for the assessment years 1960-61 and 1963-64 under section 256(1) of the INcome-tax Act, 1961, for our opinion :

(2.) THE assessee, Lekhraj and Sons, is a firm carrying on business at Madras. THE Income-tax Officer during the course of the assessment for the assessment year 1960-61 'noticed that the purchases in Bombay were claimed to have been made through a firm styled Ramchand and Co., Bombay, while the assessee paid certain amount of commission and interest to this concern. THE Income-tax Officer after going through the records held that there was no genuine partnership firm in Bombay and the business known as Ramchand and Co. was merely the branch of the Madras firm. THE above finding of the Income-tax Officer was upheld by the Income-tax Appellate Tribunal, Bombay, on May 20, 1963. THE Income-tax Officer on the basis of the above fact, included the income for the assessment year 1961-62 in the assessment of the firm assessed by him at Madras. THE assessment was completed by him on March 16, 1966, and the assessment for 1962-63 was also completed on the same lines on November 30, 1966. THE succeeding Income-tax Officer who completed the assessment for the assessment year 1963-64, following the findings of his predecessor and re-opened the assessment for the assessment year 1960-61. In the reassessment made for 1960-61 and the original assessment for the year 1963-64, the Income-tax Officer included a sum of Rs. 29,495 and Rs. 57,157 representing the income of the Bombay firm, respectively. THE Income-tax Officer also initiated proceeding for the penalty for the assessee's failure to disclose the income from the Bombay business and referred the matter to the Inspecting Assistant Commissioner for the imposition of penalty.

(3.) MR. C. V. Rajan, learned counsel for the Revenue, submitted that the order of the Income-tax Appellate Tribunal in the quantum appeal was the subject-matter of consideration before this court in the case of CIT v. Lekhraj and Sons [1985] 153 ITR 535 relating to the assessment years 1961-62 and 1962-63 and this court held that there was no determination by the Tribunal as to whether the Bombay firm was genuine or not and since the Tribunal had not adverted to the aspect relating to the genuineness of the firm, this court directed the Tribunal to rehear the appeal and record a clear finding regarding the genuineness of the Bombay firm and dispose of the appeal. According to learned counsel for the Revenue since the matter has been remitted by this court to the Appellate Tribunal to rehear the appeal with reference to the quantum appeals, the order of the Appellate Tribunal cancelling the penalty should be set aside and the matter should be remitted to the Appellate Tribunal to consider the matter again.