DEO SHARMA PT Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) ON 3rd of December, 1968, the Income-tax Officer, Kanpur, issued two notices under Section 148 of the Income-tax Act, 1961, to the petitioner, Deo Sharma, stating that he had reasons to believe that the petitioner's income chargeable to tax for the assessment years 1948-49 and 1949-50 had escaped assessment within the meaning of Section 147 of the Act, and requiring the petitioner to file returns for the two years.

(2.) BY Writ Petition No. 341 of 1959 the petitioner has challenged the notice issued for the assessment year 1948-49, whereas in Writ Petition No. 1425 of 1969 he has questioned the validity of the notice issued in respect of assessment year 1949-50. As both these petitions are based on identical facts, it will be convenient to deal with them together.

(3.) THE petitioner claimed that as he was not a partner in the firm, Sharma and Co., the Income-tax Officer could not include any portion of the income of Sharma and Co. in his income. He also claimed that any assessment made against him in respect of the assessment of Sharma and Co. without notice to him was invalid. THE pleas raised by the petitioner did not find favour with the income-tax authorities. THE matter was referred to the High Court, which on May 20, 1960, held that even if the petitioner's wife was a partner in the firm as his benami, and the petitioner was the real owner of her share of profits, he did not become a partner in the firm for the purposes of the Partnership Act. In proceedings under Section 23(5), allocation of the income of a firm had to be made between the partners and then the income of each partner had to be taken into account in the assessment of that partner. THE proceedings under Section 23(5) should have stopped at that stage of allocation. THE further order passed in those very same proceedings that the income allocated to the share of the petitioner's wife would be added in the petitioner's income was beyond the jurisdiction exercisable in those proceedings and the order being without jurisdiction could not attract the provisions of the proviso to Section 30(1) and be binding on the petitioner and bar him from contending that the income was not to be taxed in his hands. THE fact that the partner happened to be the petitioner's wife, by itself, could not take away his right to be heard. THE decision of the High Court has since been reported in Pt. Deo Sharma v. Commissions of Income-tax, 1961 41 ITR 235. THEreafter, the matter went back to the Income-tax Officer through the Tribunal and is still pending.