HIRA LAL SUTWALA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal has under section 66(2) of the Income-tax Act submitted to this court a statement of the case; the questions formulated by it are :

(2.) THE assessee, an individual, is a partner in two firms : (1) Ganesh Prasad Dalal (which for the sake of brevity will be known as firm G), and (2) Bhojnagarwala Brothers (which for the sake of brevity will be known as firm B). Now it is established that these are two distinct firms but at one time there was a dispute whether they were distinct firms, whether one of them was not a branch of the other. For the assessment year 1943-44, the assessee submitted a return showing separately his incomes from the partnership in the two firms. According to the return the two firms existed distinctly from each other. An Income-tax Officer assessed the firm G on the income from the two firm holding that the so-called firm B was not a distinct firm and was a mere branch of firm G. He, therefore, added up the incomes from the two firms and assessed the firm G on the aggregate. He then informed the Income-tax Officer, who had to assessee the assessee, of his share in the aggregate. THEreafter, the Income-tax Officer assessed the assessee on his share in the income from firm G as communicated to him by the Income-tax Officer assessing the firm. He did not include in the assessment any income from firm B. THE return did show that the assessee had derived income from firm B but he did not explain why he did not add that income to the income which the assessee had derived from firm G according to the information communicated to him by the Income-tax Officer assessing the firm G. He did not deal with that income at all. Subsequently, on an appeal against the assessment order against firm G, it was held that firm G was distinct from firm B and that firm G could be assessed only on its own income. When the assessed income of firm G was reduced by the Income-tax Officer on the basis of the appellate order, he communicated the fact to the Income-tax Officer assessing the assessee. THE Income-tax Officer thereupon rectified the assessment order passed by him previously and assessed the assessee on the reduced income. Again, he did not take into consideration his income from firm B and did not explain why he did not take it into consideration. Later an Income-tax Officer assessed firm B on its income and informed the Income-tax Officer assessing the assessee of this fact. According to the assessment order passed against firm B the assessees share in the income from it was higher than that shown by him in his return. THE Income-tax Officer once more rectified the assessment order passed against the assessee and added to the income on which he had assessed him previously the income derived by him from firm B. THEreafter, he issued a notice of demand for the excess income-tax. THE assessee did not comply with the notice of demand and the Income-tax Officer imposed a penalty upon him. THE assessee filed an appeal against the order imposing penalty on the ground that the assessment order passed a second time was illegal, because the procedure prescribed under section 34 had not been followed by the Income-tax Officer. THE Tribunal dismissed his appeal. THEn he applied for a statement of the case being submitted to this court and, on the Tribunals refusing to do so, he applied to this court for an order under section 66(2) and now the Tribunal has in compliance with this courts order submitted the statement containing the above facts.