RAJAREDDY MALLARAM Vs. COMMISSIONER OF INCOME TAX HYDERABAD

JUDGEMENT

(1.) The Income Tax Appellate Tribunal, Hyderabad Bench has referred the following questions of law to this court under Section 66(1) of the, Indian Income Tax Act:-

(2.) The relevant facts of the case are as follows; Three persons, namely, (i) Baba Gowd, (ii) Pir-kit Venkata Raj Reddy and (iii) Raj Reddy Mallaram formed an association called "Nizamabad Group Liquor Shops" (hereinafter referred to for the sake of convenience as Association) for the year 1358 Fasli and did business of liquor contract. The Association became dissolved at the end of 1358 Fasli. The Association ceased to exist altogether and the business done by it has been discontinued. On the facts concerned in this case, there does not seem to be any need to draw a distinction between discontinuance and dissolution, so far as the Association is concerned. The Income Tax Officer took cognisance of the matter and issued notice under Section 34 of the Act to Baba Gowd, one of the members of he Association on 2-3-1953 after obtaining the ap-proval of the Commissioner of Income Tax.The said notice was served on Baba Gowd on 11-3-1953 and the return was due on or before 16-4-1953. Baba Gowd did not file any return. The income Tax Officer sent a notice under Section 22(4) on 11-7-1933, asking the Association to submit the ac-count of the Nizamabad Group Liquor Shop. Baba Cowd did not file a return but sent a reply dated 20-7-1953 stating that the books of account were in :he possession of Pirkit Venkat Raj Reddy. The Income Tax Officer made enquiries and learnt that Pirkit Venkat Raj Reddy was dead and issued another notice to Baba Gowd dated 20-8-1953 to file a return. Baba Gowd did not file any return within the time allowed. The Income-tax Officer made, an order of assessment under Section 23(4) of the Indian Income-tax Act on 30-9-1953, describing the assessee as "The Nizamabad Group Liquor Shops C/o. Sri Baba Gowd Mutta Gowd, Excise Contractor, Nizamabad" and treating that assessee as an association of persons under the Income Tax Act.

(3.) The Income-tax Officers attempts to collect the tax from Baba Gowd proved futile. So, he (I.T.O.) issued a notice of demand to Rajah Reddy Mallaram on 13-3-1954. The latter obtained a copy of the order of assessment and filed an application under Section 27 of the Indian Income-tax Act for cancellation of the assessment. The Income-tax Officer received the application on 7-4-1954, and rejected it on two grounds, namely, (i) that it was out of time and (ii) that it was misconceived. Rajah Reddy Mallaram filed an appeal before the Appellate Assistant Commissioner. The latter held that the application had been filed before the Income-tax Officer within time. He allowed the appeal and directed the Income-tax Officer to cancel the order under Section 23(4) and make a fresh assessment as provided by Section 27 by giving an opportunity to the appellant to file a return and to produce the books of account of the dissolved Association of persons.