COMMISSIONER OF INCOME TAX Vs. HYDERABAD STONE DEPOT

JUDGEMENT

(1.) THIS case has come to us on reference made by a Bench of this Court on 28th July, 1971. The Bench noticed the conflict between Addepally Nageswara Rao & Bros. vs. CIT (1971) 79 ITR 306 (AP) and R.C. No. 50 of 1966 dated February 19, 1970 (CIT vs. Mandyala Govindu & Co. (1971) 82 ITR 926 (AP)) and R.C. Nos. 65 and 82 of 1968 dated February 10, 1971 (Khummaji Milapchand & Co. vs. CIT (1973) 91 ITR 333 (AP)). In order to resolve this conflict the matter has been referred.

(2.) BEFORE November 1, 1957, the Hyderabad Stone Depot consisted of 16 Partners. From November 1, 1957, however, under a deed of partnership executed on November 5,1957, a new partnership consisting of 18 partners was constituted. One of the partners, viz., Subash Keswarkar, being a minor, was admitted to the benefits of partnership.

(3.) FOR the asst. year 1959 -60, the firm filed an application under S. 26A of the IT Act before the ITO. Without making any order on the said application, the ITO made an assessment order treating the firm as an unregistered one. The assessment order was made on October 29, 1959. Subsequently, on an application made by the assessee under S. 27 of the Act, the ITO re -opened the assessment and made a fresh assessment on March 31, 1960, treating the firm as a registered one. The firm was thus assessed to a tax of Rs. 5,946.46. The ITO then allocated the profits among the 15 partners. The ITO disallowed the alleged loss of Rs. 26,369 and made certain adjustments.