ASKARAN KISSENLAL Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) This reference under Section 66(1) of the Income-tax Act, 1922 (hereinafter referred to as the Act), arises out of the following facts.

(2.) A firm in the name and style of Askaran Kissenlal was doing business in jute from the year 1946. There were originally three partners in the firm, namely, (1) Askaran Bothra, (2) Hansraj Bothra and (3) Mulchand Bothra. The firm was reconstituted under a deed of partnership dated the 3rd April, 1952, whereby (1) Hiralal Jain, (2) Hulaschand Jain and (3) Bhowarilal Kissenlal, a Hindu undivided family consisting of Bhowarilal and Kissenlal with Bhowarilal as the karta, were admitted as partners as from the 3rd April, 1952. Bhowarilal and Kissenlal were the two sons of the original partner, Mulchand, who had other sons, and at the time of the execution of the deed, Kissenlal was a minor. Hiralal and Hulaschand were not related to the original partners and they introduced Rs. 1,41,500 and Rs. 1,44,145 respectively as their capital in the business. The aforesaid deed recited, inter alia, that the parties of the first, second and third parts (the original partners) consented for the extension of business and capital, and admitted (1) Bhowarilal Kissenlal, (2) Hiralal Jain and (3) Hulaschand Jain as co-partners under the terms and conditions of the partnership. Clause 7 of the deed defines the shares of the partners in the profits and losses of the firm and such share of each of the six partners is shown as 0-2-8 pies in the rupee. The deed was executed, amongst others, by Bhowarilal Bothra for and on behalf of Bhowarilal Kissenlal. For the assessment year 1955-56, the corresponding previous year being 2011 R. N., the assessment of income-tax of the firm was completed under Section 23(4) due to the non-compliance by the assessee with the statutory notice under Section 22(4) of the Act. The Income-tax Officer had required the assessee to produce its books of account for the three preceding accounting years 2008, 2009 and 2010 R. N. But, in spite of several adjournments granted by the Income-tax Officer to enable the assessee to produce such books, the assessee ultimately failed to do so and the assessment was completed on the 30th August, 1967, under Section 23(4). The assessee applied to the Income-tax Officer under Section 27 of the Act for setting aside the best judgment assessment under Section 23(4) and for making a fresh assessment. The Income-tax Officer, in rejecting the application, pointed out that the notice under Section 22(4) for the production of the three preceding years' account books was first served on the assessee on 27th July, 1957, as the Income-tax Officer was of the opinion that the examination of these books was essential in connection with the assessment proceedings for the year 1955-56 for the various reasons given in the assessment order. The Income-tax Officer mentioned the various dates on which adjournments were given at the request of the assessee to enable it to produce the aforesaid books. But, ultimately, on the failure of the assessee to comply with the aforesaid notice in spite of the adjournments granted, the best judgment assessment was made on 30th August, 1957. The Income-tax Officer was of the opinion that, having regard to the repeated opportunities allowed to the assessee for compliance with the requirements of the notice under Section 22(4) and other requisitions made during the course of the assessment proceedings, the assessee had actually no intention at all of producing the books and furnishing other documents and evidence. The assessee's appeal against the aforesaid order under Section 27 was also dismissed by the Appellate Assistant Commissioner. In his order, the Appellate Assistant Commissioner observed that, as in the meanwhile the Income-tax Officer had detected various manipulations in the accounts, the assessee had thought it expedient to withhold the books. The Appellate Assistant Commissioner also gave the assessee an opportunity of producing the books before him, but he was informed that since Askaran, the partner who used to deal with the accounts was dead, these books were no longer traceable and could not then be produced. The Appellate Assistant Commissioner observed that in the present case there was ample necessity for examining the books as there were several accounts in the names of parties where the balance as shown in the balance-sheet and as actually revealed by the books differed by several lakhs of rupees. As these balances were alleged to have been brought forward from the preceding years, the books of those years required examination. The Appellate Assistant Commissioner had no doubt in his mind that the assessee-firm had failed deliberately to comply with the terms of the Section 22(4) notice and did not produce the books which were necessary for the purpose of the correct determination of the income for that assessment and for the production of which ample opportunity was allowed to the assessee by the Income-tax Officer. The assessee's appeal to the Tribunal against the aforesaid order of the Appellate Assistant Commissioner also failed. The Tribunal agreed with the findings of the Appellate Assistant Commissioner that the assessee's default in not producing the earlier year's books was clearly established in view of the evidence available on the record and that the assessee firm was deliberately withholding those books because it suited them to do so.

(3.) The assessee made an application for registration under Section 26A of the Act for the assessment year 1955-56. It would be material here to mention that the firm had been granted registration from 1952-53 to 1954-55. So the application was in effect an application for renewal of registration. There was no dispute that the assessee-firm had been distributing its profits as per its books according to the shares prescribed in the partnership deed.