COMMISSIONER OF INCOME TAX Vs. MANAKLAL PORWAL

JUDGEMENT

(1.) ON a direction by this court on November 15, 1968, in D.B. Income-tax Cases Nos. 7, 8 and 9 of 1968, the Income-tax Appellate Tribunal, Jaipur Bench, has referred the following question of law for the opinion of this court:

(2.) WE may state a few relevant facts. Manaklal was an "A" class contractor and was carrying on the business of construction engineer for a number of years up to March 31, 1955. With effect from April 1, 1955, he entered into a partnership agreement with Shri Kalulal, Shri Amritlal and one Smt. Jatan Bai, each of them having 1/4th share in the profits and losses of the said firm. In respect of the assessment year 1956-57, an application was moved by the assessee-firm for registration on the basis of the partnership deed and for the assessment year 1957-58, an application for renewal of registration was also moved. Along with the application, the assessee-firm filed an application dated March 6, 1956, for registration of the firm to the Registrar of Firms, certificate of registration was obtained from the Registrar of Firms and an application was made to M/s. Apaj Navinchand & Co., Udaipur, for opening a credit account for supply of petrol. The Income-tax Officer examined Shri Kalulal, Shri Amritlal and Smt. Jatan Bai with a view to find out whether they were genuine partners of the firm. Shri Manaklal was not examined. The Income-tax Officer found that there is no specific proof that the proprietary business is converted into a partnership business. The orders of the Income-tax Officer were challenged in appeal before the Appellate Assistant Commissioner and before the Appellate Assistant Commissioner some more material was presented which was taken into consideration by the Appellate Assistant Commissioner. The assessee's claim for registration and for renewal of registration was, however, rejected. The assessee further appealed to the Income-tax Appellate Tribunal against the orders of the Appellate Assistant Commissioner. Before the Income-tax Appellate Tribunal, the assessee-firm produced further evidence in respect of its claim regarding the genuineness of the firm. Affidavits of five persons were produced and four certificates of engineers were produced. It may be mentioned that before the Appellate Assistant Commissioner, it was pointed out that the firm was dissolved on March 31, 1962, and a deed of dissolution was produced. The Tribunal, after considering the evidence on record including the additional evidence, held that the position has nowhere improved and that the assessee-firm failed to establish its claim for registration of the firm. An application was moved by the assessee under Section 66(1) of the Indian Income-tax Act, 1922, but it was rejected by the Tribunal. Thereupon the assessee-firm approached this court under Section 66(2). The assessee's application was rejected by this court on August 24, 1965.

(3.) MR. K.C. Bhandari, appearing on behalf of the assessee, submitted that it is well established by a series of decisions of the Supreme Court that the findings arrived at in any previous year do not operate as res judicata nor the principle of estoppel is attracted. The findings arrived at earlier are not in any way binding or conclusive on the assessee as well as on the Revenue. He referred to the decision in ITO v. Murlidhar Bhagwan Das [1964] 52 ITR 335 (SC). The majority of the judges in that case held that under the Income-tax Act, a year is the unit of assessment. The decision of an Income-tax Officer given in a particular year does not operate as res judicata in the matter of assessments of the subsequent years. The jurisdiction of the Tribunals in the hierarchy created by the Act was no higher than that of the Income-tax Officer and it was also confined to the year of assessment. In M.M. Ipoh v. CIT [1968] 67 ITR 106, their Lordships of the Supreme Court observed as under (at p. 118):