TMI Blog1970 (6) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... cember, 1948. It is an admitted position that up to the year of S.Y. 2013, which is equivalent to 23rd October, 1957, the petitioner had a branch at Bangalore and that the income earned by that branch at Bangalore was included in the income of the petitioner-firm up to the end of S.Y. 2013. However, on 24th October, 1957, the business of the petitioner at Bangalore is said to have been taken over by a separate and independent firm under the firm name of M/s. Ishwarlal Co. This firm is constituted under a partnership deed dated 24th October, 1957. It is an admitted position that the partners of this newly constituted firm at Bangalore are two major sons of Nagindas Mulchanddas, who is one of the partners of the petitioner-firm. Over and above these two major partners, one minor son of each of the remaining partners of the petitioner-firm is admitted to the benefits of the partnership. Thus, the newly constituted firm at Bangalore in the name of M/s. Ishwarlal Co. consists of two major partners and three minor partners, who are admitted to the benefits of the partnership. For the sake of convenience, both the parties have referred to this newly constituted firm at Bangalore as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preferred to the Tribunal but even the Tribunal rejected the prayer of the Bangalore firm to obtain the registration under the Indian Income-tax Act. While rejecting this prayer, the Tribunal observed that the Bangalore firm was not an independent firm and that it has continued as a branch of the petitioner-firm. This decision of the Tribunal is dated 10th September, 1963. In the meanwhile, the assessment of the petitioner's income for the assessment year 1959-60 was undertaken by the concerned Income-tax Officer. During the course of these assessment proceedings, a question arose whether the income earned by the Bangalore firm should be included in the income of the petitioner-firm on the ground that the Bangalore firm was not an independent entity. During the same assessment proceedings, the petitioner made an attempt to show that even during the course of the assessment of the income of the Bangalore firm, that firm was treated as an independent entity. It is further found from the record of the case that the copies of the orders recorded by the Income-tax Officer as well as the Appellate Assistant Commissioner with regard to the assessment of the Bangalore firm for the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of the assessment order passed by the Income-tax Officer, Bangalore, regarding the assessment of the income of the Bangalore firm for the assessment year 1959-60 is found to be containing a note that the assessment of the Bangalore firm for that year was made only as a protective measure because it Was apprehended that the newly constituted Bangalore firm continued to remain as a branch of the petitioner-firm at Surat. On receipt of these materials, the department found that there was a case for reassessment of the petitioner's income for the assessment years 1959-60 to 1961-62 because the petitioner had omitted to mention during the course of the relevant assessments-that the Bangalore firm was merely its branch and as a result of this omission the income earned by the Bangalore branch for the period mentioned above was not clubbed with the income earned by the petitioner-assessee. In view of this, the Income-tax Officer, Surat, addressed one letter to the petitioner on 28th February, 1967, and conveyed to him that it was proposed to reopen its assessment order in question "in view of appellate order dated September 10, 1965 of Income-tax Appellate Tribunal, Madras, of M/s. Is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellate Assistant Commissioner as regards the assessment of the Bangalore firm contain all the necessary facts and materials for coming to a conclusion whether the Bangalore firm was a branch of the petitioner-firm or whether it was a separate entity. Therefore, according to Shri Vakil, so far as the petitioner-firm is concerned, it has not suppressed any of the primary facts which were required to be disclosed during the course of its assessment. As against this, the contention of the department as found raised in the affidavit-in-reply can be best stated from that affidavit itself. If a reference is made to paragraph 13 of that affidavit, we find the following to be the case of the department in justification of the reopening of the assessment in question : " I say that I have reason to believe that the income of, the Bangalore firm really belonged to the petitioner. I say that the petitioner had not disclosed in its return the income of the Bangalore firm, and had thus failed to disclose fully and truly all facts material for its assessment....I submit that such non-disclose can only be established in the course of the proceedings for reassessment. I submit that if it is ul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers contain elaborate discussion on the question whether the Bangalore firm is genuine or not. Both these orders completely reveal all the basic facts and materials which Lave, ultimately led the Tribunal to a finding that the Bangalore firm is merely a branch of the petitioner-firm. There fore, if these orders were before the concerned Income-tax Officer during the course of the original assessment, it is quite apparent that all these facts were revealed by the petitioner-assessee to the department during the course of the original assessment. These facts are the primary facts and if they were revealed, it does not matter at all if the petitioner did not make an admission about the inference which can be drawn from these facts. As pointed out above, a contention which is raised by the department in affidavit-in-reply is that the default of the petitioner-firm consists in not disclosing the income earned by the Bangalore firm and not admitting that the said firm is its own branch. But the non-disclosure of this fact would not justify the department in reopening the assessment under clause (a) of section 147 of the Act for the simple reason that it is not a primary fact but an infer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause the affidavit-in-reply does not put reliance on, the non-disclosure of these three facts. Clause (a) of section 147 of the Indian Income-tax Act speaks about the, belief of the Income-tax Officer who seeks to re-open the assessment. It is not the case of the income-tax Officer that non-disclosure of the three facts to which the learned Advocate-General has drawn our attention has led to the formation of the belief which is contemplated by clause (a) of section 147 of the Act. Under these circumstances, we do not attach any importance to the note made by the Appellate Assistant Commissioner, Bangalore, with regard to the three facts to which our attention is drawn by the learned Advocate-General. Under the circumstances, we find that there is absolutely no material from which it could be said that the petitioner-firm has failed to disclose fully and truly all the materials necessary for its assessment for the relevant period and, therefore, it cannot be said that the escapement of the income, if any, was on account of the said non-disclosure by the petitioner-firm. If that is so, the proposed action of the Income-tax Officer would obviously be without jurisdiction. We, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X
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