TMI Blog1954 (3) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. The facts that led up to the Institution of these applications cannot be in dispute. B. Audayya and C. Pitchayya carried on trade in textiles. There were three firms. The first firm was known as Audayya and Pitchayya. There was a registered deed of partnership dated 20-4-1936, and the partners purported to dissolve the partnership on 31-3-1948. The second firm was known as C. Pitchayya and Co., and purported to consist of C. Pitchayya and one R. Subba Rao. The deed of partnership between the two was dated 30-7-1941, and the partnership was dissolved on 31-3-1949. The third firm was known as Prabhat Textiles. That partnership purported to include seven persons including B. Audayya and C. Pitchayya. The deed of partnership was dated 1-12-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income Tax rules. The order of assessment for 1943-44 was dated 14-8-1952 and that for 1944-45 was dated 25-2-1953. Narayana Chetti, one of the alleged partners, filed W. P. No. 613 of 1952 with reference to the assessment for 1943-44 and W. P. No. 201 of 1953 with reference to the assessment for 1944-45. 4. Similar action under Section 34 was taken against firms I and II with notices issued under Section 34(1) dated 14-8-1951 addressed to Pitchayya on behalf of the firms. The escaped income in the case of these two firms also was assessed on the best judgment basis. The Income Tax Officer held that firm No. II was a fictitious firm, and that the business of both firms I and II really constituted one business. The registration of bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he three firms was without jurisdiction, as rule 6-B was 'ultra vires' the Central Board of Revenue, which promulgated the rules under the powers conferred on it by the Act, and (3) That it was illegal to assess escaped income under Section 34 on an unregistered firm, while the original assessment for the assessment years 1943-44 and 1944-45, which still stood, was on the basis that the firms were registered under Section 26-A of the Income Tax Act. 8. 'Point No. 1': Learned counsel for the petitioners referred to Section 23(5) of the Act and contended that it was not the registered firm that was the assessee, as Section 23(5) provided for the apportionment of the tax liability between the partners of the registered firm. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. 'Point No. 2:' We are unable to accept the contention of the learned counsel for the petitioners that rule 6-B is 'ultra vires' the Central Board of Revenue. No doubt Section 26-A(2) provides that the application for registration should contain such particulars and shall be in such form, and be verified in such manner, as may be prescribed. Section 59 confers the powers of making rules. Section 26-A read with Section 69 of the Act, the learned counsel for the petitioners contended, did .riot authorise the Central Board of Revenue to provide for the cancellation of registration. Specific provisions for cancellation of registration have no doubt been made in the Act itself under Section 23(4) of the Act, and an order for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht be scope of Rule 6-B, the cancellation of registration in these cases was in the course of assessment proceedings of which the alleged partners had full notice. It may not be necessary to go into the question, whether rule 6-B which does not provide for the issue of notice, is therefore ultra vires. In the circumstances proved in this case. 11. The next contention of the learned counsel for the petitioners was that rule 6-B could not be made retroactive in its operation. That contention really ignores the basic feature of the case that it was with reference to the two assessment years 1943-44 and 1944-45 for each of which years registration had been granted under Section 26-A, that the Income Tax Officer purported to cancel the regist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Section. 34 of the Act, the Income Tax Officer could deal only with the escaped income of a firm and, in doing so, he cannot go back upon the assessment already made under Section 23; but in making assessment under Section 34 all the powers conferred upon the Income Tax officer under Section 23 can and should be exercised; and with reference to the given assessment year it was perfectly open to the Income Tax Officer to deal with the assessment on the basis that it was an unregistered firm, after cancelling the registration that had already been granted. 14. The petitions fail and are dismissed with costs of ₹ 250, each in W. P. Nos. 613 and 629 of 1950. There will be no order as to costs in W. Ps. Nos. 201 and 202 of 1953. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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