1956 (4) TMI 60 - HC - Income Tax

Summary

Issues Involved:
1. Revision of the Income-tax Officer's order by the Commissioner under Section 33B.
2. Constitution of a firm for purposes of Section 26A.
3. Specification of individual shares in the partnership deed.
4. Validity of the Commissioner's orders canceling the registration of the firm.

Detailed Analysis:

1. Revision of the Income-tax Officer's Order by the Commissioner under Section 33B:
The first issue was whether the Commissioner of Income-tax could revise the order passed by the Income-tax Officer on 24th September 1949, for the assessment year 1947-48 under Section 33B. It was argued that Section 33B, which was enacted on 30th March 1948, could not apply to the assessment year 1947-48. The Tribunal rejected this argument, noting that the order of the Income-tax Officer was passed on 24th September 1949, after Section 33B came into force. The High Court agreed with the Tribunal, stating that Section 33B was in force when the Income-tax Officer passed the order, thus the Commissioner was competent to exercise his authority under Section 33B. Therefore, the first question was answered against the assessee and in favor of the Income-tax Department.

2. Constitution of a Firm for Purposes of Section 26A:
The second issue was whether Sm. Narmadabala Gupta, Dinanath Agarwala, and Basudeo Prasad Agarwala constituted a firm for the purposes of Section 26A. The assessee argued that the partnership continued after the death of Sm. Durgabati Devi based on the partnership deed dated 21st April 1943, which stipulated that the partnership would not dissolve upon a partner's death. However, the High Court held that a minor cannot enter into a partnership contract under Section 30(1) of the Partnership Act and Section 11 of the Contract Act. The court concluded that no valid partnership existed between Sm. Narmadabala Gupta and the two minor sons of Sm. Durgabati Devi. Therefore, the second question was answered against the assessee and in favor of the Income-tax Department.

3. Specification of Individual Shares in the Partnership Deed:
The third issue was whether the individual shares of Dinanath Agarwala and Basudeo Prasad Agarwala were specified in the partnership deed dated 21st April 1943. The assessee argued that the partnership deed should be read along with the will of Sm. Durgabati Devi, which bequeathed her half share to her two minor sons in equal shares. However, since the court concluded that there was no legal partnership, the third question became academic and was not answered.

4. Validity of the Commissioner's Orders Canceling the Registration of the Firm:
The fourth issue was whether the Commissioner of Income-tax had jurisdiction under Section 33B to cancel the registration of the firm granted by the Income-tax Officer. The High Court noted that the Commissioner could revise only the order of the Income-tax Officer, not the order of the Appellate Assistant Commissioner. The court observed that the Income-tax Officer had passed two orders: one under Section 26A granting registration and another under Section 23(5) assessing the firm. The assessee appealed against the quantum of assessment, not the registration. The court held that the order of the Income-tax Officer granting registration did not merge into the order of the Appellate Assistant Commissioner, thus the Commissioner had jurisdiction to revise the order under Section 33B. Therefore, the fourth question was answered in favor of the Income-tax Department and against the assessee.

Separate Judgment by Misra, J.:
Misra, J. disagreed with Ramaswami, J. on the fourth issue. He argued that the order of the Income-tax Officer regarding registration, when considered in the course of assessment, becomes part of the assessment order. Thus, the Appellate Assistant Commissioner could review the entire order, including the registration. Misra, J. concluded that the Commissioner's jurisdiction under Section 33B was not applicable as the matter was already before the Appellate Assistant Commissioner. Therefore, he answered the fourth question in favor of the assessee.

Final Decision by DAS, C.J.:
Das, C.J. sided with Misra, J., holding that the Commissioner had no jurisdiction under Section 33B to cancel the registration after the Appellate Assistant Commissioner had dealt with the assessment. He emphasized that the Commissioner could not indirectly set aside the order of the Appellate Assistant Commissioner by canceling the registration. Thus, the fourth question was ultimately answered in favor of the assessee.