TMI Blog1971 (9) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... ng that the Appellate Assistant Commissioner in appeals before him could not convert the provisions of section 147(a) into those of section 153(3)(ii) of the Income-tax Act, 196 1, and that provisions of section 153(3)(ii) of the Act were not applicable to the instant case ? " References relate to the assessment years 1955-56 and 1956-57 relevant to the previous years ending on 24th March, 1955, and 11th May, 1956, respectively. The Income-tax Officer completed the assessments for the two years on 28th January, 1960, and 9th March, 1961, respectively. The assesee filed substituted returns of income for the above said two years and showed 1/3rd share from M/s. Faqir Chana Raghunath Dass and also showed income from house properties. The assessee claimed that 1/4th share of income of property at Sunder Nagar was not liable to tax for the said assessment years as the house was completed in September, 1954. However, in the assessment year 1956-57, the assessee declared 1/4th share of income from house property at Sunder Nagar and 1/4th share from Golf Link property but claimed exemption from tax on the income from the property for both these years. The Income-tax Officer while framing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent year 1956-57, debited a sum of Rs. 99,148 in the building account of the firm as cost of construction of the property at Golf Link. The valuation report made by one Brij Mohan Lal, dated 20th January, 1961, was not accepted by the Income-tax Officer and for under-statement of the cost of construction the said officer added a sum of Rs. 35,000 towards the income from undisclosed sources to the partnership firm. Being dissatisfied with the order of the Income-tax Officer, the firm filed an appeal before the Appellate Assistant Commissioner who for the assessment year 1955-56 held that, although the plots of land at Sunder Nagar had not been actually divided by metes and bounds at the time of partial partition of the Hindu undivided family, yet 1/4th of the total value was debited to the account of each member of the disrupted family. The Appellate Assistant Commissioner also held that when the construction of the building was started funds were advanced by the New Delhi branch of the partnership firm and debits in the books of account in the New Delhi branch of the firm were transferred to the head office account and 1/4th share of the total expenses were debited to the account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ree partners of the firm, M/s. Faqir Chand Raghunath Dass, could be covered under the term "any person" contemplated by sub-clause (ii) of sub-section (3) of section 153 of the 1961 Act. Besides, the quantum of addition to income from undisclosed sources was revised by the Appellate Assistant Commissioner for both the assessment years. The assessee challenged the order in appeal before the Appellate Tribunal and four contentions were raised before the Tribunal, namely, (i) that the Income-tax Officer on receiving information from the appellate order could assess to tax the escaped incomes of the assessee under section 147(b) of the 1961 Act only ; (ii) that the Appellate Assistant Commissioner could not convert the proceedings taken under section 147(a) of the 1961 Act into one under section 153(3)(ii) of the said Act. Accordingly, it was contended that the Appellate Assistant Commissioner exercised a jurisdiction which did not vest in him in law. The third contention was that a registered firm is a distinct assessable unit and as such its partners are to be treated as third persons. That being so, the proviso to section 153(3)(ii) of the 1961 Act could not be attracted and, last ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained under section 153(3)(ii) of the said Act, as was sought to be done by the Appellate Assistant Commissioner of Income-tax. Section 153(3)(ii) lifts the ban of limitation imposed by sub-sections (1) and (2) of section 153 and lays down in clear terms that there shall be no bar of limitation where the assessment, reassessment or recomputation is made on an assessee or any person in consequence of or to give effect to any finding or direction contained in an order under sections 250, 254, 260, 262, 263 and 264 (or in an order of any court in a proceeding otherwise than by way of appeal or referernce under the Act). Now the point to be seen is whether the assessment made by the Income-tax Officer can be upheld as being under section 153(3)(ii) of the 1961 Act. Besides, we have to see what was the finding of the original Appellate Assistant Commissioner who dealt with the assessments of the firm, and whether that finding was necessary for the disposal of the appeal of the firm and that the finding was in respect of the persons intimately connected with the firm. While dealing with the assessment for the year 1956-57 in appeal, the Appellate Assistant Commissioner held that the buil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be only that which was necessary for the disposal of an appeal in respect of an assessment of a particular year and that the appellate or revisional authority may hold that the income shown by the assessee was not the income for the relevant year and thereby exclude that income from the assessment of the year under appeal or revision, although the appellate or revisional authority may incidentally find that the income belongs to another year but that is not a finding necessary for the disposal of the appeal or the revision, as the case may be, in respect of the year of assessment in question. In this connection the court (majority judgment of Sinha, C.J., Subba Rao and Rajagopala Ayyangar JJ. was delivered by Subba Rao J. Raghubhar Dayal and Mudholkar JJ. (contra.)) observed as follows at page 345 : " . . . . that the finding is a finding necessary for giving relief in respect of the assessment of the year in question and the direction is a direction which the appellate or revisional authority, as the case may be, is empowered to give under the sections mentioned therein. " Their Lordships also held that the expression " any person " in the setting in which the said express ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Income-tax Officer may take action to assess the excess, if any, in the hands of the co-owners and treat the said excess amounts as income of the co-owners for the previous year from undisclosed sources. There can be no denying the fact that the partners of the firm are intimately connected with the firm and are covered by the expression "any person" occurring in sub-section (3)(ii) of section 153 of the 1961 Act. It is a well-settled principle of law that a person sought to be taxed in pursuance of a direction given by the appellate or revisional authority as contemplated by sub-section (3)(ii) of section 153 of the 1961 Act, should not be a stranger to the assessment proceedings in respect of the firm or an association or a Hindu undivided family. Partners of the firm are not strangers to the firm and were, therefore, party to the proceedings in the assessment of the firm, M/s. Faqir Chand Raghunath Dass. The very word "firm" suggests that the partners are intimately connected with it. It cannot be denied that the income of the individual partners went into the income of the firm for the two assessment years, i.e., 1955-56 and 1956-57, which was the subject-matter of dispute be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court observed that the assessment of a partner in a registered firm cannot be completely divorced from the assessment of the firm of which he is a partner and the two assessments are not in two different water-tight compartments, rather the two assessments are complementary to one another. It was further held that the assessment of a registered firm is in a way a preliminary step in the matter of assessment of its partners and forms part of their assessment. Now, let us examine the position in the references before us. Four partners of the firm filed their individual returns. In the books of account of the firm cost of construction of the two buildings is debited equally to each partner. That being so, the Appellate Assistant Commissioner was within his right to give a direction to the Income-tax Officer at the time he dealt with the appeal of the firm as to whether the excess amounts involved in the construction of the two buildings were undisclosed investments of the partners or whether the said amounts could he treated as explained ones. The assessees who are partners of the firm cannot be held to be not intimately connected with the firm. It has also to be held that thei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o tax has escaped assessment for any assessment year. That being so, it is not necessary that notice under section 141 of the 1961 Act should state under which of the clauses, whether under clause (a) or clause (b), the same is issued. The main notice to be issued in a case under section 147 is a notice under section 139(2), and section 148 read with section 147, merely authorises the issue of such a notice. (See Kantamani Venkata Narayana and Sons v. First Additional Income-tax Officer, Deepchand Daga v. Income-tax Officer, C-Ward, Raipur Anne Nagendram and Bomma Reddi Venkayya and Co. v. Commissioner of Income-tax and Sowdagar Ahmad Khan v. Commissioner of Income-tax . The point to be considered is whether assessment can be defeated or rendered invalid if it can be sustained under any other provision of the Act. However, this aspect of the matter need not further detain us, as in view of our discussion above, we are of the opinion that the assessment can be sustained under' section 153(3)(ii) of the 1961 Act. Another contention of the learned counsel for the respondent may also be noted and that is that the Tribunal has given no finding in respect of the question whether all th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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