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TMI Blog1971 (4) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner. No incriminating material was found in his house. The firm did not conceal any income. The incriminating material found in the possession of the managing partner of the firm, Mr. Ammi Reddy, had nothing to do with the firm. The Income-tax Officer had no reason to believe that income chargeable to tax in his hands had escaped assessment and the notice dated 11th December, 1970, served on him under section 148 of the Income-tax Act, 1961, was issued long after the expiry of four years from the last date of the assessment year. It was, therefore, time-barred and bad in law. The notice was also issued without any jurisdiction. The Income-tax Officer should, therefore, be prohibited from proceeding further in the matter of reassessment in pursuance of the said notice. The respondent, the Income-tax Officer, filed a counter-affidavit alleging that from the business premises of the firm an agreement was found, wherein it was stated that the firm had purchased three launches for Rs. 58,000 but in the account books of the firm the sale price was shown at Rs. 30,700. The managing partner of the firm, Sri Ammi Reddy, in his deposition on October 19, 1970, admitted that the difference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did not press those writ appeals and they were accordingly dismissed. As per the revised return filed by Ammi Reddy, the managing partner of the firm, the petitioner, received a sum of Rs. 59,747 towards his share, but had returned only an income of Rs. 24,637. It is on the basis of these facts the Income-tax Officer considered that there was reason for him to believe that income chargeable to tax had escaped assessment in the hands of the petitioner. The notice issued by him was valid and cannot be quashed. We have heard the arguments of the learned counsel for the petitioner and also of the standing counsel, Sri P. Rama Rao, at some length. The learned counsel, Sri Dasaratharama Reddy, appearing for the petitioner raised the following four contentions .- (1) Since the notice dated December 11, 1970, issued by the Income-tax Officer to reopen the petitioner's assessment for the year 1965-66, did not disclose the sub-section of section 147, under which it was issued, the petitioner's case is that this case falls under section 147(b) and, therefore, the notice, dated December 11, 1970, served on him was barred by time, as it was issued after four years from the end of the relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 155 of the Act. Sections 147 and 155 of the Act are not mutually exclusive. In the circumstances of the case, the Income-tax Officer could reopen the assessment under section 147 and bring the escaped income to tax. It is not within the province of the assessee to question the validity of the notice issued by the Income-tax Officer under section 148 on the ground that he could have taken action under section 155, without reopening the assessment under section 147 of the Act. Income may escape assessment in one of two ways. It may escape assessment by reason of the default on the part of the assessee in filing the return of income or on account of omission or failure on his part to fully and truly disclose all the particulars of the income necessary for making the assessment. Income may also escape assessment for other reasons, which may not be attributable to the assessee. In other words, escapement, of income may also be due to the inadvertence and carelessness of or mistaken view of law taken by the Income-tax Officer. In both the cases the law empowers the Income-tax Officer to reassess or recompute the said income under section 147(a), if he has reason to believe t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orded by the Income-tax Officer, so also the learned counsel. The further contention of the learned counsel was that the Commissioner of Income-tax did not apply his mind in sanctioning the issue of notice and merely noting" yes " at the end of the report, does not establish that the Commissioner of Income-tax had duly applied his mind to the reasons recorded by the Income-tax Officer for justifying issue of notice. In support of the above contention the learned counsel invited our attention to the decision of the Supreme Court in Chhugamal Rajpal v. S. P. Chalika . In that case the Income-tax Officer had recorded that during the year the assessee had shown to have taken loans from various parties at Calcutta. From a letter received by him from the office of the Commissioner of Income-tax, it is found that those persons, from whom the assessee had alleged to have taken loans, were name-lenders and the transactions were bogus. Hence proper investigation regarding those loans was necessary. On the basis of that report the Commissioner of Income-tax merely noted " yes " and commenting upon those reasons, the Supreme Court observed : " That the Income-tax Officer had not even come to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irm, the tax payable by the firm itself is determined as in the case of any other entity and tax in respect thereof is levied on the firm itself. When the firm is registered, income-tax at special low rates is assessable on the registered firm. The partners of a registered firm are liable to be taxed in their individual assessment, in respect of their shares from the profits of the registered firm. Tax is not payable by a partner of an unregistered firm in respect of his share in the profits of the firm of which tax is payable by the firm, although such share is to be be included in his total income for the purpose of determining the rate applicable to his taxable income. However, under section 183(b) of the Income-tax Act, 1961, the Income-tax Officer may assess the partners of an unregistered firm in respect of their shares of the firm's profits, instead of assessing the unregistered firm as a unit of assessment, if such a course would be more advantageous to the revenue. Under section 141(3) of the Act, a partner of a firm can be assessed on his share from the firm, if the firm's return is received, even though the individual return of the partner has not been received. Thus, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned counsel that section 155 is a special provision and section 147, a general provision, and that when both the sections are applicable to a given case, the special provision would prevail over the general provision, is not supported by any authority. Under section 155(1) wherein in respect of a completed assessment of any individual partner it is found that on reassessment of the firm, the share income of the partner as originally assessed is not correct, according to the share income of the firm as reassessed, it would be open to the Income-tax Officer to amend the assessment of the individual partners under section 155 and in such a case section 154 of the Act would apply. It is now well settled that in cases where reassessment under section 147, or rectification under section 154, are both equally competent, the department may take action under either section, since the two sections are not mutually exclusive. If any authorities are required for this proposition, we find them in Commissioner of Income-tax v. Naik and Doshi v. Income-tax Officer. Even for the amendment of the assessments of the individual partners as a consequence of the reassessment of the firm, it could ..... X X X X Extracts X X X X X X X X Extracts X X X X
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