TMI Blog1971 (4) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... 65-66 and requiring him to file a return of income for the said assessment year. The case as set up by the petitioner in his affidavit is as follows: The petitioner is a partner of Sri Venkateswara Ferry Company. His individual assessment for the assessment year 1965-66 was completed after a thorough scrutiny of the account books. On March 17, 1970, the income-tax officials raided the business premises of the said firm and also the houses of seven of its partners including that of the petitioner. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t year 1965-66. It was further submitted in the counter that some of the partners of the firm including the petitioner filed writ petitions bearing Nos. 647 to 649 of 1971, questioning the validity of the notice issued for reopening the assessment of the firm for the assessment years 1965-66, 1966-67 and 1967-68 and they were dismissed. As against the said orders of dismissal, the petitioner had filed writ appeals but after arguing for some time, the learned counsel appearing, for the appellants 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 Red ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y his mind to the reasons recorded by the Income-tax Officer and had accordingly sanctioned issue of notice. The case does not fall under clause (b) of section 147, because income chargeable to tax had escaped assessment by reason of the assessee's failure to disclose true and correct income of the relevant assessment year. The Income-tax Officer is entitled to reopen the assessment under section 147 in the above-said circumstances and may have also power to modify the assessment of the petitioner under 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argument and that the case rightly fell under section 147(a) of the Act. In the present case, the Income-tax Officer has recorded his reasons in writing for the issue of notice under section 148. The Commissioner of Income-tax has also sanctioned the issue of notice. The contention of the learned counsel appearing for the petitioner, that the Income-tax Officer did not record his reasons in writing for the issue of notice under section 148, is factually incorrect. We have ourselves seen the reasons recorded 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the learned single judge, T. K. Basu J., of the Calcutta High Court in Girdhardas Kothari v. Income-tax Officer. The learned judge held that " non-disclosure of certain receipts by an unregistered firm does not justify reopening of the assessment of the individual partners ". Assessment includes three steps : (1) Computation of income, (2) Registration of tax, and (3) Demand for the tax found due. Registration of a firm does not make any difference in the first step. In the case of an unregistered firm, 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. Howe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the individual partners in pursuance of the reassessment of the firm, there is no necessity for reopening the assessment of the individual partners under section 147. In support of this argument, the learned counsel submitted that section 155 is a special provision and section 147, a general provision, and when both the sections are applicable to the facts of a given case, the special provision must prevail over the general provision. We do not find any merit in this argument. The arguments advanced by the learned 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 woul ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
