TMI Blog1982 (5) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... essee-firm against the same order of the AAC. The assessee-firm was registered under the I.T. Act and was carrying on business at Calcutta. The partners of the firm, according to the partnership deed, were N. Ch. R. Rao and P. Jagannathan. The return of the income of the firm for the assessment year 1963-64 was filed on 18th December, 1963, by N. Ch. R. Rao as a partner. In the return N. Ch. R. Rao and P. Jagannathan were shown as the two partners of the assessee-firm. The application for registration was also signed by these two persons. The assessment for the assessment year 1963-64 was completed by the ITO on a total income of Rs. 1,03,106. By an order dated 22nd February, 1968, u/s. 158 of the I. T. Act, the ITO allocated the assessed income in equal shares between the two partners, N. Ch.R. Rao and P. Jagannathan. The total income on which the assessee-firm was assessed to tax was inclusive of Rs. 50,000 added as income from undisclosed source on the basis of peak credit and Rs. 26,829 being the interest on the hundi loans, deduction on which was claimed by the assessee-firm but disallowed by the ITO. It was on the basis of a disclosure petition filed by the partners of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share only 15% belonged to P. Jagannathan and the remaining 35% belonged to P. Bhaskara Rao. The former was also a benamidar of P. Bhaskara Rao to the extent of 35%. Later, there was a change in the profit sharing ratio. Between April 1, 1961, and March 31, 1963, the share of P. Bhaskara Rao was 75% and between April 1, 1964, and March 31, 1965, he held 9/16ths share in the above firm. P. Bhaskara Rao had no share in the assessee's firm with effect from April 1, 1965. The amount due to him as on March 31, 1965, from the firm was worked out at Rs. 2,40,000. This amount due to Bhaskara Rao was arrived at without treating the hundi loans recorded in the accounts as profits of the firm. All these facts were set out in the agreement executed by N. Ch. R. Rao, Sri P. Jagannathan and Sri P. Bhaskara Rao jointly on 29th May, 1965. P. Jagannathan and N. Ch. R. Rao thereafter filed a disclosure petition u/s. 271(4A) before the Commissioner, West Bengal on 19th November, 1965, admitting that certain hundi credits appearing in the firm's accounts represented the firm's undisclosed income and offering to be assessed on peak credit basis with some spread over during the assessment years 1961-62 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the disclosure petition should have been accepted as a whole. The Department made a mistake of law in accepting a part of the disclosure petition. In that view of the matter the Tribunal held on the basis of the disclosure petition that the disclosed income should be spread over a number of years as claimed by the assessee in his case. Being aggrieved by the aforesaid order of the Tribunal, the Commissioner applied u/s. 256(1) of the I.T. Act, for referring certain questions of law arising out of the order of the Tribunal to the High Court. The Tribunal has referred the following questions of law: "1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that P. Bhaskara Rao had the locus standi to intervene in the appeal filed on behalf of the assessee-firm and prosecute it ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal misdirected itself in law in holding that the addition of Rs. 55,000 as income from undisclosed sources based on the admission made in the petition under section 271(4A) of the Income-tax Act, 1961, was not made on a proper basis and in setting aside accordingly the orders of the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the firm's income. Therefore, P. Bhaskara Rao was directly interested in the assessment of the firm and came within the description of " an assessee aggrieved by the order of the AAC". In that view of the matter the Tribunal was right in holding that P. Bhaskara Rao could be permitted to come on record as a person affected by the assessment under appeal and that as P. Bhaskara Rao became liable to pay tax assessed on the assessee-firm, he had locus standi to intervene in the appeal filed on behalf of the firm, especially when the two persons shown as partners of the firm had died during the pendency of the appeal and the legal representatives were not interested in prosecuting the appeals. In the case of Adi Pherozshah Gandhi v. H. M. Seervai, AIR 1971 SC 385, the meaning of the phrase " person aggrieved " came up for consideration before the Supreme Court. M. Hidayatullah C.J. pointed out (p. 387): " The expression a ' person aggrieved ' is not new, nor has it occurred for the first time in the Advocates Act. In fact it occurs in several Indian Acts and in British statutes for more than a hundred years. In the latter a right of appeal to a person aggrieved is conferred in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years are Rs. 1,45,000 which also we pray that you will kindly allow us spreadover of the said sum during the assessment years 1961-62 to 1964-65, for the reasons submitted above." The Tribunal held: " If the Department wanted to make the addition on the basis of the disclosure, then the disclosure should be taken as a whole and the addition made as desired by the assessee. Otherwise, the Department should have determined the quantum of income from undisclosed sources on the basis of material gathered in an independent enquiry. But it was not open to the Department to take one part of the admission contained in the disclosure petition and act upon it, ignoring the rest." The Tribunal, therefore, directed the ITO for a fresh determination of the issue in the light of the observations made by the Tribunal. The Department's case before us, is that the credits in question appeared in the books of account of the assessee. The Department was entitled to tax the entire amount. The Department's jurisdiction to tax was not limited to the difference in the peak credits year after year. The Tribunal was in error in sending the matter to the ITO for fresh determination of that issue. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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