TMI Blog1978 (9) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... year 1947-48, the ITO, Burdwan, intimated the ITO, Dehra Dun, that Murarilal's ten annas share in that firm came to Rs. 33,217. Murarilal in his assessment accepted this, but claimed that the capital invested by him in the Panagarh firm was taken by him as loans from several parties, to whom he had paid interest. He claimed Rs. 6,549 as interest and Rs. 1,620 for travelling expenses. The ITO allowed this deduction and assessed the balance of Rs. 25,048 as the assessee's share income from Panagarh business in Muralilal's individual assessment. He had an income of Rs. 1,173 from grain dealing business. Thus, his assessment was completed at a total income of Rs. 26,221 by an order dated 25th February, 1952. Murarilal filed an appeal. In the appeal he submitted that there were four other partners with him in the Panagarh business, and, therefore, proportionate share of profits only should be assessed in his hands. In support, he referred to entries in his books of account, making allocation of this income amongst the respective alleged partners. He also stated that one of these partners had suffered tax on the amount of his share. The AAC rejected this submission by an order dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ea that Murarilal was not liable to be assessed except on a two annas share was even whispered before the ITO for the assessment year 1949-50. This order also was not subjected to any appeal. It appears that there was some difficulty in realising the income-tax demand from Murarilal. When the recovery was pressed he made certain disclosures from which the ITO believed that in fact a sub-partnership consisting of Murarilal and four other persons as partners existed. This sub-partnership was represented by Murarilal in the Panagarh business. He issued notice under s. 34(1)(a) to all the five partners. By an elaborate order dated 19th March, 1958, he held that the five persons constituted sub-partnership in the Panagarh business. The firm had filed no returns under s. 22(1). The return filed under s. 22(2) was, belated. No accounts were produced. So default under s. 22(4) has also been committed. He assessed the ten annas share in the Panagarh business for the assessment year 1949-50 at Rs. 93,016. No action was taken for the earlier two years, namely, 1947-48 and 1948-49, because it had become barred by time. The assessee-firm went up in appeal, but failed. It met with the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upheld this view. It observed: " No arguments were addressed by the learned counsel for the assessee on the ground of jurisdiction. " It also expressed the opinion that s. 64 of the Act provides that where any question arises as to the place of assessment, such question shall be determined by the Commissioner. The proviso to s. 64, inter alia, says that if the assessee has not made a return, he shall not call in question the place of assessment after the expiry of the time allowed by the notice under s. 34 for the making of the return. The objection before the AAC was taken after the expiry of the time allowed under s. 34. Further, the objection could be decided by the Commissioner. The AAC was, therefore, justified in repelling the submission. In our opinion, the view expressed by the Tribunal is perfectly correct. The first question has to be decided against the assessee. The next question is whether the finding that there was a partnership consisting of five persons is right in law. In support of the finding, the Tribunal relied upon the statement of Murarilal, who was cross-examined by the other partners. He had made a clean breast of the whole thing. His stateme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oans were really partners in the business and that the sub-partnership owned the ten annas share in the Panagarh business. For the assessment year 1947-48, the ITO observed: "The assessee has a 0-10-0 share in the registered firm styled as M/s. Nanak Chand Agarwal, Panagarh. The capital invested in the Panagarh firm by the assessee was from a number of loans taken by the assessee, regarding which full explanation has been obtained and placed on file. In the account of L. Gujarmal Gupta of Mogha there are credits amounting to Rs. 15,000 which shall be reported to the Income-tax Officer, Ferozepur, for consideration in the present assessment of Sri Gujarmal Gupta. All the deposits in various names have been explained. The assessee's share from the registered firm, M/s. Nanak Chand Agarwal, Panagarh, as reported by the Income-tax Officer, Burdwan, amounts to Rs. 33,217, which shall be taxed in the assessee's hands. The assessee has claimed Rs. 6,549 as interest paid on loans for Panagarh contract and Rs. 1,620 for expenses of travelling; the total claim of the assessee thus is Rs. 8, 169 which is in order and is allowed against the share income of Rs. 33,217. Deducting this, ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces, the amount claimed as interest was allowed. There was not even whisper either for the year 1948-49, or for the year 1949-50, that there was a sub-partnership. Murarilal allowed his individual assessment to be completed after including the ten annas share income. Subsequently, when the recovery was pressed, Murarilal squealed. He produced accounts of the sub-partnership as well as the instrument of sub-partnership. Then the ITO came to know the real facts. It was held that five persons constituted the sub-partnership. They together owned the ten annas share in the Panagarh firm. On this finding, it was apparent that the ten annas share income was assessed in wrong hands, and it was liable to be assessed in the hands of the sub-partnership firm. The Tribunal has observed that since this income had wrongly been included in the assessment of another assessee (namely, Murarilal, individual), it would be open to the latter to take proper steps to get it excluded from his assessment. They further observed that they had no doubt that the department would riot try to realise tax from two different assessees in respect of the same income. It has, to be kept in mind that the reasses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irm, hence, has no application. The remaining two questions on the quantum side are, therefore, decided against the assessee. In respect of the levy of penalty, the position is that on 21st December, 1946, the ITO, Dehra Dun, made the following report to the Commissioner, requesting him to accord sanction to issue notice under s. 34 : " Shri Amar Nath Gupta and other four partners derived income from share in M/s. Nanak Chand Agarwal, Panagarh, and constituted a sub-partnership. This sub-partnership did not file a return under section 22(1) although the income was much above the taxable limit. The income of this partnership for the previous year relevant for the assessment year 1949-50 is estimated to be more than Rs. 1,00,000. This income has escaped assessment in the hands of the firm. Action under section 34 is necessary to assess the same. Sanction to issue notice under section 34 may kindly be accorded. " The Commissioner issued sanction. Thereafter, on 9th January, 1957, the ITO issued a notice under s. 34(1)(a) to the various partners starting that he had reason to believe that income assessable to income-tax for the year ending 31st March, 1950, had escaped asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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