TMI Blog1956 (2) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... any such contention had been raised, it would have been open to the Commissioner to have taken action under section 19 of the Act. Appeal dismissed. - - - - - Dated:- 15-2-1956 - Judge(s) : BHAGWATI., S. R. DAS., VENKATARAMA AIYAR JUDGMENT The Judgment of the Court was delivered by VENKATARAMA AYYAR, J. --- The firm of Bhagat Ram Mohanlal, which is the appellant before us, was constituted on 23rd August, 1940, and registered under section 26A of the Indian Income-tax Act. The partners of the firm, according to the registration certificate, were (1) Bhagat Ram Mohanlal, Hindu undivided family, (2) Richpal and (3) Gajadhar, their shares being respectively 8 annas, 4 annas and 4 annas. Mohanlal was the karta of the aforesaid joint family, which consisted of himself and his two brothers, Chhotelal and Bansilal, and he entered into the partnership as such karta. The firm carried on business at Drug in Madhya Pradesh as the agent of the Government for the purchase of foodgrains, and during the accounting years ending 1943 and 1944, it made profits on which it was assessed to excess profits tax respectively of Rs. 10,023-5-0 and Rs. 13,005-5-0. During the year 1944-1945 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ground of mistake. This notice was issued under section 20 of the Act, which confers on the Commissioner authority to rectify "any mistake apparent from the record." The mistake, according to the Commissioner, consisted in the Excess Profits Tax Officer failing "to take into consideration the change in the constitution of the firm which took place on 17th October, 1944, consequent on the disruption of the joint Hindu family of one of the partners." The appellant appeared in response to the notice, and contended that on the facts the proceedings under section 20 were misconceived. The facts on which the proceedings were taken were not themselves disputed. By his order dated 15th March, 1950, the Commissioner held that on the facts disclosed on the record, there was a change in the persons carrying on the business, and that the award of relief under section 7 by the Excess Profits Tax Officer was a mistake. He, however, maintained the order dated 23rd December, 1946, with reference to Richpal and Gajadhar, and set it aside only so far as "Bhagat Ram Mohanlal, Hindu undivided family" which was registered as partner on 23rd August, 1940, was concerned. He further directed that Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, both according to the Hindu law and even apart from it, under the general law relating to partnerships. It is not in dispute that Mohanlal was the karta of the joint family, and that he entered into the partnership on 23rd August, 1940, as such karta. It is well settled that when the karta of a joint Hindu family enters into a partnership with strangers, the members of the family do not ipso facto become partners in that firm. They have no right to take part in its management or to sue for its dissolution. The creditors of the firm would no doubt be entitled to proceed against the joint family assets including the shares of the non-partner coparceners for realisation of their debts. But that is because under the Hindu law, the karta has the right when properly carrying on business to pledge the credit of the joint family to the extent of its assets, and not because the junior members become partners in the business. In short, the liability of the latter arises by reason of their status as coparceners and not by reason of any contract of partnership by them. It would therefore follow that when Mohanlal became a partner of the firm on 23rd August, 1940, Chhotelal and Bansilal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with reference to coparcenary properties the members can at the same time be both coparceners and partners. To get over this difficulty, it was suggested that all the three coparceners might be regarded as having entered into the contract of partnership as kartas of the joint family. But even if that could be done consistently with the principles of Hindu law, the very pleadings of the appellant are against such a supposition being made, affirming as they do that it was only Mohanlal that was the karta, not the others. The contention, therefore, that Chhotelal and Bansilal should be held to have become partners in the old firm under the agreement dated 23rd August, 1940, cannot be maintained. The question whether there was a change in the persons carrying on the business may now be considered independently of the principles of Hindu law or the general law of partnership and with special reference to the provisions of the Indian Excess Profits Tax Act. Section 2(17) of the Act defines a "person" as including a joint family. Applying this definition, who were the members of the firm when it was constituted on 23rd August, 1940 ? Richpal, Gajadhar and "Bhagat Ram Mohanlal, Hindu u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use the record referred to and contemplated by that section must be the record of the excess profits tax proceedings, and that the records of the income-tax proceedings could not be used under that section. We are unable to agree with this contention. Section 22(1) of the Act provides that : "Notwithstanding anything contained in the Indian Income-tax Act, 1922, all information contained in any statement or return made or furnished under the provisions of that Act or obtained or collected for the purposes of that Act may be used for the purposes of this Act." Section 22(2) similarly makes the record of the excess profits tax proceedings admissible in proceedings under the Indian Income-tax Act. The fact is that the proceedings under the two Acts are interdependent. Assessments under the Excess Profits Tax Act are, subject to the special provisions of that Act, made on the basis of the assessments made under the provisions of the Indian Income-tax Act. The same officers are in charge of the proceedings under both the enactments. The order of the Excess Profits Tax Officer dated 23rd December, 1946, refers in terms to the order dated 28th September, 1946, passed in the proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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