TMI Blog1982 (4) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... uently, the assessment was completed on 21-3-1979 on a total income of Rs. 66,955. 3. Subsequently, the Commissioner after going through the records was of the opinion that a sum of Rs. 57,196, which was not added by the ITO in the assessment order was really the income of the assessee in the year of account. According to him, the assessment order passed by the ITO was erroneous and was also prejudicial to the interests of the revenue. So he issued show-cause notice to the assessee under section 263 of the Act. Before the learned Commissioner, on behalf of the assessee, it was contended that in view of partial partition dated 22-10-1968 which was entered into between the assessee, his wife and son, each party got one-third share in the business assets which originally belonged to the HUF. There was also an agreement between the parties on 22-10-1968 and according to this agreement, there would be overriding title of the wife and son of the assessee, in respect of profits which may be earned in the business, which was to be conducted by the assessee either in his individual capacity or in partnership. It was further contended that the payment made to the wife and son of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id not decide that matter, the original order on that point will not merge in the appellate order and the Commissioner under section 263 would be fully justified to start proceedings on such point which was not appealed against and no finding was given by the learned AAC. In the present case the ITO did not add a sum of Rs. 57,196 in the total income of the assessee. As such, the assessee was not aggrieved and be could not appeal against the order of the ITO. Thus, it was contended that on the point at issue there could be no decision of the appellate authority and as such on the point at issue the order of the ITO will never merge with the order of the AAC. Reliance was placed on the ratio of decision in the case of Karsandas Bhagwandas Patel v. G.V. Shah, ITO [1975] 98 ITR 255 (Guj.). 7. We have considered the rival submissions and perused the entire material on record. 8. It is common ground that the ITO did not make addition of a sum of Rs. 57,196 in the total income of the assessee. Under the circumstances, the assessee was not aggrieved on this point. As such he could not possibly file appeal before the AAC. It means that a sum of Rs. 57,196 was not subject-matter of appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in section 154 by the Direct Taxes Amendment Act, 1964. Section 154(1) provides as under : "With a view to rectifying any mistake apparent from the record-- (a) the Income-tax Officer may amend any order of assessment or of refund or any other order passed by him ; (b) the Appellate Assistant Commissioner or the Commissioner (Appeals) may amend any order passed by him under section 250 or section 271 ; (c) the Commissioner may amend any order passed by him in revision under section 263 or section 264." Sub-section (1A) was introduced by way of amendment, in section 154 of the Act by the Direct Taxes Amendment Act. The sub-section provides : "Where any matter has been considered and decided in any proceeding by way of appeal or revision relating to an order referred to in sub-section (1), the authority passing such order may, notwithstanding anything contained in any law for the time being in force, amend the order under that sub-section in relation to any matter other than the matter which has been so considered and decided." Under this sub-section, in relation to any matter which has been so considered and decided as discussed above, even after an appeal from an ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tails of the division of the assets were detailed in the partition deed dated 22-10-1968 which was registered on 4-12-1968. After the partition, an agreement dated 10-12-1968 was entered into between the said three members. Since Shri Gyanchand Jevatraj Hiran was minor, natural father and guardian signed the agreement on his behalf. In the said agreement it was provided that the business in question shall be carried on by the party of the first part, viz., Shri Jevatraj Balchand Hiran. He may conduct the business in his individual capacity or in any manner in which he may think proper. It was also agreed that the said business was subject to charge of one-third and one-third on the parties of second and third part of the profits of the said business conducted by the party of the first part. It was also agreed with that before the party of the first part was entitled to have profits from the business, the parties of the second and third parts shall be entitled to their share as a result of their said charge. Thus, it was agreed that the party of the first part shall be conducting the business subject to discharging the charge of the parties of the second and third part. It was also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the partner, insofar as the law of partnership was concerned, but it has full effect upon the family insofar as the Hindu law is concerned. Just as the fact of a karta becoming a partner does not introduce the members of the HUF into the partnership, the division of the family does not change the position of the partner, vis-a-vis, the other partner or partners. The income-tax law before the partition took note, factually, of the position of the karta, and assessed him not as partner but as representing the HUF. In doing so, the income-tax law looks not to the provisions of the Partnership Act, but to the provisions of the Hindu law. When once the family has disrupted, the position under the partnership continued as before, but the position under the Hindu law changed. There is then no HUF as a unit of assessment in point of fact, and the income which accrued cannot be said to be that of a HUF. There is nothing in the Indian income-tax law or the law of partnership which prevented the members of joint Hindu family from dividing any asset. Such division must, of course, be effective so as to bind the members, but Hindu law does not further require that the property must in e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid share as to extent of the said profit there will be a charge on the said business of the parties of the second and third parts. Subject to such charge, the party of the first part shall conduct the said business and this agreement is accepted today on 22-10-1968, the terms of which are as under : 1. Jevatraj Balchand shall conduct the said business along with creditors, debtors, stock, etc., but the said business shall be conducted subject to the charge of one-third share on the profit of each of the party of the second and third parts. 2. The said business shall be conducted by the party of the first part on his own responsibility either individually or in partnership or in such manner as he thinks fit, but the said business is subject to the charge of one-third, one-third of the parties of the second and third parts on the profits of the said business conducted by the party of the first part. Before the party of the first part is entitled to have his profits from the business, the parties of the second and third parts shall be entitled to their share as a result of the said charge. Accordingly, the party of the first part shall be conducting the business subject to discha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conducting the business. In the present case, it was clearly provided that the parties of second and third parts shall not bear the loss if incurred in the conduct of the business and such loss if any shall be borne by the assessee himself. As a matter of fact, on the facts of that case, it was held that the assessee was representing the other persons and he was carrying on the business for himself and also on behalf of the other persons. No such facts are existing in the present case. So the decision relied on by the learned departmental representative is of no help to the department. 19. For the reasons discussed above, we are of the view that the ITO while completing the assessment in the year under consideration was quite correct in not including the income of Rs. 57,196 in the hands of the assessee. The said order was neither erroneous nor prejudicial to the interests of the revenue. So the learned Commissioner was not correct in holding that the income of Rs. 57,196 was to be included in the hands of the assessee. 20. The other contention of the learned counsel for the assessee was that the learned Commissioner was wrong in holding that the business in question was carri ..... 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