Sriramulu, J. -
(1.) THE following three questions of law have been referred to this court by the Income-tax Appellate Tribunal, under Section 66(2) of the Indian Income-tax Act, 1922 :
" (1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the assessment on the association was invalid ?
(2) Whether the Tribunal was within its powers to rehear the entire appeal and decide all issues which did not form the subject-matter of the reference before the High Court without any direction from the High Court?
(3) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the Appellate Assistant Commissioner has the power under law to uphold the ex parte assessment on the basis of an alleged non-compliance by D. D. Italia when the Income-tax Officer making the ex parte assessment did-not refer to that default at all in the assessment order?"
(2.) THE material facts, so far as they are relevant for answering the above questions, are :
D. D. Italia, a member of the Hyderabad Deccan Liquor Syndicate (hereinafter referred to as " the Syndicate "), filed return of his individual income for the assessment year 1358 Fasli, which included his share income from the Syndicate of Rs. 77,972. According to him, the Syndicate had earned from its liquor business for the year 1358 F. an income of Rs. 2,07,926. THE Income-tax Officer assessed D. D. Italia to income-tax for the assessment year 1358 F. in September 1952. Another member of the Syndicate, by name, Namchand, was also assessed to tax in respect of his share income from the Syndicate for the same year.
Since the Syndicate did not file its return of income for the year 1358 F. before the expiry of the assessment year 1358 F. its income chargeable to tax for that year escaped assessment. Bansilal managed the business of the Syndicate, had maintained its accounts and also kept the account books of the Syndicate with him. Notices issued by the Income-tax Officer to Bansilal as representing the Syndicate, under Section 30(2) read with Section 46 of the Hyderabad Act, were returned unserved, on the ground that he had gone on pilgrimage to Benaras. Notice dated August 13, 1951, issued to Bansilal, as representing the Syndicate was affixed on the outer door of Bansilal's house, as he was out of station. On the basis of the report of the inspector submitted to him, the Income-tax Officer, in writing, held that there was a valid service of notice on Bansilal under Section 30(2) read with Section 46(1) of the Hyderabad Act. Since no return was filed on behalf of the Syndicate, best judgment assessment was made on the Syndicate in the status of an "A.O.P." (association of persons) on a total income of Rs. 4,43,256.
On appeal against the assessment, the assessee, inter alia, contended before the Appellate Assistant Commissioner that since the Syndicate was defunct on the date of assessment, best judgment assessment made on it, without serving notices on all the members of the A.O.P. was bad. It was also contended that no notice was served on Bansilal and the one served on him by affixture was only a " summons " under Section 49 for the production of the account books and not a " notice under Section 30, read with Section 46 of the Hyderabad Act ", requiring him to rile a return. After considering the remand report which was submitted by the Income-tax Officer in pursuance of the remand order, the Appellate Assistant Commissioner held that Bansilal was duly served with a notice under Section 30(2) read with Section 46(1). The Appellate Assistant Commissioner also justified the best judgment assessment made on the Syndicate, on the ground that one of the members of the Syndicate, namely, D. D. Italia, was served with such a notice.
(3.) THE Appellate Assistant Commissioner rejected all the contentions raised by the assessee and confirmed the assessment.
In further appeal to the Income-tax Appellate Tribunal the assessee raised four objections. The first objection, was that the assessment made on the A.O.P. was bad in law, as it was made on the A.O.P. which was, admittedly, defunct on the date of the assessment. The Tribunal considered that the first objection raised by the assessee went to the very root of the matter and, therefore, considered only that objection, and did not go into other objections. On the strength of the decision of this court in Raja Reddy Mallaram v. Commissioner of Income-tax, 1960 39 ITR 636 (A.P.). the Tribunal upheld the contention of the assessee and set aside the assessment, as no notices were served on all the members of the erstwhile association of persons before making the assessment.;