LAWS(PAT)-1966-2-16

COMMISSIONER OF INCOME TAX Vs. NARAINJI MANJI RATHORE

Decided On February 14, 1966
COMMISSIONER OF INCOME-TAX Appellant
V/S
NARAINJI MANJI RATHORE Respondents

JUDGEMENT

(1.) These four references under Section 66, Clause (1) of the Indian Income-tax Act, relate to the assessment years 1952-53, 1953-54, 1954-55 and 1955-56. The assessee derived income, during the period relating to these four assessment years from contract business, from property and share in the firm 'Narainji Manji Rathore'. The above firm was assessed as a registered firm during those years in which the assessee had 0-12-0 annas share. Assessments were also made on two other partners of the firm on total income consisting of their respective shares of income from that firm and salaries received by them therefrom. On the 22nd March 1957 the registration of that firm was cancelled under Rule 6B of the Income-tax Rules relating to these four years on the ground that the present assessee Narainji Manji Rathore, was the proprietor of that business and that it was not actually a partnership firm. Since the assessee had been assessed on his share income from that firm, the Income-tax Officer reopened the assessment after serving a notice under Section 34 of the Act in respect of those four years as the entire income from that firm was not included in the assessee's total Income. When the re-assessments were completed, the assessee went in appeal and the Appellate Assistant Commissioner, by his order, dated the 31st May 1961, held, in connection with the assessment year 1952-53 that there was no omission or failure on the part of the assesses to disclose fully and truly all material facts necessary for the assessment. All the relevant facts were before the Income-tax Officer at the time of the original assessment. Since no fresh fact was found subsequent to the completion of the assessment, the re-assessment under Section 34 of the Act was annulled. For the three other assessment years (viz., 1953-54, 1954-55 and 1955 56) the same Appellate Authority held likewise. When the matter came before the Tribunal at the instance of the Department of Income-tax, the view of the Appellate Assistant Commissioner was upheld. The Revenue, therefore, asked for a reference to this Court under Section 66 (1) of the Act.

(2.) Section 34 of the Act enables the assessing officer to initiate fresh assessment if any income of the assessee had escaped assessment either on account of suppression of material facts by the assessee in his return or at the time of assessment or if on information received by the Income-tax Officer, after the original assessment, he finds that some income had not been included in the total income assessed. In the present case the information that came to the Income-tax Officer, after the cancellation of the registration of the firm, Narainji Manji Rathore, was that the assessee was not a partner, but the proprietor of that firm and that the entire income of that business run under the name of that firm had not been included in the assessee's total income, but only a part of it. Since a part of that income had escaped assessment in hands of the assessee he initiated the proceeding under Section 34 of the Act. It is true that all facts connected with the firm had been disclosed to the Income-tax Officer by the assessee at the time of the original assessment, and therefore, the view taken by the Appellate Tribunal that the assessee was not guilty of any suppression as contemplated under Section 34 (1) (a) was correct. But, the case can well be covered by Clause (b) of Sub-section I of that section. The Appellate Tribunal was of the view that since notices were issued under Section 34 (1) (a) by the Income-tax Officer, it was not open to the Department to take over under the provisions of Clause (b) of Sub-section (1). We have looked to the original notices and have found that neither Sub-clause (a) nor Sub-clause (b) was mentioned therein. It was only under Section 34 and that can cover either of the two clauses. In that view of the matter, the re-assessment, as made by the Income-tax Officer, could be justified, if the conditions under Clause (b) were satisfied.

(3.) Learned counsel appearing for the assessee before us contended that no new information came to the Income-tax Officer before he gave the notice under Section 34. The information on which he acted at that time was with him when he completed the original assessment. The view that the firm was not a partnership firm, but only the assessee's own business was a question of inference drawn from the facts and not a new information about any new fact All the reasons that led to the cancellation of the registration of the firm were available to the Income-tax Officer at the time of the original assessment for these four years. Though this contention may have some apparent soundness, yet on analysis it will be found that whether the firm is a partnership firm or an individual business is a question of fact dependent upon many other facts. For whatever reasons it may be, if at any point of time the Income-tax Officer is equipped with the information that a particular business is not a partnership and that the assessee was the sole proprietor or that, but the entire income from that business was not included in his original assessment, that will b" an 'information' within the meaning of Clause (b) of Sub-section (1) of Section 34 In the present case that was the position, and, therefore, in my view, reassessment was justified within the meaning of Section 34 (1) (b) of the Act. But as far as the year 1952-53 was concerned, four years had elapsed before the notice under Section 34 was issued and for that reason proceedings for re-assessment were barred by time. For the other three years, viz., 1953-54, 1954-55 and 1955-56, the notice was within time.