Shah, C. J. - (1.) Gurbux Rai Harbux Rai - hereinafter called 'the assessee' - is a registered firm carrying on business in piece goods and commission agents. It has its head office at Kanpur and a branch office at Farrukhabad. During the chargeable accounting periods July 4, 1943 to June 21, 1944 and June 22, 1944 to July 10, 1945 Gurbux Rai and Harbux Rai (each representing his joint family) were the two partners of the assessees with equal shares in the profit and loss. In proceedings for assessment of tax under the Excess Profits Tax Act, 1940 for the two chargeable accounting periods the assessee informed the Tax Officer that the joint family of Gurbux Rai had been dissolved and there was a reconstitution of the business of the partnership with effect from July 4, 1943. According to the assessee the constitution of the firm after partition was that in the firm at Kanpur the former two partners were interested, their share being equal, but in the business of the firm at Farrukhabad there were three partners - Harbux Rai with -/8/- share, Chameli Devi with -/4/- share and Gopaldas with -/4/- share.
(2.) In assessing tax under the Income Tax Act, 1922 for the assessment year 1944-45 relevant to the account year ending June 21, 1944 the Income-tax Officer held that the case set up by the assessee that there was partition amongst the members of the family of Gurbux Rai could not be accepted. In the view of the Income-tax Officer, an attempt was made "to avoid proper incidence of taxation as an afterthought to create evidence for camouflaging the Farrukhabad business as a separate unit of assessment" The Income-tax Officer directed that the income be assessed as the income of the assessee and not as the income of a separate firm The excess profits tax assessment being consequential upon the income-tax assessment, the Excess Profits Tax Officer assessed the entire income of the two businesses at Kanpur and at Farrukhabad, in the hands of the assessee firm.
(3.) Against the order passed by the Income Tax Officer the assessee appealed to the Appellate Assistant Commissioner who by his order dated October 10, 1947 observed "......... that partial partition in respect of moveable property of Gurbux Rai was effected on a date some where near Asadh Samvat 2000, from which date Farrukhabad was conducted by a separate firm consisting of Harbuxrai, Mst. Chameli and Gopaldas". Pursuant to this order the Income-tax Officer modified the assessment with respect to the Income-tax assessment of the assessee for the assessment years 1944-45 and 1945 46. The Excess Profits Tax Officer however start ed proceedings under Section 10-A by notice dated February 6, 1951 calling upon the assessee to show cause why appropriate adjustments should not be made in the assessment, and passed orders in that behalf for both the chargeable accounting periods holding that the main purpose of the partial partition of the family business of Gurbux Rai was avoidance of excess profits tax liability. By order dated February 21, l957, passed under Section 15 of the Excess Profits Tax Act the Excess Profits Tax Officer modified the original excess profits tax assessment In the revised assessment in pursuance of orders under Section 10-A he included the income of the branch shop at Farrukhabad in the total income of the assessee for purposes of excess profits tax assessment. The assessee appealed against the order of additional assessment contending that the Excess Profits Tax Officer was not competent to re-open the case under Section 15 as he had no definite information coming into his possession to enable him to discover that the profits of the chargeable accounting period had escaped assessment. The assessee contended that-all the materials in the case were before the Excess Profits Tax Officer at the time of his original assessment and no new information came into his possession thereafter. The assessee also contended that the Excess Profits Tax Officer was not competent to pass any order under Section 10-A merely to make an adjustment in the revised assessment under Section 15. The Income-tax Appellate Tribunal held that the Excess Profits Tax Officer had received definite information regarding the state of the law in pursuance of the appellate order of the Appellate Assistant Commissioner who had held that the family of Gurbux Rai was partially partitioned. The Tribunal also held that the Excess Profits Tax Officer was competent to pass an order under Section 10-A, of the Excess Profits Tax Act.;