Grover, J. - (1.) In these appeals this Court by an order dated January 21, 1971 directed the Income-tax Appellate Tribunal to submit a supplementary statement of the case on the question whether the proceedings under S.10-A were started in the course of assessment or reassessment proceedings commenced under Section 15 of the Excess Profits Tax Act 1940, hereinafter called the "Act."
(2.) The facts set out in the supplementary statement of the case may be recapitulated. M/s Gurbux Rai Harbux Rai hereinafter referred to as the "assessee" is a registered firm carrying on business in piece goods. During the chargeable accounting period 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 assessee with equal shares. In the proceedings for assessment of tax under the Act for the above two chargeable accounting periods the assessee informed the Tax Officer that the joint family of Gurbux Rai had been partitioned and there had been a reconstitution of the business of partnership with effect from July 4, 1943. According to the assessee the constitution of the firm after the 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, namely, Harbux Rai with a share of 8 annas, Mst. Chameli Devi with a share of 4 annas and Gopal Das with a share of 4 annas. In assessing tax under the Income Tax Act, 1922 for the assessment year 1944-45 corresponding to the accounting year from October 19,1942 to October 7, 1943 the Income-tax Officer held that the partition set up by Gurbux Rai could not be accepted as the same had been made to avoid proper incidence of taxation. He, therefore, assessed the income as that of the assessee and not as the income of a separate firm. The Excess profits tax being consequential upon the Income-tax assessment, the Excess Profits Tax Officer assessed the entire income of the two businesses at Kanpur and Farrukhabad in the hands of the assessee. Against the order passed by the Income-tax Officer in the Income-tax assessment the assessee appealed to the Assistant Commissioner. On October 10, 1947, that Officer held that only partial partition had been effected in the joint family of Gurbux Rai. This is what he held:- ".............., that partial partition in respect of moveable property of Gurbux Rai was effected on a date somewhere near Asadh Samwat 2000, from which date Farrukhabad business was conducted by a separate firm consisting of Harbux Rai, Mst. Chameli and Gopaldas." The Income-tax assessments were consequently modified for the two assessment years 1944-45 and 1945-46. The Excess Profits Tax Officer also started proceedings under Sec. 10-A of the Act by serving a notice dated February 3,1951 on the assessee. The notice required the assessee to show cause why proper adjustment should not be made on the footing that the main purpose of the partial partition of the family of Gurbux Rai was the avoidance of the Excess profits tax liability. By an order dated February 21, 1951 passed under Section 15 of the Act the Excess Profits tax Officer modified the original assessment for both the chargeable accounting periods. In the revised assessment he included the income of the branch shop at Farrukhabad in the total income of the assessee for the purpose of assessment of Excess Profits tax.
(3.) The assessee went up in appeal against the orders of the Excess Profits Tax Officers to the Appellate Assistant Commissioner. These appeals were dismissed. The Appellate Tribunal confirmed the order of the departmental authorities. Thereafter the Tribunal referred the following two questions of law to the Allahabad High Court under Section 21 of the Act read with Section 66 (1) of the Income Tax Act, 1922. (1) "Whether on the facts and in the circumstances of this case them was any definite information within the meaning of Section 15 by virtue of which the Excess Profits Tax Officer was competent to reopen the excess profits tax assessments (2) Whether in the circumstances of this case, the Excess Profits Tax Officer was competent to apply the provisions of Section 10-A and make necessary adjustments in pursuance thereto in the revised assessment under Section 15 - The High Court answered both the questions in the negative.;