Ranganathan, J. - (1.) This is the assessees appeal from a judgment of the Madras High Court dated 10-1-75 answering three questions referred to it by the Income-tax Appellate Tribunal in favour of the Revenue and against the assessee. The reference related to the assessment year 1961-62, the previous year in respect of which commenced on 13-4-1960. The judgment of the High Court is reported as (1976) 102 ITR 622.
(2.) The appellant-assessee is a partnership firm. Since 1949, it was carrying on, in Malaya, a money lending business and, as part of and incidental to the said business, a business in the purchase and sale of house properties, gardens and estates. It had been reconstituted under a deed dated 26-3-1960. The firms accounts for the year 1960-61, which commenced on 13-4-60, would normally have come to a close on or about the 13th April, 1961. However, the firm closed its accounts as on 13-3-1961 with effect from which date it was dissolved. Along with its income-tax return for the assessment year 1961-62 filed on 10th April 1962, the assessee filed a profit and loss account and certain other statements. In the profit and loss account, a sum of $ 1,01,248 was shown as "difference on revaluation of estates, gardens and house properties" on the dissolution of the firm on 13-3-61, such difference being $70,500 in respect of "house properties" and $ 30,748 in respect of estates and gardens. In the memo of adjustment for income-tax purposes, however, the above sum was deducted on the ground that it was not assessable either as revenue or capital. A statement was also made before the officer that partner Ramanathan Chettiar, forming one group and the other partners forming another group, were carrying on business separately with the assets and liabilities that fell to their shares on the dissolution of the firm.
(3.) The Income-tax Officer (I.T.O.) issued a notice under S. 23(2) on the same day (10-4-1962) posting the hearing for the same day and completed the assessment also on the same day, after making a petty addition of Rs. 2083 paid as property tax in Malaya, and recording the following note : "Audit assessment - Lakshmanan appears - return filed - I.T. 86 acknowledged in list of books - scrutnised - order dictated." ;