H.N. Seth, J. - (1.) THESE three petitions under Article 226 are being disposed of by a common judgment.
(2.) WRIT petition No. 523 of 1975 is by M.L. John and I.E. John. The two petitioners question the validity of the various reassessment orders under the Indian I.T. Act, 1922, and the Excess Profits Tax Act, for the assessment years 1942-43 to 1947-48, as also that of the reassessment orders under the I.T. Act for the assessment years 1948-49 to 1956-57, made in the case of the unregistered firms known as John Mills and Co. and John and Co. They pray that notices of attachment of movable and immovable properties for a realisation of the tax assessed under the impugned assessment orders be quashed and the respondents be restrained from taking any step to recover the said demands amounting to Rs. 26,72,662-66 from the petitioners. Writ Petitions Nos. 562 of 1975 and 790 of 1975 are by N.K. Patni and Munni Lal Mehra. By these petitions, the two petitioners also question the validity of the recovery proceedings, in respect of the aforesaid demands, initiated against them. The respondents have, however, clarified that they were proceeding to recover from the petitioners only the sum representing the demand created as a result of the reassessment proceedings under the Indian I.T. Act, 1922 and the Excess Profits Tax Act, taken against the firm John Mills and Company for the assessment years 1942-43 to 1944-45. Briefly stated, the facts giving rise to these petitions are that at one stage four brothers G.A. John, A.U. John, Edven John and H.C. John owned three spinning mills and one flour mill at Agra. They ran those mills under the name and style of John Brothers. During the course of their business, John Brothers took some loan from one Govind Ram Saksaria of Bombay after mortgaging the mill properties with him. Govind Ram Saksaria filed a suit against John Brothers in the Bombay High Court for the recovery of the aforesaid loan advanced by him. The Bombay High Court appointed a receiver to take possession of the mills. In the meantime, some time before the year 1940, G.A. John died and, his interest in the mills devolved upon his three sons and a daughter, i.e., M.L. John, I.E. John, R.E. John and Mrs. Doris Marzano. Before the Bombay High Court, the parties resolved their dispute and the court passed compromise decree in the year 1940, providing that A.U. John (uncle of the petitioner) and R.E. John (one of the brothers of the petitioner) and I.E. John (one of the petitioners) would run the mills as lessees of the receiver appointed by the court and that they would continue to pay the rent thereof, to the receiver till such time as the mortgage debt, together with interest due thereon, and the expenses of litigation, was not liquidated. Thereafter, A.U. John, M.L. John and I.E. John ran the said mills in the name and style of M/s. John Mills and Company. It is claimed that the respective shares of the three partners in the said business were not in proportion to their proprietary interest in the mills.
(3.) MAJOR A.U. John, one of the partners of John Mills Co. died on May 8, 1943, and, thereafter, M.L. John and I.E. John filed suit No. 28/1943 in the Civil Courts at Agra, claiming a decree for the dissolution of the firm and for accounting. A preliminary decree was passed in February, 1944, but the proceedings in preparation for final decree are still pending. Thereafter, according to the petitioners, R.E. John ran the mills till May 23, 1946, in the name and style of John Mills Company (1943) as his proprietory concern. The case of the respondent, on the other hand, is that as per the returns filed by Sri M.L. John, it was run by the remaining partners of the firm John Mills and Company i.e., R.E. John, M.L. John and I.E. John in the name of John Mills Company (1943). John Mills and Co. and the business income thereof was assessed as such. At this stage R.E. John sold his proprietary interest in three mills to his two brothers M.L. John, I.E. John and Mrs. Marzano, who had already become the owner of G.A. John's share in the mill properties and, thereafter, the mills were run by M.L. John, I.E. John and Mrs. Doris Marzano in the name of the firm M/s. John. and Co. In the month of July, 1946, the executors of the estate of A.U. John, sold the interest that A.U. John had in the mills to Hira Lal Patni (father of petitioner, N.K. Patni, in Writ Petition No. 962 of 1975) and Munni Lal Mehra (petitioner in Writ Petition No. 790 of 1975). Likewise Edven John sold his interest in the mill properties to one Sri Gambhirmal Pandey. On April 11, 1949, the new owners of the mills formed a partnership by the name of John Jain Mehra and Company. On April 18, 1949, one Sri Loon Karan Sethiya filed suit No. 76/49 against John Jain Mehra and Company and John Mills and Company for the recovery of certain loans advanced to M/s. John and Company. In that suit, the Civil Court at Agra, vide its order dated May 21, 1949, appointed Sarvasri P.S. Mathur and M.B. Tawakley, advocates, as joint receivers. In due course, for the assessment year 1942-43, the ITO by his order dated June 30, 1945, assessed the firm M/s. John Mills and Co., on an income of Rs. 1,78,468, after permitting depreciation allowance on the assets represented by the mill properties treating its original cost as Rs. 20,80,000 instead of Rs. 62,37,505, as claimed by the assessee. He pointed out that the court receiver, appointed by the Bombay High Court in the suit instituted by Govind Ram Saksaria, had claimed depreciation on the same property treating its original costs as Rs. 62,37,505, but the AAC had upheld the order of the ITO allowing depreciation allowance treating the original costs of the mills as Rs. 20,80,000, only and that there was no reason for him to take a contrary view. The assessment order further disclosed that M/s. R.E. John, I.E. John and M.L. John were the partners of the assessee-firm. Likewise, for the assessment years 1943-44 to 1948-49, the ITO determined the income of the firm M/s. John Mills and Company after accounting for depreciation allowance calculated in the light of the depreciation allowed by him for the assessment year 1942-43.;