MALIK, J. - (1.) THIS is a reference under Section 66 (1), Income -tax Act. Two questions have been referred to us, one at the instance of the Commissioner of Income -tax and the other at the instance of the assessee. The questions referred for decision are : '1. Whether in the circumstances of the case the Appellate Assistant Commissioner was empowered under the law to cancel the assessment and whether the order in appeal passed by the Appellate Assistant Commissioner was within the ambit of his powers under Section 31, Income -tax Act? 2. Whether in the circumstances of the cage the income of the period from 11th December 1942, to 10th December 1943, could be legally assessed in the hands of the assessee company which was incorporated on 11th December 1943?'
(2.) THE facts found in the appellate order of the income -tax Tribunal and which are stated in the statement of the case are that Messrs. David Mills Ltd, were previous owners of the Bijli Cotton Mills at Hatnras. Messrs. Shyamlal Chimanlal, a partnership firm, thought of acquiring the Bijli Cotton Mills for a sum of 15 lacs on behalf of a company, which they were going to get incorporated. Messrs. Shyamlal Chimanlal paid the stipulated price to Messrs. David Mills Ltd., purporting to do so on behalf of the company which they were going to float. On 10th December 1942, they obtained possession of the Bijli Cotton Mills as representing the purchaser company which had not yet come into existence but which they specifically mentioned they had decided to get incorporated, On 11th December 1943, the company was duly incorporated and on 2nd January 1945, a formal conveyance was executed by Messrs. David Mills Ltd. in favour of the new company, called the Bijli Cotton Mills Ltd., Agra. On 14th March 1945, the Income -tax Officer assessed the Bijli Cotton Mills Ltd. on the income from 11th December 1942, to 31st December 1943. This assessment could only be on the basis that the Bijli Cotton Mills Ltd. had earned profits from the date that Messrs. Shyamlal Chimanlal had commenced business after taking over possession of Bijli Cotton Mills from. Messrs. David Mills Ltd. The Bijli Cotton Mills Ltd. had claimed certain sums of money as depreciation. They were not satisfied with the depreciation allowed by the Income -tax Officer and filed an appeal under Section 30, Income -tax Act against the assessment order. While the appeal was still pending the Income -tax Officer thought that he had made a mistake in assessing the Bijli Cotton Mills Ltd., on the income from 11th December 1942, and came to the conclusion that he should have assessed the Bijli Cotton Mills Ltd. only from the date of its incorporation, i.e. 11th December 1943, and that the liability for the payment of Income -tax for the period from 11th December 1942, to 10th December 1943, was of Messrs. Shyamlal Chimanlal, the promoters, who had during that period continued the business. He drew the attention of the Appellate Assistant Commissioner to this, setting forward his views. The Appellate Assistant Commissioner held that the Bijli Cotton Mills Ltd., was assessable only from the period of its incorporation i.e. 11th December 1943, to the end of the year, i.e. 3ist December 1943. He, therefore, cancelled the assessment. Against the order of the Appellate Assistant Commissioner the Bijli Cotton Mills Ltd., (which for the sake of brevity we shall henceforward call the assessee) filed an appeal before the Income -tax Appellate Tribunal. Before the Tribunal two points were raised. It was urged that the Appellate Assistant Commissioner was seized merely of the appeal filed by the asses -see and he could not entertain a sort of cross -objection on behalf of the Income -tax Officer and hold that the assessee was liable for the income only from the date of its incorporation. In other words, the suggestion was that the Appellate Assistant Commissioner was confined only to the points raised by the assessee and he had no right to annul the assessment. It was further urged that it was the assesses which was liable to be taxed for the period from 11th December 1942 to 10th December 1943, as the business was carried on for its benefit and the promoters, Messrs. Shyamlal Chimanlal, were not liable for assessment for that period.
(3.) THE Appellate Tribunal held on the first point against the assessee and on the second point in favour of the assessee and it was thereafter that the assessee and the Commissioner made applications that the points mentioned above may be referred to this Court for its decision.;