JAGDISH SAHAI J. - (1.) THIS special appeal has been filed by M/s. Kanodia Brothers, a partnership firm registered under the Indian Partnership Act, hereinafter referred to as the appellant, against the decision of a learned single judge (Manchanda J.) dated April 3, 1963, dismissing writ petition No. 86 of 1963 filed by the appellant. The appellant is a partnership of which the following are members in four-anna share each : 1. Srimati Hira Mani, 2. L. Murlidhar, 3. L. Satya Prakash Kanodia, and 4. L. Jagmohan Lal.
(2.) A gentleman by the name of Shahzade Prasad Srivatsava also carried on business at Kanpur. The Indian Army and Police Equipment Factory (hereinafter referred to as the factory) is said to be a partnership business of which Shahzade Prasad is admittedly one partner, the other partners according to Kanodia Brothers being the individual members who constitute the Kanodia Brothers. According to the income-tax department (hereinafter called the department), the factory is an association of persons. The Income-tax Officer, Project Circle, Kanpur, served the following notice on the factory through Shri Kanodia Brothers, former partners, Kahukothi, Kanpur : Whereas I have reason to believe that your income assessable to income-tax for the year ending 31st March, 1956, has - (a) escaped assessment. I therefore propose to assess the said income that has - (a) escaped assessment. I hereby require you to deliver to me within 35 days of the receipt of this notice, a return in the attached form of your total income and total world income assessable for the said year ending 31st March, 1956. The notice is being issued after obtaining the necessary sanction of the Commissioner of Income-tax, Lucknow. Sd. Income-tax Officer.
(3.) ON receipt of the notice mentioned above the appellant filed an objection before the Income-tax Officer. The proceedings dragged on for some time and on January 17, 1961, Writ Petition No. 182 of 1961 was moved in this court on behalf of the appellants. In that petition a number of reliefs were claimed. When the matter came up for hearing before a learned judge of this court (Brijlal Gupta J), he granted an adjournment in order to enable the parties to inform him as to how far the proceedings under section 34 had gone and whether the petitioners objection to the order under section 23B had or had not been disposed of. ON the next date of hearing learned counsel for the parties informed the learned single judge that only about 15 days ago service of notice of the date in the proceedings had been made on the petitioners and that no orders had been passed on the objection under section 23. Having observed as below, the learned single judge passed an order, an extract from which is also reproduced : It seems to me that it is not fair to me the petitioner that his objections to the order under section 23B should not have been decided and the tax demand under that order should be sought to be enforced, and not only this but that penalty should be imposed upon the petitioner for non-payment of the amount of tax... In the circumstances, the order which I propose to make is that the tax demand created under the order under section 23B and the penalty imposed for non-payment of that tax demand amounting in all to Rs. 68,185.42 nP. shall not be enforced against the petitioners until the assessment under section 34/44 is completed. It is also only fair that the petitioners objection to the order under section 23B should be disposed of by the income-tax department at an early date. Sri. R. S. Pathak, learned counsel for the petitioners, is quite content with this order. The petition is, therefore, allowed to this extent. The petitioners shall be entitled to the costs of the petition.;