SATISH CHANDRA, C.J. - (1.) THESE three references relate to the assessment year 1949 -50. In Income -tax Reference No. 597 of 1964, the Tribunal referred two questions to us. In Income -tax Reference No. 336 of 1972, the Tribunal has referred another two questions which were called for by this court. Income -tax Reference No. 159 of 1970 is in respect of imposition of penalty in the sum of Rs. 5,000 for the assessment year 1949 -50.
(2.) A firm styled as M/s. Nanak Chand Agarwal was floated in May, 1945. It did business at Panagarh in the district of Burdwan in Bengal. This firm carried on business for about three years only. Its assessments for the years 1947 -48 to 1949 -50 were completed by the ITO, Burdwan.He found the partners of the firm were Murarilal and Nanak Chand having a share of 10 annas and six annas, respectively. For the assessment year 1947 -48, the ITO, Burdwan, intimated the ITO, Dehra Dun, that Murarilal's ten annas share in that firm came to Rs. 33,217. Murarilal in his assessment accepted this, but claimed that the capital invested by him in the Panagarh firm was taken by him as loans from several parties, to whom he had paid interest. He claimed Rs. 6,549 as interest and Rs. 1,620 for travelling expenses. The ITO allowed this deduction and assessed the balance of Rs. 25,048 as the assessee's share income from Panagarh business in Muralilal's individual assessment. He had an income of Rs. 1,173 from grain dealing business. Thus, his assessment was completed at a total income of Rs. 26,221 by an order dated 25th February, 1952.
(3.) MURARILAL filed an appeal. In the appeal, he submitted that there were four other partners with, him in the Panagarh business, and, therefore, proportionate share of profits only should be assessed in his hands. In support, he referred to entries in his books of account, making allocation of this income amongst the respective alleged partners. He also stated that one of these partners had suffered tax on the amount of his share.;