M M A K MOHIDDIN THAMBY AND CO ELLORE Vs. COMMISSIONER OF INCOME TAX HYDERABAD
HIGH COURT OF ANDHRA PRADESH
M.M.A.K.MOHIDDIN THAMBY AND CO., ELURU
COMMISSIONER OF INCOME-TAX, HYDERABAD
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(1.)Rao, C.J. (1) The Income-tax Appellate Tribunal, Madras Bench "B" referred the following questions under S. 66 (1), Indian Income-tax Act to the High Court of Judicature, Madras (i)
"Whether there was definite information in the possession of the Income-tax Officer in consequence of which he could have discovered that there was an under-assessment within the meaning of Section 34 as it stood before its amendment in 1948? (ii) Whether the re-assessment of Rs.11,185.00 is a vliad."
The said reference was tranferred to this Court afterits constitution.
(2.)The facts that gave rise to the reference may be breiefly stated. M. M. A. K. Mohiddin Thumby and Co., was a firm having four tanneries at Eluru and one at Guntur. Its head office was situated at Eluru. The following were the six partners of the firm: 1. M. M. Mohamed Mama Labbai, 2. M. K. A. S. Syed Mohammad. 3. Vavoo Mohammad Hasana Labbai. 4. O. M. Ahmed Mohideen Sadaktulla. 5. Velak Mohammed Shekna Labbai. 6. Velak Mohammad Mohideen.Though they were carrying on business at Eluru, they were permanent resident of Kayapatnam village in Tinnevelly District. For the assessment year 1940-41 the assessee filed a return showing a total income of Rs.21,420.00 durin tghe scrutiny of the accounts, the Income-tax Officer came across a transfer of Rs.1,15,000.00 from the account of V. Syed Moahmed Ali of Calcutta to the accounts of the following four partners of the assessee firm:1. M. M. Mohammad Mama Labbai Rs. 25,000.002. A. K. Mohamed Omar Sahib Rs. 30,000.003. V. M. K. Dawood Labbai Rs. 30,000.004. N. K. A. S. Syed Mohammad Rs. 30,000.00 Though the Income-tax Officer suspected that the said amount represented the secret profits of the fir, he was not able to get any definite information to hold that the said sum also was part of the profits of the firm. Ignoring that item, he made an order of assessment dated 17-3-1941. On 31-3-1941, the said amount was spread over the accounts of the fourteen partners. The explanation of the assessee was that in October 1939, 14 persons contributed amounts totalling Rs.1,15,000.00 with the view of constituting a partnership, that the said amounts were remitted to Syed Mohamed Ali of Calcutta as the money was urgently required for purchasing skins for the partnership and that the money was subsequently adjusted on 31-3-1941 by transferring the same to the capital account of the four partners and thereafter to that of the 14 parners.In addition to the enquiries started by the Income-tax Officer before 17-3-1941, he addressed the Income-tax Officer, Tuticorin, to make an enquiry in respect of the financial position of the said four partners. On 17-2-1942, he sent a report that none of the partners had any private interest of his own apart from his interest in the business of the assessee. On receiving the said information, the Income-tax Officer issued a notice under S. 34, Indian Income-tax Act for the purpose dof re-opening the assessment.After following the procedure prescribed, he re-opened the assessment and found that the aforesaid amount of Rs.1,15,000.00 transferred from Syed Mohammed Alis account to the credit of the four partners really represented the profits of the firm. The was satisfied that the financial position of the said four partners was not such as to enable them to advance such a large amount towards capital. On that basis, he assessed the company to tax.
(3.)The Assessee filed an appeal to the Apellate. Assistant Commissioner of Income-tax, Nezwada, but he accepted the view of the Incoem-tax Officer and confirmed and assessment. when an appeal was filed to the Tribunal, that was dimsised. Thereafter the present reference was made at the instance of the assessee.
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