Sudhindra Mohan Guha, J. - (1.) This reference at the instance of the Commissioner of Income-tax, West Bengal-II, under Section 256(1) of the I.T. Act, 1961, relates to the assessment year 1964-65, for which the relevant previous year ended on Dewali, 1963.
(2.) M/s. C. Ratan & Co., a partnership firm, had entered into a contract with one Sri S. N. Agarwalla to carry on the business of import/export, the latter having a half share. This was claimed to be a joint venture which was also accepted by the income-tax authorities in the earlier years and the respective shares were assessed in the hands of the firm as well as of Sri S. N. Agarwalla separately as shares from a joint venture. In the assessment year 1963-64, the ITO held that it was not a case of joint venture as regular business had been carried on from. 1951 to 1965. Being of the opinion that it was a case of association of persons between the firm and Sri Agarwalla, he called upon this new entity to file a return of income. Returns showing "nil" incomes for the assessment years 1963-64 and 1964-65 were filed under protest on the ground that the business belonged to a joint venture and there was no separate entity. The ITO, however, made the assessments on the association of persons and rejected the various arguments of the assessee. The income assessed for the assessment year 1964-65 in the status of an association of persons was Rs. 45,917.
(3.) The assessee filed an appeal before the AAC. The AAC agreed with the ITO that the business belonged to a separate entity, an association of persons. It was, however, argued before him that the income earned by the firm and Sri S. N. Agarwalla had already been assessed in their individual hands much earlier than the date when it was assessed in the hands of the association of persons and, therefore, the assessment made on the association of persons was illegal in view of the principle laid down by the Supreme Court in the case of CIT v. Murlidhar Jhawar and Purna Ginning & Pressing Factory [1966] 60 ITR 95. The AAC accepted these facts and cancelled the assessments for both the above years.;