Ajit K.Sengupta, J. - (1.) lit this reference under Section 256(1) of the Income-tax Act, 1961, the Tribunal has referred to this court the following questions of law : "1. Whether the Tribunal is right, on the facts and in the circumstances of the case, in arriving at the finding that the partner who had certainly objected to the apportionment of her income and tax thereon had a right of appeal under Section 246(c) read with Section 247 because it cannot be that there can be no appeal against the allocation altogether?
(2.) Whether the Tribunal is right, on the facts and in the circumstances of the case, in interpreting that, though the firm's appeal was dismissed earlier as incompetent, yet the Appellate Assistant Commissioner was justified in entertaining the appeal filed by one of the partners of the firm, Messrs. A.K. Mundra and Co. ?" 2. Shortly stated, the facts are that originally a firm, Messrs. Arun Kumar Mundra and Co., had declared its status as such as it had not asked for registration. Therefore, it had been assessed as an unregistered firm. According to clause 6 of the partnership deed constituting the assessee-firm, the profits of the firm were to be accumulated for a period of eight years and there was to be no distribution thereof amongst the partners. The Income-tax Officer, however, relied upon Section 13 of the Partnership Act according to which there was a provision for equal sharing of profits and losses between the parties subject to any contract to the contrary. Since there was no specific agreement determining the ratio in which the profits or losses were to be shared, the Income-tax Officer assessed the firm on a total income of Rs. 20,300 and, relying upon the provisions of Section 13(b) of the Partnership Act, he allocated the same in the ratio of one-third each.
(3.) Being aggrieved by that order, the firm filed an appeal under Section 246(c) of the Income-tax Act before the Appellate Assistant Commissioner who, vide his order dated September 5, 1979, in Appeal No. 77/(JL) of 1979-80, held that since there was a definite contract amongst the partners as regards the distribution of the profits of the firm, Section 13 of the Partnership Act did not come into play at all. Therefore, no part of the income which was not distributed in the year of account could be added in the assessment of any partner even for rate purposes, because no income belonged to any partner as such. Thereafter, the Department came in second appeal before the Tribunal and took up an additional ground that the Appellate Assistant Commissioner could not have entertained the appeal under Section 246(c) in the separate set of status because there was no such provision in that section. This ground was allowed and the appeal was accepted.;