P.Chakravartti, C.J. - (1.) On 16-5-1947, an application was made on behalf of a firm called the Benares Steel Rolling Mills for its registration in connection with its assessment for the income-tax year 1944-45. The applicants were four persons, one of whom was Mahaliram Santhalia and each was said to own a one fourth share in the firm. In support of the application a deed of partnership, executed on 24-12-1943, was produced. The Income-tax Officer allowed the application and proceeded to assess the firm as a registered firm. Similar assessments of the firm were made for the next three years, namely, 1945-46, 1946-47 and 1947-48.
(2.) In the return for his personal assessment in respect of none of the aforesaid years did Mahaliram Santhalia include his share of the income from the firm of Benares Steel Rolling Mills. Upon the Income-tax Officer detecting that income and wanting to include it in his assessment, he put forward the contention that he was a partner of the firm of Benares Steel Rolling Mills, not in his individual capacity, but as a representative of another firm, called Radhakissen Santhalia, of which he was a partner. According to him, the proportionate income of the firm of Benares Steel Rolling Mills in respect of the one-fourth share standing in his name was to be included in the assessment of the firm Radhakissen Santhalia and not in his personal assessment. The Income-tax Officer overruled that contention. He appears to have informed himself in the first year from the Excels Profits Tax Officer of Cawnpore that Mahaliram Santhalia was a partner of the Benares Steel Rolling Mills in his personal capacity, but subsequently he was able to see for himself the deed of partnership relating to that firm which was produced before him. The deed confirmed the view which had been taken by the Excess Profits Tax Officer of Cawnpore. For that reason and also for the reason that questions about the real constitution of the firm, the Benares Steel Rolling Mills, could be agitated only in an appeal from the assessment of the firm and not in any proceeding relating to the assessment of the partners, he included the one-fourth share of the income of the firm in the total income of Mahaliram Santhalia. This was done in respect of all the four assessment years.
(3.) Mahaliram Santhalia appealed against the order of the Income-tax Officer. It so happened that two of his appeals, those relating to the assessment years 1944-45 and 1947-48, came to be heard by an Appellate Assistant Commissioner, named Mr. K. N. Bose, whereas the remaining two appeals, those relating to the assessment years 1945-46 and 1946-47, came to be heard by another Appellate Assistant Commissioner, named Mr. M. K. Banerji. The conclusions the two Assistant Commissioners arrived at were diametrically opposite. In his order relating to the assessment year 1944-45, Mr. K. N. Bose said that he had already held in an appeal preferred by the firm of Radhakissen Santhalia in respect of its own assessment that the share of the income of the Benares Steel Rolling Mills paid to Mahaliram Santhalia should be taken as the profit of that firm and consequently he held that that income should be excluded from Mahaliram's personal assessment. In his order for the assessment year 1947-48, Mr. Bose stated a further fact. He again referred to his finding recorded in an appeal by the firm of Radhakissen Santhalia that the one-fourth share of the income of the Benares Steel Rolling Mills actually belonged to that firm, but he also stated that the books of the firm of Radhakissen Santhalia had since been shown to him and they showed that the capital contributed to the Benares Steel Rolling Mills had come from the funds of Radhakissen Santhalia. Mr. Bose's conclusion was that Mahuliram Santhalia had no interest in the firm of Benares Steel Rolling Mills as an individual and accordingly he directed that the income should be excluded from his assessment and included in the assessment of Radhakissen Santhalia as profit of that firm.;