G.M. Lodha, J. - (1.) WE are disposing of these two income-tax reference applications under Section 256(1) of the I.T. Act, 1961, by a common judgment as prayed for by Mr. Joshi, learned counsel for the Department. The brief facts giving rise to the references are as follows : The respondent is a P.W.D. contractor and derives income from the contracts executed in his own name and share income from the two firms, i.e., M/s. Makhan Singh & Co. comprising of three partners at Hanumangarh and M/s, Makhan Singh & Co. comprising of four partners at Sriganganagar. Both the firms were granted registration for the first time for the assessment year 1959-60.
(2.) THE assessment for the year 1959-60 was completed by the ITO on May 8, 1982, on a total income of Rs. 26,597 in which the share of profit of Makhan Singh from the partnership firm of Sriganganagar was determined at Rs. 6,475 and that at Hanumangarh it was determined at Rs. 14,750. While the assessment proceedings for the assessment year 1960-61 in the case of the firm, M/s. Makhan Singh & Co., Hanumangarh, were being taken, the ITO noticed certain facts which led him to believe that the business run in the name and style of Maklian Singh & Co. belonged to Makhan Singh in his individual capacity and was not that of a genuine partnership firm. He, therefore, refused to grant contimiation of registration to the firm and completed the assessment for 1960-61 treating Makhan Singh as sole proprietor of the firm and, therefore, in the status of an individual. The assessment was upheld and confirmed by the Tribunal, vide its order in I.T.A. No. 13615 of 1965-67 dated March 25, 1960. The ITO while rejecting the prayer for registration and assessing the income of Makhan Singh as sole owner in his individual capacity, issued notice under Section 148 read with Section 147(b) of the I.T. Act, 1961, for the assessment year 1959-60, also with a view to assess the income of Makhan Singh & Co., Hanumangarh, in the hands of the assessee. The assessee, Makhan Singh, filed a reply and denied that he was carrying on Makhan Singh & Co., Hanumangarh business, as a sole proprietor. In his reassessment proceedings, the assessee contended that issue of notice under Section 148 was illegal, void and unwarranted in law. He also argued that no action could be commenced under Section 148 of the I.T. Act as the ITO had no definite information in his possession about the underassessment of any income. Undeterred by the above submission of the assessee, the ITO rejected the contention of the assessee and completed the assessment on a total income of Rs. 49,685 on February 27, 1965. Makhan Singh filed an appeal before the AAC. The assessee argued that since he has placed all the material facts necessary for his assessment before the ITO, proceedings under Section 147(b) of I.T. Act, 1961, were misconceived and cannot be taken resort to on those very grounds. Reliance was placed by the assessee on Calcutta Discount Co. v. ITO [1961] 41 ITR 191 (SC) and Muthappa Chettiar v. CIT [1964] 53 ITR 642 (Mad).
(3.) THE AAC was of the opinion that the decisions cited are not applicable to the present case as action is being taken under Section 147(b) and not under Section 147(a) of the I.T. Act. The assessee then submitted that even under Section 147(b) of the I.T. Act, no fresh proceedings can be taken now as all relevant facts were placed before the ITO at the time of the original assessment proceedings. It was held that the order of the ITO in 1960-61 discovering that Makhan Singh was not a partner only, but he was the sole proprietor of the firm, was referred to. The assessee preferred an appeal before the Tribunal and raised the same arguments as raised before the ITO and the AAC. It was contended that the ITO was fully aware of the facts relating to the partnership business and no new information came into his possession and as such the ITO could not take action under Section 147(b) of the I.T. Act. The assessee placed reliance on the decisions in the matter of Bhimraj Pannalal v. C1T [1957] 32 ITR 289 (Pat) and ITAT v. Byramji & Co. [1946] 14 ITR 174 (Nag). The assessee further argued that before and without cancelling the assessment of the firm, no assessment could be done afresh as sole proprietor. The decision in Agarwal v. CIT [1959] 37 ITR 107 (All) and C1T v. Murlidhar Jhawar & Purna Ginning & Pressing Factory [1966] 60 ITR 95 (SC) were relied upon. The Departmental representative submitted that the information received by the ITO after completion of the assessment is an information within the meaning of Section 147(b) and hence the ITO was competent to reopen the assessment. Reliance was placed on Makaraj Kumar Kamal Singh v. CIT [1959] 35 ITR 1. The Tribunal accepted the first contention of the assessee and allowed the appeal of the assessee, vide order dated June 14, 1968. ;