1957 (9) TMI 52 - HC - Income Tax

Summary

Issues Involved:
1. Competence of Kikabhai to appeal to the Tribunal.
2. Competence of the Tribunal to examine and decide the partnership status of Kikabhai.

Issue-Wise Detailed Analysis:

1. Competence of Kikabhai to Appeal to the Tribunal:

The primary issue was whether Kikabhai had the right to appeal to the Tribunal against the orders of the Appellate Assistant Commissioner (A.A.C.) dismissing the appeals filed by Gokuldas. The court examined the procedural history, noting that the Income-tax Officer (I.T.O.) had assessed the unregistered firm based on a deed of partnership showing Kikabhai as a partner. However, this assessment was made without notifying Kikabhai, thereby denying him an opportunity to contest his partnership status. The court concluded that since the I.T.O.'s order implicitly determined Kikabhai as a partner, which affected his liability, he was entitled to appeal to the A.A.C. under Section 30. Given that Gokuldas' appeal was disposed of before Kikabhai became aware of his alleged partnership, his remedy lay in appealing to the Tribunal. The court affirmed that Kikabhai was competent to appeal to the Tribunal.

2. Competence of the Tribunal to Examine and Decide the Partnership Status of Kikabhai:

The second issue was whether the Tribunal had the jurisdiction to examine and decide if Kikabhai was a partner in the firm of Gokuldas Dayalji and Co. The court analyzed the relevant sections of the Indian Income-tax Act, particularly focusing on the powers and duties of the I.T.O. under Section 23. It was determined that the I.T.O. has an implied power to ascertain the partners of an unregistered firm during the assessment process. This power is necessary for various purposes, including the computation of income and compliance with Section 10(4)(b) and Section 26(1). The court emphasized the principles of natural justice, stating that the I.T.O. must notify alleged partners about their purported status and give them an opportunity to contest it. Since the I.T.O.'s determination affects the liability of the alleged partners, they must have the right to appeal against such determinations. Consequently, the Tribunal was competent to examine and decide the question of Kikabhai's partnership status.

Conclusion:

The court concluded that the procedural irregularities in the case did not result in any injustice to Gokuldas, as he had the opportunity to appear and contest the proceedings at relevant stages. The answers to both referred questions were given in the affirmative, confirming that Kikabhai was competent to appeal to the Tribunal and that the Tribunal was competent to decide his partnership status. The applicant, Gokuldas, was ordered to pay the costs of Kikabhai for this reference.