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Petition under Section 66(3), Income Tax Act for stating the case on questions of law, Assessment of income of a firm, Deduction of bad debt, Treatment of partner's profit for rate purposes, Presumption under Hindu Law for family business, Reopening of assessment based on previous year's decision. Analysis: 1. The petition was filed by a firm seeking the Commissioner of Income Tax to state the case on questions of law regarding the assessment of their income for a specific year. The firm, owned by Chuni Lal and his son Hanuman Parshad, disputed the assessment by the Income Tax Officer, particularly regarding the addition of Hanuman Parshad's share of profits from another firm for rate purposes, and the deduction claimed as a bad debt against Khushi Ram. The Commissioner refused to review the assessment or make a reference to the Court under Section 66. 2. The Court analyzed the facts presented and concluded that no question of law arose in the case. Regarding the bad debt deduction, it was found that the petitioner failed to produce necessary evidence despite being given an opportunity. The Court also discussed conflicting views on the authority of debiting bad debts against profits. On the treatment of partner's profit for rate purposes, the Court found that the initial presumption under Hindu Law for a family business was rebutted based on the facts presented, supporting the Income Tax authorities' decision. 3. The petitioner argued that a previous decision excluding Hanuman Parshad's share of profits from the firm's income should bar the authorities from revisiting the issue. However, the Court cited a Madras High Court decision stating that authorities can reopen assessments based on fresh facts, as long as it is not done arbitrarily. The Court concurred with this ruling and found that the Income Tax authorities did not depart from principles of natural justice in disallowing the deduction. 4. In conclusion, the Court dismissed the petition, stating that no question of law required the Commissioner to state the case under Section 66(3). The parties were left to bear their own costs. Another judge on the panel concurred with this decision.
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