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Issues Involved:
1. Whether the Tribunal was right in declining to permit the assessee to raise the additional ground or let in any additional evidence sought to be introduced to support the ground. 2. Whether the Tribunal was right in holding that the assessment made on the firm was valid in law when both the partners had already been assessed on their shares of profit derived from the firm. Detailed Analysis: Issue 1: Tribunal's Discretion to Permit Additional Ground and Evidence The Tribunal declined to permit the assessee to raise an additional ground of appeal and introduce new evidence. The assessee argued that the Income-tax Officer (ITO) was incompetent to assess the firm after having assessed the individual partners. The Tribunal held that this new ground required fresh facts and there was no justification for the assessee not raising it earlier. The Tribunal noted that the original assessment orders were not available, and only copies were produced, which did not clearly indicate that the assessed individuals were partners of the firm. The Tribunal concluded that determining the real position would require investigating the records, which justified their decision to decline the additional ground. The High Court affirmed the Tribunal's discretion in such matters, citing several precedents, including the Supreme Court's decision in Manji Dana v. CIT [1966] 60 ITR 582. The Court noted that while the Tribunal could have admitted the additional ground by calling for the original assessment order, it was not legally improper for the Tribunal to exercise its discretion as it did. Therefore, the High Court answered the first question in the affirmative, in favor of the revenue. Issue 2: Validity of Assessment on the Firm Post Assessment of Partners The core issue was whether the assessment on the firm was valid after the individual partners had already been assessed. The assessee contended that once the partners were assessed, the ITO had exercised the option under Section 3 of the Indian I.T. Act, 1922, and could not assess the firm again. The High Court reviewed the historical changes in the assessment provisions under the Act, particularly Section 23(5) before and after the 1939 amendment and the Finance Act, 1956. The Court noted that Section 35(5) allowed for rectification of the partners' assessments based on the firm's assessment, indicating that assessments of partners and the firm could coexist. The High Court referenced several Supreme Court decisions, including CIT v. P. M. Bagchi & Co. [1951] 20 ITR 33 (Cal) and CIT v. Kanpur Coal Syndicate [1964] 53 ITR 225 (SC), which supported the view that the ITO had the option to assess either the firm or its partners. The Court also referred to CIT v. Murlidhar Jhawar and Purna Ginning and Pressing Factory [1966] 60 ITR 95 (SC), where it was held that once an option was exercised to assess individual partners, the firm could not be subsequently assessed. However, the Court distinguished these cases, noting that Section 35(5) specifically allowed for rectification based on the firm's assessment, thus supporting the Tribunal's decision. The High Court concluded that the Tribunal's decision on the merits was correct and upheld the validity of the firm's assessment. Consequently, the second question did not need to be answered, but the Court expressed its views, affirming the Tribunal's decision. Conclusion: The High Court upheld the Tribunal's discretion in declining to admit the additional ground and evidence, answering the first question in the affirmative. On the merits, the Court supported the Tribunal's decision that the firm's assessment was valid despite the prior assessment of the partners, effectively affirming the Tribunal's judgment. Each party was ordered to bear its own costs.
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