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Issues Involved:
1. Validity of reassessment notice issued to a dissolved firm. 2. Limitation period for reassessment completion. 3. Evidence supporting the conclusion that Rs. 1,75,000 represented undisclosed income. 4. Determination of whether the entire sum of Rs. 1,75,000 or only a part thereof represents the assessee's income. Issue-wise Detailed Analysis: 1. Validity of Reassessment Notice Issued to a Dissolved Firm: The court examined whether the reassessment notice issued under the name of a dissolved firm and served on one of its partners was valid. It was concluded that even after the dissolution of a firm, it could be treated as continuing for the purpose of assessing its pre-dissolution income. The assessment or reassessment under section 44 of the Indian Income-tax Act could be made as if the firm had not discontinued its business. The court referenced the decision in Commissioner of Income-tax v. Devidayal and Sons and the Supreme Court decision in C. A. Abraham v. Income-tax Officer, Kottayam, which supported this view. Hence, the notice and subsequent reassessment were deemed valid. 2. Limitation Period for Reassessment Completion: The court analyzed whether the reassessment completed on March 18, 1958, was barred by the limitation period of one year from the date of service of the notice, as mentioned in the first proviso to section 34(3). The notice was served on March 23, 1957, and the reassessment order was made on March 18, 1958, but served on March 25, 1958. The court held that the reassessment was completed within the time limit because the order was made within one year from the date of service of the notice, despite being communicated later. The court referenced multiple high court decisions that supported this interpretation, distinguishing them from the context of section 33A(2) and concluding that the reassessment was not barred by limitation. 3. Evidence Supporting the Conclusion that Rs. 1,75,000 Represented Undisclosed Income: The court evaluated whether there was evidence to support the conclusion that Rs. 1,75,000 represented the undisclosed income of the assessee. The assessee's claim that the amount pertained to a transaction of Hastimal was rejected by the Income-tax Officer, Appellate Assistant Commissioner, and the Tribunal. The court noted that the transaction of the sale of 826 bales of cotton was prima facie between the assessee and the Indore Mills, with no evidence of Hastimal's involvement. The Tribunal found that the amount invested in the cotton bales did not come from the assessee's business accounts, indicating it was from undisclosed sources. The court concluded that the finding was based on substantial evidence and not merely on surmises or suspicion. 4. Determination of Whether the Entire Sum of Rs. 1,75,000 or Only a Part Thereof Represents the Assessee's Income: The court considered whether the entire sum of Rs. 1,75,000 or only the profit portion should be treated as the assessee's income. It was argued that only the profit part should be taxable. However, since the cost price of the cotton bales did not come from the assessee's disclosed funds, both the cost and the profit constituted undisclosed income. The court referenced Supreme Court decisions indicating that unexplained cash credits could be treated as assessable income. The Tribunal's conclusion that the entire amount was the undisclosed income of the assessee for the relevant year was upheld. Conclusion: - The reassessment notice issued to the dissolved firm was valid. - The reassessment was not barred by the limitation period. - There was sufficient evidence to conclude that Rs. 1,75,000 represented the undisclosed income of the assessee. - The entire sum of Rs. 1,75,000 was considered the undisclosed income of the assessee for the relevant assessment year. The court answered all questions against the assessee and allowed the department's notice of motion to delete references to the Bombay Cotton Annual, 1946-47, No. 28, from the supplementary statement. The assessee was ordered to pay the costs of the Commissioner.
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