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TMI Blog1979 (8) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... red in Sunder Nagar, New Delhi, in the name of the karta, and the price was paid out of the books of the family. A building was constructed on the land and was completed in September, 1954. Another building was constructed in the following year on a plot at Golf Links, New Delhi. On March 18, 1950, there was a partial partition of the HUF, and its business was taken over by a partnership firm, Messrs. Faqir Chand Raghunath Das consisting of Lala Sham Nath and the two elder sons, Rajinder Nath and Ram Chander Nath. The partnership firm debited a sum of Rs. 98,418 in the building account of the firm towards the cost of construction of the Sunder Nagar property during the assessment year 1955-56. In the assessment year 1956-57, the partnershi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luded in their individual assessments. The ITO rejected the plea of the assessees that as they had already disclosed that they have invested in the properties when filing their original individual returns there was no case for invoking s. 147(a). The AAC, on appeal, agreed that there was no default on the part of the assessees to warrant proceedings under s. 147(a) and that ordinarily the assessments would have been barred by limitation. But he maintained the assessments on the ground that s. 153(3)(ii) of the Act applied. In second appeal, the Income-tax Appellate Tribunal, while rejecting the contention that I the assessees were not covered by the expression " any person " in s. 153(3)(ii), pointed out that nevertheless that provision cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the cost of construction could not be regarded as the concealed income of the firm. The High Court observed that such a finding was necessary for the disposal of the appeals filed by the firm, and as a corollary it was held that the buildings belonged to the co-owners. This, according to the High Court, necessitated the " direction " to the ITO that he was free to assess the excess amount in the hands of the co-owners. The High Court, taking the view that the co-owners were partners of the firm, and, therefore, covered by the expression " any person " in s. 153(3)(ii) of the I.T. Act, held that the bar of the limitation for making the impugned assessments was raised by that provision, and that the assessments could be sustained by ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is possible in certain cases that in order to render a finding in respect of A, a finding in respect of B may be called for. For instance, where the facts show that the income can belong either to A or B and to no one else, a finding that it belongs to B or does not belong to B would be determinative of the issue whether it can be taxed as A's income. A finding respecting B is intimately involved as a step in the process of reaching the ultimate finding respecting A. If, however, the finding as to A's liability can be directly arrived at without necessitating a finding in respect of B, then a finding made in respect of B is an incidental finding only. It is not a finding necessary for the disposal of the case pertaining to A. The same pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artnership was not the owner of the property and consequently any excess over the disclosed cost of construction could not be added in the assessments of the firm. All that has been recorded is the finding that the partnership firm is not the owner of the properties. It is true that the finding proceeds on the basis that the cost has been debited in the accounts of the four co-owners. But that does not mean, without anything more, that the excess over the disclosed cost of construction constitutes the concealed income of the assessees. The finding that the excess represents their individual income requires a proper enquiry and for that purpose an opportunity of being heard was needed to be given to the assessees. Indeed, that is now plainly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is left to the option and discretion of the ITO whether or not to take action, it cannot, in our opinion, be described as a direction. Therefore, in our judgment, the order of the AAC contains neither a finding nor a direction within the meaning of s. 153(3)(ii) of the I.T. Act in consequence, of which, or to give effect to which, the impugned assessment proceedings can be said to have been taken. Reliance was placed by the revenue on CIT v. Vadde Pullaiah & Co. [1973] 89 ITR 240 (SC). In that case, there were two appeals before the AAC, an appeal by the firm and another by Pullaiah, a partner of the firm, filed in his individual status. The question was whether the business was the business of the firm or that of Pullaiah. In order to de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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