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TMI Blog1927 (2) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... ccordance with the Act in assessing them by way of summary assessment while a bona fide dispute was going on as to whether they were liable to be assessed in Cawnpore at all. (3) Consequential upon the foregoing questions whether it was the duty of the Income-tax authorities to obtain a decision under section 64 (3), and (4) Whether having regard to the fact that the particular venture had come to an end, and the members of the partnership who had taken part in it were no longer carrying on business at all, the Income-tax authorities at Cawnpore had jurisdiction to make the assessment upon the firm, even if it had carried on business at Cawnpore, such business no longer existing. The Commissioner has requested permission to raise another question, which we will deal with in a moment, and which in substance challenges the jurisdiction of the High Court, to direct a case to be stated in this matter owing to the provisions of section 64. Before dealing with this question of jurisdiction, it is necessary to make two preliminary observations. As a rule it is better in a statement of a case to confine the case to findings of fact, and to the expression of the Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de in October on behalf of the Commissioner that this sub-section concluded the matter and ousted the jurisdiction of the High Court under section 66. It appears to us that the Income-tax Officer of Cawnpore who dealt with this matter in the ordinary course of his duty, wholly overlooked this provision, and that the Commissioner's attention was not drawn to it, and further that it is entirely owing to this oversight that the matter has got into the complicated condition in which we now find it. The question which has arisen between the assessee and the Income-tax authorities is really a perfectly simple one, namely, whether the partnership, or firm, formed for a special undertaking, being the assessee, had its principal place of business in Cawnpore or Calcutta. It is said that the facts of the case are intricate, but we do not agree. As will appear hereafter the facts relating to this particular business, which was only of a temporary character, are by no means uncommon, and according to the ordinary tests, which are applied in such cases, it ought not to be difficult to find as a fact where their principal place of business was, although the matter has now come before u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atter. They seem to have acted with circumspection in this matter except that a branch in Cawnpore failed to produce their books. They went on to say that although it did not matter much where the assessment was made, in Calcutta or in Cawnpore, they asked the Income-tax Officer to take into consideration the fact that it would cause serious inconvenience and loss to them if the assessment was made in Cawnpore, and they gave reasons for this contention, pointing out what is admitted to be correct, that the business relating to the castor seeds was done by the Calcutta firm with the East Indian Railway, and that the contract was entered into in Calcutta, and that as a matter of fact the Income-tax Officer in Calcutta was already arranging to take evidence upon the point. There may be some difference in the method of calculating profit in the different provinces. This is a matter for the Income-tax authorities. We were told that the payments by the East Indian Railway amounted to 14 lakhs, and that the Calcutta authorities had assessed the profit at one lakh, while in Cawnpore it had been assessed at 3 lakhs. In the former case a profit of one lakh, upon an outlay of 13, would be nea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to exercise the function imposed upon him, as the case may be, giving the assessee an opportunity of representing his views. What is quit clear is that the Income-tax Officer cannot himself decide this question, or act as though it had been determined in accordance with the provisions of this section, and that if he proceeds to prejudge the issue, act as though it had been determined in and to assess the firm as though their principal place of business was in his own jurisdiction, in spite of the dispute being still undetermined, he is doing something not authorised by the Act-in other words an illegality. It is quite true that the following sub section, namely, sub-section 4, provides that notwithstanding anything contained this section, every Income-tax Officer shall have all the powers conferred by or und this Act on him in respect of any income profits or gains accruing or arising or received within the area for which he is appointed. This means that he can proceed assess a branch, as such, if he has the materials for so doing. What would be the result of such an assessment of the branch if the decision afterwards is that the principal place of business is in another prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are compelled to hold in this case that there being a total failure on the part of the Income-tax authorities to apply the plain provisions of section 64, and on the other hand an illegal assumption of authority by the Income-tax Officer in Cawnpore to assess the assessee, as though their principal place of business had been determined to be in Cawnpore, the existence of an alternative remedy under section 64(3) does not affect this case, and cannot be held to be a bar to the right of the appellant to have a case stated, and the jurisdiction of the High Court to answer those questions in the way in which it holds they ought to be answered. Owing to the disregard of the machinery provided by section 64(3) and to the wholly irregular proceedings, as that appear to us to have been, which have necessarily followed upon the action of the Income-tax Officer in Cawnpore, in assessing the profits of the firm or of this special business as though the principal place of business had been determined to be in Cawnpore, the subsequent proceedings appear to have been irregular in form and infructuous in substance! We need not dwell upon the immediate proceeding which took place between the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s firm, which was an unregistered partnership firm for a special venture for dealing with castor-seeds under a contract with the East Indian Railway for one year, in 1923-24, consisted of three existing firms, one the firm of Dina Nath Hem Raj of Calcutta, who held the lion's share, namely, 8 annas, and after whose name the temporary partnership was named; a firm of Messrs. Dewan Chand and Sons of Lahore, who held a 4-annas share, and the firm of Narain Das of Cawnpore, who held the other-4-aanas share. 2. The Calcutta firm started and formed the partnership and clearly financed it. The inference may fairly be drawn that it would not have come into existence without their instrumentality. They might have succeeded in inducing other firms in Cawnpore or Lahore, to join the partnership, but there is nothing to show that either the firm in Cawnpore, or the firm in Lahore, would have formed the partnership, or have become members of any such partnership if it had not been for the Calcutta firm. The Calcutta firm were therefore the moving spirit and apparently the financiers. 3. The partnership was ultimately dissolved by deed in July 1924 in Calcutta. 4. The contract with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pears to have held, that the fact that the Cawnpore firm were making purchases as a far a field as Moradabad, affected the question whether theirs was the principal place of business. Although in the end he answers the 1st para graph in the affirmative, he frames his finding on this point in language which is far from being convincing, saying that it is not established that the business was not carried on in Cawnpore. He rather thinks that it .is a fair inference that the business was conducted in Cawnpore. In the way in which these findings are stated, this is not a decision of the question at all. Undoubtedly a great deal, if not the bulk of the practical business, was conducted in Cawnpore. But that is not the sole, or indeed the important test in considering in a case like this, whether Cawnpore was the principal place of business. Question (1) was intentionally framed so as to leave open, the question whether the business was solely carried on in Cawnpore. But that question is now not open, and we have no hesitation in coming to the conclusion that on the facts stated in the case, there is no evidence upon which it can be held that the principal business was in Cawnpore, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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