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TMI Blog1966 (9) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... he Income-tax Officer on January 19, 1959, November 30, 1959, and November 29, 1961, under section 23(3) accepting the assessee's share income from the above firms as returned by the assessee. It was noted in the assessment orders that the share incomes were being accepted subject to rectification later. In the assessment year 1958-59, the assessee's share in M. M. Madalappa Bros. was a loss and was not taken into account in the original assessment. In 1959-60, neither income nor loss was taken into account. In the assessment year 1960-61, a loss of Rs. 4,941 from this firm was deducted. Against the share income from the other two firms in the assessment for 1958-59, it was noted " tax earned ". In the other two years, no mention has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al assessments as earned income. The assessee had no objection to the enhanced share income being adopted, but objected to the Income-tax Officer, treating these as unearned income. The Income-tax Officer passed orders under section 154 of the Income-tax Act, 1961, in all the three years on August 28, 1963, levying a special surcharge on the share incomes. The assessee filed appeals to the Appellate Assistant Commissioner, objecting to the treatment of the share of profit from the firms as unearned income. The Appellate Assistant Commissioner, however, upheld the orders of the Income-tax Officer, observing as under : " The section does not restrict the scope to the alteration of the quantum only. The nature or character of the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t share of the income left scope for such inclusion so as to even change the character of the income from earned income to unearned income. " A copy of the Appellate Tribunal's order is annexure " B " and forms part of the case. The question of law is : " Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the Income-tax Officer, while passing the order under section 155 of the Act, was not justified in treating the share income of profit from the partnership firms as unearned ? " After setting out the statement of case as above, HEGDE J. continued. This is a reference under section 256(1) of the Income-tax Act, 1961 (to be hereinafter referred to as the Act). This reference comes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal assessable income was more than that determined under the regular assessment orders, but also on the ground that the rate of tax payable in respect of a portion of that income is more because the same is unearned income. Before rectifying the assessment orders the Income-tax Officer purporting to act under sections 154 and' 155 called upon the assessee to show cause why the proposed enhancement of tax should not be made. But in the course of his final order, he purported to revise the assessment orders under section 154. In paragraph 6 of its order, the Appellate Tribunal came to the conclusion that on the facts of the case, the Income-tax Officer could not have acted under section 154 and he should be deemed to have acted only under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been made both under section 154 as well as under section 155. Our opinion is sought on the solitary question that, while acting under section 155, the Income-tax Officer could have changed the basis of taxation. In other words, whether he could have treated any portion of the income as unearned income which he had earlier treated as earned income by having recourse to his power under section 155. It may be that the Income-tax Officer erred in treating that portion of the income as earned income. The mistake committed by him may be apparent from the record. But such mistakes cannot be rectified under section 155. That section deals with amendment of assessment of a partner or a member of a firm or association under circumstances mentioned t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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