9911796707
TMI Blog1971 (5) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... follows : With effect from January 1, 1946, a par tnership firm,M/sSharma Co., became the sole selling agent of M/s. Cawnpore Cotton Mills Ltd, The firm, Sharma Co., consisted of two partners, namely, Sri Sheo Sharma and Smt. Chandan Devi, wife of the petitioner. This, firm dissolved on 31st December, 1947, and with effect from 1st January, 1948, the petitioner, Sri Deo Sharma, took over as the sole selling agent of Cawnpore Cotton Mills Ltd. Subsequently, Sheo Nath Sharma also joined him as a partner. This newly constituted firm was also known as Sharma Co. The agreement further provided that this new firm was to operate retrospectively with effect from January 1, 1948. In respect of the assessment year 1947-48, the old Sharma Co. made an application for registration under section 26A of the Indian Income-tax Act, 1922. The Income-tax Officer rejected this application on the finding that the partners disclosed by the deed were not the real partners, the real partners of the firm being the petitioner, Deo Sharma (instead of Smt. Chandan Devi), and Sri Sheo Nath Sharma. Though the old firm, Sharma Co., was not registered, the Income-tax Officer proceeded to assess this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nued, certain changes had merely taken place in the constitution of the firm and that the firm as a unit of assessment had continued throughout. Relying upon section 26(l) of the Act, it upheld the assessment. The matter was ultimately referred to the High Court (I.T.Rs. Nos. 738 and 739 of 1962) which by its order dated 20th May, 1964, held that the old Sharma Co. dissolved on 31st December, 1947, and thereafter the entire business was taken over by the petitioner, Deo Sharma. In the circumstances, the provisions of section 44 of the Act could not be invoked. This court further expressed an opinion that section 26(2) of the Act merely provided for apportionment of the tax liability between the original owner of the business and his successor. It did not provide for any procedure for assessment of cases falling within the section. In the result it held that the assessment made against Sharma Co. after 31st December, 1947, was invalid. On receipt of the finding of the High Court the Income-tax Appellate Tribunal made an order dated 18th December, 1964, directing that the assessment made against Sharma Co., after dissolution of the firm, was not valid and that it be set aside. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment or recomputation to be made in pursuance of the notice is to be made on him as the agent of such nonresident, the notice shall not be issued after the expiry of a period of two years from the end of the relevant assessment year." It will thus be seen that depending upon the amount of income that is said to have escaped assessment, a notice in a case falling under section 147(a) can be issued up to the maximum period of 16 years after the end of the assessment year, the income of which is said to have escaped assessment. In cases falling under section 147(b) of the Act the maximum period up to which a notice under section 148 can be issued is four years from the end of the relevant assessment year. In this case the two notices have been issued for the assessment years 1948-49 and 1949-50. According to this section, a notice in respect of the assessment year 1948-49, could in no case be issued after the year 1965. Similarly, in respect of the assessment year 1949-50 it could not be issued after the year 1966. The notices in respect of the two years having been issued on 3rd of December, 1968, are prima facie barred by time. Learned counsel for the revenue, however, contende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch was dissolved ,on December 31, 1947. Proceedings under section 147(b) read with section 150(i) were initiated against the petitioner as for the assessment year 1948-49 an income of Rs. 3,64,957 and for the assessment year 1949-50 an income of Rs. 1,55,328 had escaped assessment. It is not disputed that these two amounts represented the income of the old Sharma Co., earned during the relevant accounting year, prior to its dissolution on December 31, 1947. Two questions, therefore, that arise for consideration are : " (1) Whether it is open to the income-tax authorities to tax the petitioner in respect of the income earned by old Sharma Co., to whose business he succeeded ? and (2) Whether there is no time limit for issuing the two notices as they had been issued in consequence of and in order to give effect to the finding recorded by the High Court in I.T.Rs. Nos. 738/62 and 739/62. Learned counsel for the revenue cited section 44 of the Act in this connection. Section 44 of the Income-tax Act, 1922, as it stands after its amendment in the year 1958, provides that where any business, profession or vocation carried on by a firm or other association of persons has been di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this section, is when the person whose business, profession or vocation is succeeded cannot be found. In such a case the assessment of the profits of the year in which the succession took place up to the date of the succession, and for the year preceding that year is to be made on the person succeeding him in the like manner and to the same amount as it would have been made on the person succeeded or when the tax in respect of the assessment made for either of such years assessed on the person succeeded cannot be recovered from him, it shall be payable by and be recoverable from the person succeeding, and such person shall be entitled to recover from the person succeeded the amount of any tax so paid. In the case before us there is no allegation that the partners of the old Sharma Co. are not available for the purposes of assessment and recovery of tax in respect of the business carried on by the firm tin 31st December, 1947, the date on which it was dissolved. In the circumstances, it is not possible to take any proceeding against the petitioner who was not a partner in the old Sharma Co. in respect of the income that had accrued to the old Sharma Co. up to the date of its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding or direction by which the income had been excluded from the income of old Sharma Co., and was held to be the income of the assessee, only if the assessee bad been given an opportunity of being heard before the order was made. The assessee was not a party to the Income-tax References Nos 738 and 739 of 1962 and the revenue has not taken up the case that he was given any opportunity of being heard before the High Court made the observation on which reliance is being placed. Even if by some stretch of imagination it could be said that in these references, the High Court had recorded a finding that income for the assessment years 1948-49 and 1949-50 had to be excluded from the total income of old Sharma Co., and was to be included in the income of the assessee (which finding is not there at all), the revenue could still not have derived any benefit from Explanation III to section 153 as that finding was not recorded after giving an opportunity to the petitioner to be heard. As the notices had not been issued in order to give effect to a finding or direction contained in an order passed by any authority in any proceeding under the Act by way of appeal, reference or revision, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
