1994 (12) TMI 47

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..... ed in holding that the interest paid to the partners on the deposit accounts in their individual capacity in the firm far the years under consideration was liable to be disallowed under section 40(b) of the Income-tax Act, 1961 ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the action of the Income-tax Officer in initiating reassessment proceedings under section 147 of the Income-tax Act, 1961, was in accordance with law ? " This income-tax reference relates to the assessment years 1974-75 to 1979-80. At the material times, there were three partners in the firm of the assessee, namely, Ghanshyamdas Kotumal, Gopaldas Ghanshyamdas and Ramesh Ghanshyamdas. Each one of them was a .....

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..... indu family or he may be a trustee. He occupies a dual position. Qua the partnership, he functions in his personal capacity ; qua the third parties, in his representative capacity. This dual position of a partner " qua the partnership " and " qua the third parties " is clearly recognised by the Supreme Court in CIT v. Bagyalakshmi and Co. [1965] 55 ITR 660. In the case of CIT v. Jhabarmal Agarwalla [1990] 184 ITR 431, a Division Bench of the Gauhati High Court, of which one of us (Dr. B. P. Saraf J.) was a member, after considering the decision of the Supreme Court in CIT v. Bagyalakshmi and Co. [1965] 55 ITR 660 and also of the Allahabad High Court in the case of Madho Prasad v. CIT [1978] 112 ITR 492 has held that in a case where the kart .....

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..... completed by the Income-tax Officer under section 143(3) of the Act on October 16, 1975, for the assessment years 1974-76, on May 31, 1977, for the assessment year 1976-77 and on August 31, 1978, for the assessment years 1977-78 and 1978-79. These assessments were reopened by the Income-tax Officer under section 147 of the Act and the only item of additional income included in the assessments was the interest as aforesaid paid by the assessee-firm. The Income-tax Officer initiated reassessment proceedings under section 147(b) of the Act on July 25, 1979, since the audit objections were received from the internal audit party of the Income-tax Department pointing out that the interest paid as aforesaid was wrongly allowed. The Tribunal, the .....

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