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TMI Blog1984 (2) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... tory to the said deed. The partnership claimed and was granted registration under the I.T. Act for the relevant assessment years and was assessed as a registered partnership. In the assessment proceedings for the assessment year 1959-60, it was found that Tarachand had been born in 1940 and was a minor on May 24, 1948, the date on which the said partnership deed was executed. A notice was issued to the partnership to show cause why its registration for the relevant assessment years should not be cancelled under r. 6B of the Indian I.T. Rules, 1922, on the ground that the partnership was invalid. In the ensuing proceedings, the partnership contended that Tarachand was not a minor on May 24, 1948. An affidavit of Shamendra dated October 25, 1960, stating that Tarachand was a major on the relevant date and two horoscopes were produced as evidence. A certificate of birth of Tarachand dated November 24, 1960, issued by the Municipality of Howrah, on the application of Tarachand supported by the said affidavit of Shamendra, and a policy of insurance taken out on the life of Tarachand from Pearl Assurance Company on August 7, 1952, were also produced and taken into account. In the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... W) of 1965. The said rule was disposed of on October 11, 1974. It was stated in the judgment as follows : " In my opinion, there is nothing wrong in the order passed by the Commissioner of Income-tax. Whether the subsequent order of the Tribunal will have affected or not the proceeding under section 147 of the Act, I am not deciding it in this proceeding. For the purpose of disposal of this case I note that the notice under section 147 of the Act is not bad as it is not without jurisdiction. It is open to the petitioner to take all objections that the notice under section 147 is bad before the Income-tax Officer concerned, but it must be held that challenge in regard to the notice under section 147 of the Act on the ground of initial lack of jurisdiction cannot be sustained. The rule must, therefore, stand discharged." The ITO thereafter proceeded with and completed the assessments. The incomes computed in the assessments of the firm were retained but in each year the status of the assessee was changed from that of a firm to an association of persons. Appeals from the said assessments were disposed of by the AAC by his consolidated order dated March 18, 1975. The Appellate Assis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the, assessment years involved, for the opinion of this court : " 1. Whether the conclusion of the Tribunal as to the existence of an AOP comprising Sudhansu Kumar Bose, Biraj Kumar Bose and Tarachand Bose is perverse in the sense that it was inconsistent with the evidence on record ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the reassessment in the status of AOP was valid ? " At the hearing, the learned advocate for the assessees submitted that even if it was held that an association of persons came into existence on the cancellation of the registration of the firm, there was no clear finding as to who constituted the association. It was contended that on the cancellation of registration of a firm, an association of persons does not and cannot come into existence automatically. An association of persons like partnership could be formed only by an act or volition of individuals. If Tarachand, being a minor, was not competent to enter into a partnership, he was also incompetent to enter into an association of persons. Moreover, the case of Tarachand that he had no connection with the partnership or his brothers h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it under a will and it may be said, that in the first instance they did not constitute an association of individuals. But as soon as they elected to retain the property and manage it as a joint venture producing income, it seems to me that they became an association of individuals within the meaning of the Income-tax Act, and that they are properly assessed as the owners of the property under section 9." (c) Buldana District Main Cloth Importer's Group v. CIT/EPT [1956] 30 ITR 61 (Nagpur): In this case, a Division Bench of the Nagpur High Court following, inter alia, B. N. Elias [1935] 3 ITR 408 (Cal), observed as follows (p. 71): "........ before any group of persons can be called an association of persons, it must be established on facts that they are in the nature of partners i.e........ the established facts...... must at least lead to an inference that the members of the group of their volition or free will have joined in a venture with a view to earn profit." (d) Indira Balakrishna v. CIT reported in [1956] 30 ITR 320 (Bom). In this case, three widows had jointly inherited properties and assets. The income arose from the assets under several heads, namely, income from pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 147 was obtained on the incorrect representation that this was a case of a new assessee. There being no association of persons in existence, neither assessment nor reassessment of the same could have been made under s. 147. Learned advocate submitted last that the notice under s. 148 was expressly bad inasmuch as it was addressed to Sudhansu Kumar Bose and others who were left undetermined. It was also not known in what capacity the said notice was served on Sudhansu. Though not raised before the Tribunal, it was open to the assessees to agitate the same at the stage of reference inasmuch as the validity of the assessment itself was under challenge. The assessees never waived the invalidity of the said notice. Learned advocate cited the following decisions on question No. 2. (a) CIT v. Scindia Steam Navigation Co. Ltd. [1961] 42 ITR 589 (SC). This well-known decision was cited for the following propositions laid down by the Supreme Court: (a) A complex question of law might involve more than one aspect requiring to be tackled from different standpoints. Each aspect of a question is not a distinct question for the purpose of reference. (b) In answering such a question, the cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mooted before the Tribunal and as such the same could not be urged for the first time in this reference. On question No. 2, learned advocate submitted that the assessees had sought to raise a specific question in this reference as to the validity of the initiation of the proceedings under s. 147 which was not allowed to be raised. The assessee was, therefore, not entitled to impugn the validity of the notice. Learned advocate submitted further that the terms " assessment and " reassessment " were interchangeable and, in any event, the order of the ITO showed that what was done was an assessment under s. 147 and not a reassessment. Both the Appellate Assistant Commissioner and the Tribunal have treated the order as an assessment. In that view, if it was contended that question No. 2 was raised on the basis of reassessment, the same could not be answered. Learned advocate submitted last that the finding in C.R. No. 4735(W) of 1965 that there was no lack of jurisdiction in the initiation of the proceedings under s. 147, precluded the assessees from contending that the notice of the proceedings was bad as it was only by that notice the proceedings could be initiated, The assessees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the co-heirs does not affect the incidence of taxation in this case, because the business was carried on...... as one business with unitary control and by the consent of the parties." (d) CIT v. Krishna Reddy [1962] 46 ITR 784 (AP). Here, a Division Bench of the Andhra Pradesh High Court following Mohamed Abdul Kareem & Co. v. CIT [1948] 16 ITR 412 (Mad) held that where a partnership constituted in contravention of law was void, the person having purported to join as partners with the common purpose of earning profit were assessable as an association of persons. (e)M.M. Ipoh v.CIT [1968] 67 ITR 106 (SC). This decision was cited for the following observations of the Supreme Court (p. 120) " There is...... nothing in the Act which supports the contention ...... that before proceedings in assessment can commence against an association of persons, a notice must be issued and an order passed after giving opportunity to the person proposed to be treated as the principal officer to show cause why he should not be so treated. It is open to the Incometax Officer to serve a notice on a person who is intended to be treated as the principal officer...... The Income-tax Officer may postpone a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e it was held that Tarachand had attained majority in 1948. The Revenue has relied on the matriculation records of Tarachand and the statement of Tarachand recorded and the order passed by the Commissioner in the revision proceedings. It is to be noted that the order of the Commissioner had become final not having been challenged by the assessee in any further proceedings. In this state of conflicting evidence, the finding of the Tribunal that no valid partnership was constituted by the deed cannot be held to be perverse as being based on no evidence or as being contrary to the, evidence on record. On the same evidence, a different finding could have been reached, but to come to such a finding in this reference would mean reappreciation of the evidence. The order of the Tribunal in the subsequent assessment years where the finding is to the contrary cannot help the assessee in this reference. The principle of res judicata does not apply in revenue proceedings so far as findings of facts are concerned. Moreover, in the assessment years involved in this reference, the order of the Commissioner passed in the revision proceedings could not have been ignored by the Tribunal. The nex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 has been framed in broad language. Under this question, the assessee sought to contend at the hearing that the notice issued under s. 148 of the I.T. Act initiating proceedings under s. 147 thereof was bad as (a) there was no new assessee, and (b) as the notice left undetermined as to who were the persons who were sought to be assessed. It is on the record that, in the present reference, the assessee sought to raise a specific question, viz., whether the Tribunal was right in holding that the reassessment proceedings were validly initiated under s. 147(a) of the Act. This question was not allowed to be raised. Therefore, in our view, it is not open to the assessee to urge this contention under question No. 2. In any event, it has been held in C.R. No. 4735(W) of 1965 (Cal) that there was no lack of jurisdiction in the initiation of the proceedings. We note that the Tribunal directed the Revenue to adjust the tax already paid under the earlier assessments made on the firm in computing the tax payable by the association of persons. For the above reasons, we answer question No. 1 in the negative and question No. 2 in the affirmative, both in favour of the Revenue. In the facts an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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