Judgement

HIDAYATULLAH, J. : This appeal, by special leave of this Court, is directed against the judgment and order of the High Court of Judicature at Bombay dated 26-2-1953, in Appeal No. 108 of 1952. By that judgment, the Divisional Bench .(Chagla, C. J. and Shah, J.) declined to interfere, in Letters Patent Appeal, with the judgment of Tendolkar, J. dated 8-7-1952, in Miscellaneous Application No. 48 of 1952. In the petition which was originally filed in the High Court under Art. 226 of the Constitution, a writ of mandamus was asked against the Union of India and two Income-tax Officers to compel them to give effect to the appellate order of the Appellate Assistant Commissioner of I. T. F. Range, Bombay, dated 29-4-1949. The High Court in both the judgments declined the writ.

2. The facts of the case are as follows : The appellant, Messrs. Sarupchand and Hukamchaud and Co., (hereinafter referred to as the assessee firm) was carrying on business, inter alia as Shroffs, merchants and commission agents at Bombay, Indore, Ujjain and Calcutta. It had, in the relevant account years, two partners, Sir Sarupchand Hukamdhand and Sri Hiralal Kalyanmal. The two partners were also separately liable to income-tax, the former as a Hindu undivided family and the latter as an individual. We are concerned here with the assessment years 1940-41, 1941-42 and 1942-43. These correspond to the account years, 1995-1996 (Samvat) to 1997-1998 (Samvat). When the assessment of the assessee firm was made, the Income-tax Officer, section VIII (Central), Bombay treated the firm as "resident and ordinarily resident". For the assessment year 1940-41 the Income-tax Officer found a profit of Rs. 80,358, and applying S. 23(5)(b) of the Indian Income-tax Act (hereafter called the Act), he proceeded to treat the firm which was unregistered as registered for the purpose of assessment. On 15-3-1945, he therefore assessed the two partners carrying the profit into their individual returns and made no demand upon the firm. It appears that an application for registration had already been filed under S. 26A of the Act before the Income-tax Officer, but it was rejected - and quite correctly - because no instrument of partnership was disclosed. That order was also passed on the same date.

3. For the assessment years 1941-42 and 1942-43, the Income-tax Officer by his orders dated 31-7-1945, and 31-10-1945, respectively, treated the firm as "resident and ordinarily resident" and as an unregistered firm. For the first of the two assessment years, he assessed the firm on a total income of Rs. 2,30,798 to income-tax and super-tax, and for the second year, its British Indian income was taken at Rs. 2,62,827 and the total income at Rs. 7,00,l16 and was also treated accordingly.

4. The assessee firm appealed against these assessments. The Appellate Assistant Commissioner by his order passed in the consolidated appeals on 29-4-1949, held that the assessee firm was non-resident and excluded the income of the firm outside British India, though it was included in the total world income for the purpose of computing the rate of tax. He also found error in the computation of income made by the Income-tax Officer, and held that in the assessment year 1940-41 there was a loss of Rs. 1,61,084 in the total world income of the assessee firm. For the subsequent years also there were slight variations in the amounts determined by the Income-tax Officer, but it was held that the assessee firm had made profits in those years. The following is the summary of the findings of the Appellate Assistant Commissioner, as given by him in his order :

Assessment year Income in British India Income outside British India Total world Income.

1940-41 Loss Rs. 2,26,028 Rs. 74,944 Loss Rs. 1,61,084

1941-42 .... Rs. 1,27,062 Rs. 1,08,236 .... Rs. 2,35,298

1942-43 .... Rs. 2,62,827 Rs. 4,41,789 .... Rs. 7,04,616

5. In addition to these findings, the Appellate Assistant Commissioner added a direction to the followin