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1982 Supreme(Cal) 172
High Court Of Calcutta
SABYASACHI MUKHERJI, SUHAS CHANDRA SEN
COMMISSIONER OF INCOME-TAX - Appellant
Versus
N.CH.R.ROW AND CO. - Respondent
Income-Tax Reference 452 Of 1975
Decided On : 05/12/1982
AJIT SEN GUPTA, RANENDRA N.DUTTA
A person who becomes liable to pay tax by any order against which an appeal is preferred has the locus standi to intervene in the appeal and prosecute it.
Headnote:
INCOME TAX - PARTNER - LOCUS STANDI TO INTERVENE IN APPEAL - DISCLOSURE PETITION - ACCEPTANCE OF PART OF THE DISCLOSURE PETITION.
Fact of the Case:
The assessee-firm, M/s. N. Ch. R. Row and Co., was registered under the I. T. Act and was carrying on business at Calcutta. The partners of the firm, according to the partnership deed, were N. Ch. R. Rao and P. Jagannathan. The return of the income of the firm for the assessment year 1963-64 was filed on 18th December, 1963, by N. Ch. R. Rao as a partner. In the return N. Ch. R. Rao and P. Jagannathan were shown as the two partners of the assessee-firm. The application for registration was also signed by these two persons. The assessment for the assessment year 1963-64 was completed by the ITO on a total income of Rs. 1,03,106. By an order dated 22nd February, 1968, under Section 158 of the I. T. Act, the ITO allocated the assessed income in equal shares between the two partners, N. Ch. R. Rao and P. Jagannathan. The total income on which the assessee-firm was assessed to tax was inclusive of Rs. 50,000 added as income from undisclosed source on the basis of peak credit and Rs. 26,829 being the interest on the hundi loans, deduction on which was claimed by the assessee-firm but disallowed by the ITO.
Finding of the Court:
1. P. Bhaskara Rao had locus standi to intervene in the appeal filed and to prosecute it before the Tribunal. 2. The Tribunal was right in holding that the disclosure petition should have been accepted as a whole. The Department made a mistake of law in accepting a part of the disclosure petition.
Issues: 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that P. Bhaskara Rao had the locus standi to intervene in the appeal filed on behalf of the assessee-firm and prosecute it ? 2, Whether, on the facts and in the circumstances of the case, the Tribunal misdirected itself in law in holding that the addition of Rs. 55,000 as income from undisclosed sources based on the admission made in the petition under Section 271 (4a) of the Income-tax Act, 1961, was not made on a proper basis and in setting aside accordingly the orders of the Income-tax Officer and the Appellate Assistant Commissioner with direction for fresh determination on the point?
Ratio Decidendi: 1. The right to appeal to the Tribunal from an order passed by the AAC was not confined technically to the party who was a party to the appeal but was a much wider right which could be exercised by any person who became liable to pay tax by any order against which the appeal was preferred. 2. The Tribunal's finding is that as a result of the assessment of the firm, 75% of its income was included in the income of P. Bhaskara Rao. Therefore, as a result of the assessment order of the firm, P. Bhaskara Rao had to pay tax. It must be held that the assessment order caused him a legal grievance by imposing a tax which according to him was not lawfully payable. 3. The Tribunal was right in holding that the disclosure petition should have been accepted as a whole. The Department made a mistake of law in accepting a part of the disclosure petition.
Final Decision: 1. The first question is answered in the affirmative and in favour of the assessee, the second question is answered in the negative and in favour of the assessee. Each party to bear and pay its own costs.
( 1 ) AS no one was appearing on behalf of the assessee in this case, at our request Mr. R. N. Dutt appeared as amicus curiae. We are grateful for the assistance rendered by Mr. Dutt to the court in this case.
( 2 ) THIS reference application arises out of a consolidated order of the Tribunal disposing of the two appeals filed on behalf of the assessee-firm, M/s. N. Ch, R. Row and Co. , against the order passed by the AAC in the appeal filed by the said firm against the assessment for the assessment year 1963-64. One appeal (I. T. A. No. 2092 (Cal.) of 1969-70) was filed by one partner, Sri P. Jagannathan, and the other appeal (I. T. A. No. 7205 (Cal.) of 1969-70), was filed by Sri P. Bhaskara Rao claiming to be a partner of the said firm. It is necessary to mention here how two different appeals came to be filed on behalf of the assessee-firm against the same order of the AAC.
( 3 ) THE assessee-firm was registered under the I. T. Act and was carrying on business at Calcutta. The partners of the firm, according to the partnership deed, were N. Ch. R. Rao and P. Jagannathan. The return of the income of the firm for the assessment year 1963-64 was filed on 18th December, 1963, by N. Ch. R. Rao as a partner. In the return N. Ch. R. Rao and P. Jagannathan were shown as the two partners of the assessee-firm. The application for registration was also signed by these two persons. The assessment for the assessment year 1963-64 was completed by the ITO on a total income of Rs. 1,03,106. By an order dated 22nd February, 1968, under Section 158 of the I. T. Act, the ITO allocated the assessed income in equal shares between the two partners, N. Ch. R. Rao and P. Jagannathan. The total income on which the assessee-firm was assessed to tax was inclusive of Rs. 50,000 added as income from undisclosed source on the basis of peak credit and Rs. 26,829 being the interest on the hundi loans, deduction on which was claimed by the assessee-firm but disallowed by the ITO. It was on the basis of a disclosure petition filed by the partners of the assessee-firm before the Commissioner of Income-tax, West Bengal, on 15th November, 1965, that the aforementioned sum of Rs. 50,000 was treated by the ITO as assessee's income from undisclosed source and added in the assessment under the head "other sources".
( 4 ) THE additions in respect of hundi loans and interest made by the ITO in the assessment order was challenged in appeal filed by the assessee. The AAC, however, sustained the addition made by the ITO.
( 5 ) BEING aggrieved by the order of the AAC, P. Jagannathan as partner of the assessee-firm, filed an appeal before the Tribunal (I. T. A. No. 2092 (Cal) of 1969-70 ). During the pendency of the appeal both the partners, N. Ch. R. Rao and P. Jagannathan, died. Their legal representatives did not respond to the notices issued to them and P. Bhaskara Rao claiming to be a partner of the assessee-firm, filed an application seeking to intervene in the appeal (I. T. A. No. 2092 (Cal) of 1969-70), filed by P. Jagannathan on behalf of the assessee-firm. He also filed a separate appeal (I. T. A. No. 7205 (Cal)/ (969-70) as a partner of the assessee-firm against the order of the AAC. The reasons given by Sri Bhaskara Rao in support of his prayer to be brought on record as a party to the proceeding were that P. Bhaskara Rao was the real partner and N. Ch. R. Rao was merely a benamidar of P. Bhaskara Rao. It was argued that the business in Calcutta, was being conducted by Sri P. Jagannathan and Sri N. Ch. R. Rao under the name and style of N. Ch. Row and Co. In the year 1955, those two persons approached Sri Bhaskara Rao for finance and for bank guarantee. Accordingly, Sri P. Bhaskara Rao stood guarantee to the banks and also contributed a capital of Rs. 45,000 from out of the amount realised by him by the sale of the closing stocks of his business in Vizianagaram. Sri Bhaskara Rao was given a share of 85% in the firm in consideration
