Case: Firm Of Bhagat Ram Mohanlal Vs. The Commissioner Of Excess Profits Tax, Madhya Prades

be done consistently with the principles of Hindu Law, the very pleadings of the appellant are against such a supposition being made, affirming as they do that it was only Mohanlal that was the karta, not the others. The contention, therefore, that Chhotelal and Bansilal should be held to have become partners in the old firm under the agreement dated 23-8-1940 cannot be maintained.9. The question whether there was a change in the persons carrying on the business may now be considered independently of the principles of Hindu Law or the general law of Partnership and with special reference to the provisions of the Indian Excess Profits Tax Act. Section 2(17) of the Act defines a person as including a joint family. Applying this definition, who were the members of the firm when it was constituted on 23-8-1940? Richpal, Gajadhar and "Bhagat Ram Mohanlal, Hindu undivided family" consisting of three coparceners, Mohanlal, Chhotelal and Bansilal, it being immaterial to the present purpose whether the karta of the family was only Mohanlal, or all the three of them. Then, the family became divided in 1944, and the result of it was that one of the three persons who were partners in the old firm, "Bhagat Ram Mohanlal" ceased to exist.On 17-10-1944 the two surviving partners of the old firm, Richpal and Gajadhar, entered into a contract of partnership with Mohanlal, Chhotelal and Bansilal. The erstwhile joint family of which they were members not being a partner in the new firm, it having ceased to exist by reason of the partition, there was, having regard to the definition in S. 2 (17) of the Act, a change. That was the view taken in - "Shanmugavel Nadar and Sons v. Commissioner of Income-tax, 1949 Mad 228 (AIR V 36) (C), and we agree with it. Whether the question is considered on the principles of Hindu Law or on the provisions of the Excess Profits Tax Act, there was a change in the personnel of the firm on 17-10-1944, and the matter falls within section 8 (1) of the Act.10. (2) The next question for determination is whether the order of the Commissioner dated 15-3-1950 is not justified by the provisions of section 20 of the Act for the reason that there was no mistake apparent from the record. The argument in support of this contention is that the record in the Excess Profits. Tax proceedings consisted in the present case of only the order dated 23-12-1946, that the facts on which the proceedings were taken under S. 20, namely, the constitution of the firm on 23-8-1940 were not recited therein, and that, in consequence, there were no materials on which an order could have been passed under that section.It is true that the order of the Excess Profits Tax Officer dated 23-12-1946 does not mention these facts,but they appear from the record of the income-tax proceedings which included the registration certificates of the firm under S. 26-A, Income-tax Act and the returns made by the firm disclosing the names of the partners and their respective shares. It is argued for the appellant that these records were inadmissible for the purpose of proceedings under S. 20 of the Act, because the record referred to and contemplated by that section must be the record of the excess profits tax proceedings, and that the records of the income-tax proceedings could not be used under that section. We are unable to agree with this contention. Section 22(1) of the Act provides that: "Notwithstanding anything contained in the Indian Income-tax Act. 1922, all information contained in any statement or return made or furnished under the provisions of that Act or obtained or collected for the purposes of that Act may be used for the purposes of this Act".Section 22(2) similarly makes the record of the excess profits tax proceedings admissible in proceedings under the Indian Income-tax Act. The fact is that the proceedings under the two Acts are interdependent.Assessments under the Excess Profits Tax Act are, subject to the special provisions of that Act, made on the basis of the assessments made under the provisions of the Indian Income-tax Act. The same officers are in charge of the proceedings under both the enactments. The order of the Excess Profits Tax Officer dated 23-12-1946 refers in terms to the order dated 28-9-1946 passed in the proceedings for assessment of income-tax on the appellant, and the deficiency of profits in worked out on the basis of the loss of Rs. 15,771 as ascertained therein. We see no substance in this contention, which must accordingly be rejected.11. It was finally contended that the particulars recited in the registration certificate as to who were all partners of the firm were not conclusive, and that the appellant was not estopped from proving that even on 23-8-1940 the real partners were all the five persons mentioned in the deed dated 17-10-1944, and the decision in - Shapurii Pallonji and Co. v. Commissioner of Income-tax, 1945 Bom 238 (AIR V 32) (D), was relied on is support of the position. It is undoubted law that the income-tax authorities are not estopped by the fact of registration from going behind the certificate, and deciding who the real partners of the firm are. But can the assessee whose statement is the basis on which the registration is made and who has possibly been benefits thereby deny its correctness, when the facts mentioned therein turn out to his disadvantage? It is unnecessary to consider this point, in view of our decision that on the facts as pleaded by the appellant, Chhotelal and Bansilal could not be regarded as partners in the old firm. We may add that this contention does not appear to have been put forward before the Commissioner when notice was issued to the appellant under S. 20 of the Act. If any such contention had been raised, it would have been open to the Commissioner to have taken action under S. 19 of the Act.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]6. It is not in dispute that Mohanlal was the Karta of the joint family, and that he entered into the partnership on 23-8-1940 as such karta.It is well settled that when the karta of a joint Hindu family enters into a partnership with strangers, the members of the family do not ipso facto become partners in that firm. They have no right to take part in its management or to sue for itswould therefore follow that when Mohanlal became a partner of the firm on 23-8-1940, Chhotelal and Bansilal could not be held by reason of that fact alone, to have become partnersthe registration certificate of the firm while showing "Bhagat Ram Mohanlal, Hindu undivided family" as a partner, makes no mention of either Chhotelal or Bansilal ascontention that they also became in their individual capacity partners appears therefore to be an afterthought, and is opposed to the findings of the learned judges of the High Court. This is sufficient, without more, to dispose of this contention. But even apart from this, it is difficult to visualise the situation which the appellant contents for, of a Hindu joint family entering into a partnership with strangers through its karta and the junior members of the family also becoming at the same time its partners in their personalin the present case, the basis of the partnership agreement of 1940 is that the family was joint and that Mohanlal was its karta and that he entered into the partnership as karta on behalf of the joint family. It is difficult to reconcile this position with that of Chhotelal and Bansilal being also partners in the firm in their individual capacity, which can only be in respect of their separate or divided property.To get over this difficulty, it was suggested that all the three coparceners might be regarded as having entered into the contract of partnership of kartas of the joint family. But even if that could be done consistently with the principles of Hindu Law, the very pleadings of the appellant are against such a supposition being made, affirming as they do that it was only Mohanlal that was the karta, not the others. The contention, therefore, that Chhotelal and Bansilal should be held to have become partners in the old firm under the agreement dated 23-8-1940 cannot be maintained.9. The question whetherthere was a change in the persons carrying on thebusiness may now be considered independently of the principles of Hindu Law or the general law of Partnership and with special reference to the provisions of the Indian Excess Profits Taxwas the view taken in - "Shanmugavel Nadar and Sons v. Commissioner of Income-tax, 1949 Mad 228   (AIR V 36) (C), and we agree with it. Whether the question is considered on the principles of Hindu Law or on the provisions of the Excess Profits Tax Act, there was a change in the personnel of the firm on 17-10-1944, and the matter falls within section 8 (1) of theue that the order of the Excess Profits Tax Officer dated 23-12-1946 does not mention these facts,but they appear from the record of the income-tax proceedings which included the registration certificates of the firm under S. 26-A, Income-tax Act and the returns made by the firm disclosing the names of the partners and their respectiveare unable to agree with thissee no substance in this contention, which must accordingly beis undoubted law that the income-tax authorities are not estopped by the fact of registration from going behind the certificate, and deciding who the real partners of the firm are. But can the assessee whose statement is the basis on which the registration is made and who has possibly been benefits thereby deny its correctness, when the facts mentioned therein turn out to hisis unnecessary to consider this point, in view of our decision that on the facts as pleaded by the appellant, Chhotelal and Bansilal could not be regarded as partners in the old firm. We may add that this contention does not appear to have been put forward before the Commissioner when notice was issued to the appellant under S. 20 of the Act. If any such contention had been raised, it would have been open to the Commissioner to have taken action under S. 19 of the Act.