Gujarat High Court Prabhudas Jagjivandas And Ors. vs IncomeTax Officer, WardB, ... on 25 February, 1964 Equivalent citations: [1965]55ITR1A(GUJ) JUDGMENT Bhagwati, J. 1. This petition filed by some of the partners of the firm of Messrs. Dhrangadhra Salt Trading Company challenges an order of reassessment made against the firm under section 34(1) (a) of the Incometax Act, 1922, for the assessment year 195051 and certain orders of penalty imposed on the firm under sections 28 and 46(1) of the Act in respect of the assessment years 195051 and certain orders of penalty imposed on the firm under sections 28 and 46(1) of the Act in respect of the assessment years 195051 and 195253. The firm was originally constituted under a deed of partnership dated 29th April, 1947. Three firms, namely, Messrs. Ramvallabh Gopikishan, Messrs. Vasantlal Manoharlal and Messrs Jagjivandas Hirachand and one individual, namely, Kesrimal Bhunch, were shown as partners of the firm in the deed of partnership dated 29th April, 1947. The petitioners were partners of Messrs. Jagjivandas Hirachand. The firm carried on business in salt at Dhrangadhra situate in the former State of Saurashtra. The Indian Incometax Act was made applicable to the State of Saurashtra from 1st April, 1950, and assessment of the firm for the assessment year 195051 was made under the Act. The accounting year of the firm for the assessment year 195051 was taken as the calendar year 1949. The Incometax Officer by an order of assessment dated 22nd April, 1951, determined the total income of the firm at Rs. 75,964 and assessed the firm on such total income as an unregistered firm. It appears that the firm had shown its entire income as arising in Part B state and the Incometax Officer, therefore, granted rebate to the firm in respect of the entire income under the part B states (Taxation Concessions) Order, 1960. The Incometax Officer determined the tax payable by the firm at an aggregate sum of Rs. 9,13320 which was paid by the firm on 24th May, 1951. This assessment was subsequently reopened by the Incometax Officer and it is the order of reassessment made by the Incometax Officer as a result of reopening this assessment that has given rise to the main controversy between the parties. We will presently refer to the fact relating to the reopening of this assessment of the firm for the subsequent assessment years, for that would be conductive to a clear understanding of the factual position. 2. The firm was assessed to tax for the assessment year 195152, the accounting year this time being the Samvat year, namely, Samvat year 2006, and the total income of the firm was computed at Rs. 4,253. Tax was assessed on the firm on this income on the basis that the entire income had arisen to the firm in part B State. There is no dispute before us in regard to this assessment. Now what happened was that with effect from Kartak Sud 1, Samvat year 2007, i.e., 10th November, 1950, and in this deed of partnership fourteen persons were shown as partners, of whom the petitioners were eight. Though the new deed of partnership recited that there was a change in the partners of the firm as constituted under the deed of partnership dated 29th April, 1947, and it had, therefore, become necessary to execute a new deed of partnership, there was in fact no new firm constituted under the new deed of partnership. The same firm continued with only this difference that whereas formerly three firms were shown as partners along with Kesrimal Bhunch, now under the new deed of partnership the partners of these firms were themselves shown as partners in their individual capacity. The aggregate share of the partners of each of the three firms also remained the same. There was thus no difference in the constitution of the firm. The assessment on the firm for the assessment year 195253, for which the corresponding previous year was Samvat year 2007, was made by the Incometax Officer on 3rd November, 1953. The firm had applied for registration under section 26A but the registration was refused and the firm was assessed as an unregistered firm. The Incometax Officer disallowed certain interest paid by the firm to Messrs. Ramvallabh Gopikishan, Messrs. Vasantlal Manoharlal and Messrs. Jagjivandas Hirachand and determined the total income of the firm at Rs. 70,864. The Incometax Officer apportioned the total income of the firm between part A State and part B State and held that 85 per cent. of the total income must be regarded as having arisen in part B state. The Incometax Officer accordingly gave rebate to the firm only in respect of 15 per cent. of the total income. It may be pointed out that for this assessment year a return was filed by the firm, though long after the period allowed by the notice under section 22(2) which was served on the firm by the Incometax Officer, but the firm did not appear in response