# Firm of Bhagat Ram MoT1anlat v. The Commissioner of Exctss Profits Tax, Madhya Pradesh, NagPur and, another

- **Citation:** [1956] 1 S.C.R. 143
- **Court:** Supreme Court of India
- **Decided:** 1956-02-15
- **Case number:** Civil Appeal No. 139of1953
- **Bench:** S. R. DAs, Acting C.J, Bhagwati, Venkatarama Ayyar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/firm-of-bhagat-ram-mot1anlat-v-the-commissioner-of-exctss-profits-tax-madhya-1291
- **Pages:** 11

## Headnote

Indian Income-Tax Act, 1922 (XI of 1922), s. 26-A-Excess
Profits Tax Act, 1940 (Act XV of 1940), ss. 7, 8(1) and 20-Registration of appellant firm-Partners-Hindu undivided family consisting of karta and his two brothers and two others-Made profits in two
accounting years and assessed to excess profits-Loss during 'the
succeeding year-Profits set off against loss under s. 7 of the Excess
Profits Tax Act-Partition of joint family-Appellant firm reconstituted under fresh agreement-Consisting of five partners-Erstwhile
karta and his two brothers and two previous partners-Whether a
change in the persons carrying on business within the meaning of
a. 8(1) of the ExcessProfits Tax Act-Whether previous order paying
back excess profits to assessee a mistake apparent on the record within
the meaning of s. 20 of the Excess Profits Tax Act.
The firm of Bhagat Ram Mohan Lal-Appella.nt-constituted
on 23-8-1940 wa.s registered under s. 26-A of the Indian Incometax Act, the partners of the firm according to the registration certificate being (1) Bhagat Ram Mohan Lal (Hindu undivided family),
(2) Richpal and (3) Gajadhar, their shares being respectively 8 annas,
4 annas and 4 annas. Mohan Lal was the karta of the aforesaid
family, which consisted of himself and his two brothers, Chhotelal
and Bansilal. The firm made profits during the accounting yea1'S
ending 1943 and 1944 on which it was assessed to excess profits tax
respectively of Rs.10,023/5/-andRs.13,005/5/-.Duringthe year 19441945 it susta\ned a loss of Rs. 15,771 and adding thereto Rs. 37,800
the standard profits for the business, the Excess Profits Tax Officer
determined the deficiency of profits for the year at Rs. 53,571. Acting
under s. 7 of the Excess Profits Tax Act the Excess Profits Tax
Officer passed an order on 23-12-1946 whereby after setting off the
profits of the firm for the years ending 1943 and 1944 against the
deficiency of profits during the year ending 1945, he directed a
refund of Rs. 23,028/10/- which had been paid by the appellan~ as
excess profits tax for those years.
At the commencement of the assessment year 1944-1945 there
was a partition in the joint family of which Mohan Lal was erstwhile karta, he and his two brothers becoming divided in status. As
a result thereof the appellant firm was reconstituted under an agreement dated 17-10-1944, the partners of the firm being five in number. There was a reconstitution of the firm with respect to persons
1956
February 15
1956
Firm of Bhagat
Ram MoT1anlat
v.
The Commissioner
of Exctss Profits
Tax, Madhya
Pradesh, NagPur
and, another
144
SUPREME COURT REPORTS
[1956]
and their shares.
According to s. 8(1) of the Excess Profits Tax
Act the change in the persons is deemed to bring about a disconti·
nuation of the old business and the commencement of a. new one
and if that section applied no relief could have been granted to the
appellant under s. 7 of the Act.
The facts as to the reconstitution of the firm having come to
the knowledge of the Com'\lissioner of Excess Profits Tax be issued
a notice under s. 20 of the Excess Profits Tax Act calling upon the
appellant why the order of Excess Profits Tax Officer dated
23-12-1946 should not be set aside on the ground of mistake as he
had failed to take into consideration the change in the -constitution
of the firm which took place on 17-10-1944. After hearing the appellant the Commissioner held by his order dated 15-3-1950 that on
the facts disclosed there was a change in the persons and that the
a.ward of relief under s. 7 of the Act by the Excess Profits Tax Officer
was a mistake. He set aside order only so far as Bhagat Barn Mohan
Lal was concerned maintaining it with regard to two others.
On an application for a writ of certiorari and for a writ of pro·
hibition under Art. 226 of the Constitution the High Court upheld
the order of the Commissioner. On an appea!'by Special Leave to
the Supreme Court:
Held (1) that by reason of the partition of the joint family
and the recon

## Text

S.C.R.
SUPREME COURT REPORTS
FIRM OF BHAGAT RAM MOHANLAL
v.
143
THE COMMISSIONER OF EXCESS PROFITS
TAX, MADHYA PRADESH, NAGPUR
AND ANOTHER.
(S. R. DAs, ACTING C.J., BHAGWATI and
VENKATARAMA AYYAR JJ.]
Indian Income-Tax Act, 1922 (XI of 1922), s. 26-A-Excess
Profits Tax Act, 1940 (Act XV of 1940), ss. 7, 8(1) and 20-Registration of appellant firm-Partners-Hindu undivided family consisting of karta and his two brothers and two others-Made profits in two
accounting years and assessed to excess profits-Loss during 'the
succeeding year-Profits set off against loss under s. 7 of the Excess
Profits Tax Act-Partition of joint family-Appellant firm reconstituted under fresh agreement-Consisting of five partners-Erstwhile
karta and his two brothers and two previous partners-Whether a
change in the persons carrying on business within the meaning of
a. 8(1) of the ExcessProfits Tax Act-Whether previous order paying
back excess profits to assessee a mistake apparent on the record within
the meaning of s. 20 of the Excess Profits Tax Act.
The firm of Bhagat Ram Mohan Lal-Appella.nt-constituted
on 23-8-1940 wa.s registered under s. 26-A of the Indian Incometax Act, the partners of the firm according to the registration certificate being (1) Bhagat Ram Mohan Lal (Hindu undivided family),
(2) Richpal and (3) Gajadhar, their shares being respectively 8 annas,
4 annas and 4 annas. Mohan Lal was the karta of the aforesaid
family, which consisted of himself and his two brothers, Chhotelal
and Bansilal. The firm made profits during the accounting yea1'S
ending 1943 and 1944 on which it was assessed to excess profits tax
respectively of Rs.10,023/5/-andRs.13,005/5/-.Duringthe year 19441945 it susta\ned a loss of Rs. 15,771 and adding thereto Rs. 37,800
the standard profits for the business, the Excess Profits Tax Officer
determined the deficiency of profits for the year at Rs. 53,571. Acting
under s. 7 of the Excess Profits Tax Act the Excess Profits Tax
Officer passed an order on 23-12-1946 whereby after setting off the
profits of the firm for the years ending 1943 and 1944 against the
deficiency of profits during the year ending 1945, he directed a
refund of Rs. 23,028/10/- which had been paid by the appellan~ as
excess profits tax for those years.
At the commencement of the assessment year 1944-1945 there
was a partition in the joint family of which Mohan Lal was erstwhile karta, he and his two brothers becoming divided in status. As
a result thereof the appellant firm was reconstituted under an agreement dated 17-10-1944, the partners of the firm being five in number. There was a reconstitution of the firm with respect to persons
1956
February 15
1956
Firm of Bhagat
Ram MoT1anlat
v.
The Commissioner
of Exctss Profits
Tax, Madhya
Pradesh, NagPur
and, another
144
SUPREME COURT REPORTS
[1956]
and their shares.
According to s. 8(1) of the Excess Profits Tax
Act the change in the persons is deemed to bring about a disconti·
nuation of the old business and the commencement of a. new one
and if that section applied no relief could have been granted to the
appellant under s. 7 of the Act.
The facts as to the reconstitution of the firm having come to
the knowledge of the Com'\lissioner of Excess Profits Tax be issued
a notice under s. 20 of the Excess Profits Tax Act calling upon the
appellant why the order of Excess Profits Tax Officer dated
23-12-1946 should not be set aside on the ground of mistake as he
had failed to take into consideration the change in the -constitution
of the firm which took place on 17-10-1944. After hearing the appellant the Commissioner held by his order dated 15-3-1950 that on
the facts disclosed there was a change in the persons and that the
a.ward of relief under s. 7 of the Act by the Excess Profits Tax Officer
was a mistake. He set aside order only so far as Bhagat Barn Mohan
Lal was concerned maintaining it with regard to two others.
On an application for a writ of certiorari and for a writ of pro·
hibition under Art. 226 of the Constitution the High Court upheld
the order of the Commissioner. On an appea!'by Special Leave to
the Supreme Court:
Held (1) that by reason of the partition of the joint family
and the reconstitution of the firm under the deed dated 17-10-1944
there was a change in the persons carrying on business within s.
8(1) of the Act.
If all the five persons who were mentioned as partners in the
deed of 1944 were partners of the old firm, there would be no change
in the persons carrying on the business within s. 8(1) of the Act by
the mere fact of reshuffling of the shares among them but the real
question for determination was whether Cbhotelal and Bansilal
were partners in the firm constituted on 23-8-1940. It is not in
dispute that Mohanlal was the karta of the joint family, and that
be entered into the partnership on 23-8-1940 as such karta. rt is
well settled that when the kart& of a joint Hindu family enters1nto
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 its dissolution.
The creditors of the
firm would no doubt be entitled to proceed against the joint family
assets including the shares of the nonppartner coparceners for reali ..
sation of their debts. But that is because under the Hindu Law, the
karta bas the right when properly carrying on business to pledge the
credit of the joint family to the extent of its assets, and not because
the junior members become partners in the business.
The liability
of the junior members arises by reason of their status as coparceners
and not by reason of any contract of partnership and it would follow
therefore that when Mobanlal became a partner of the firm on
23-8· 1940 Obhotelal and Bansilal could not be held by reason of
that fa.ct alone to have become partners therein.
-
S.C.R.
SUPREME COURT REPORTS
145
Accordingly whether the quer~ion was to be considered on the
1956
principles of Hindu law or on the principles of the Excess Profits
Tax Act there was a change in the personnel of the firm on 17· 10· 1944
Firm of Bhagat
and the matter fell within s. 8(1) of the Act.
Ram Mohan/al
(2) That there was a mistake apparent on the record as required
by s. 20 of the Act and the Commissioner had jurisdiction to pass
the order dated 15-3-1950 which he did. There was no force in the
contention that the record in Excess Profits Tax proceedings con·
sisted in the present case of the only order dated 23-12-1946 and
that the facts on which the proceedings were taken under s. 20,
namely, the constitution of the firm on 23-8-1940 and the changes
effected therein on 17· 10· 1944 were not recited therein and that in
consequence there were no materials on which an order could have
been passed under that section because though the order of the Ex·
cess Profits Tax Officer dated 23-12· 1946 does not mention these
facts these facts appear from the record of the income-tax proceed·
ings which included the registration certificate of the firm under s.
26-A of the Income-Tax Act and the returns made by the firm dis·
closing the names of the partners and their respective shares.
Fur·
ther the fact is that the proceedings under the two Acts, namely, the
Excess Profits Tax Act and the Income Tax Act, are interdependent.
Lackman Das v. Commissioner of Income-Tax ([1948] 16 I.T.R.
35), Sundar Singh Majithia v. Commissioner of Income-tax ([1942]
10 I.T.R. 457), Shanmuuavel Nadai· and Sons v. Commissioner of
Income-tax ((1948] 16 I.T.R. 355) and Shapurii Pellonji v. Commis·
sioner of Income-tax ((1945] 13 I.T.R. 113), referred to.
CIVIL APPELLATE JURISDICTION:
Civil Appeal
No. 139of1953.
Appeal by special leave from the judgment and
order dated the 22nd day of August 1950 of the Nagpur High Court in Miscellaneous Petition No. 67 of
1950.
Radhey Lal Agarwala and B. P. Maheshwari, for
the appellant.
0. K. Daphtary, Solicitor-General of I rulia ( G. N.
Joshi and R.H. Dhebar, with him) for the respondents.
1956. February 15. The Judgment of the Court
was delivered by.
.
VENKATARAMA AYYAR J.-The firm of Bhagat Ram
Mohanlal, which is the appellant before us, was constituted on 23-8-1940, and registered under section
26-A of the Indian Income-tax Act. The partners of
v.
The Commissioner
of Excess Profits
Tax, Madhya
Pradesh, Nai<faur
and another
1956
Firm of Bhagat
Ratn Mohanlal
v.
The Commissioner
of Excess Profits
Tax, Madhya
Pradesh, Nagpur
·and another
Venkatarama
AyyarJ.
146
SUPREME COURT REPORTS
(1956)
the firm, according to the registration certificate, were
(1) Bhagat Ram Mohanlal, Hindu undivided family,
(2) Richpal and (3) Gajadhar, their shares being
respectively 8 annas, 4 aunas and 4 annas. Mohanlal
was the karta of the aforesaid joint family, which
consisted of himself and his two brothers, Chhotelal
and Bansilal, and he entered into the partnership as
such karta. The firm carried on business at Drug in
Madhya Pradesh as the agent of the Government for
the purchase of foodgrains, and during the accounting
years ending 1943 and 194.4, it made profits on which
it was ·assessed to excess profits tax respectively of
Rs. 10,023-5-0 and Rs. 13,005-5-0. During the year
1944-1945 it sustained a loss of Rs.15,771, and adding
it to the sum of Rs. 37,800 which was the standard
profits for the business, the Excess Profits Tax Officer
determined the deficiency of profits for the year at
Rs. 53,571. Section 7 of the Excess Profits Tax Act,
hereinafter referred to as the Act, provides that when
there is a deficiency of profits in any chargeable
accounting period in any business, the profits of that
business during the previous years shall be deemed
to be reduced eo extanti, and that the relief necessarv
to give effect to the reduction shall he given by repayment of the tax paid or otherwise. Acting under
this section, the Excess Profits Tax Officer passed an
order on 23-12-1946 whereby after setting off the profits of the firm for the years ending 1943 and 1944
against the deficiency of profits during the year ending 1945, he directed a refund of Rs. 23,028-10-0 which
had been paid by the appellant as excess profits tax
for those years.
It should be mentioned that at the commencement
of the assessment year 1944-1945 there was a partition in the joint family of which Mohanlal was the
erstwhile karta, as a result of which he and his
brothers, Chhotelal and Bansilal, became divided in
status. Consequent on this disruption of the joint
family, the appellant firm was reconstituted under an
agreement dated 17-10-1944.
Under this agreement,
the partners of the firm were five in number, Richpal,
Gajadhar, Mohanlal, Chhotelal and Bansilal, the two
-
S.C.R.
SUPREME COURT REPORTS
147
former being entitled to 5 annas share each and the
latter three to 2 annas each. There was thus a reconstitution of the firm both with reference to the
persons who were its partners and the shares which
were allotted to them. Now, section 8(1) provides,
omitting what is not material, that ''as from the date
of any change in the persons carrying on a business,
the business shall he deemed to have been discontinued a.nd a new business commenced". If this section applied, then no relief could have been granted
to the appellant under section 7 of the Act.
The facts relating to the reconstitution of the firm
having come to the knowledge of the Commissioner
of Excess Profits Tax on examination of the record,
he issued a notice on 19-2-1948 calling upon the appellant to show cause why the order of the Excess
Profits Tax Officer dated 23-12-1946 should not be set
aside on the ground of mistake. This notice was
issued under section 20 of the Act, which confers on
the Commissioner authority to rectify "any mistake
apparent. from the record". Tpe mistake, according
to the Commissioner, consisted in the Excess Profits
Tax Officer failing "to take into consideration the
change in the constitution of the firm which took
place on 17-10-1944, consequent on the disruption of
the joint Hindu family of one of the partners". The
appellant appeared in response to the notice, and
contended that on the facts the. proceedings under
section 20 were misconceived.
The facts on which
the proceedings were taken were not themselves disputed. By his order dated 15-3-1950 the Commissioner
held that on the facts disclosed on the record, there
was a change in the persons carrying on the business,
and that the award of relief under section 7 by the
Excess Profits Tax Officer was a mistake. He, however, maintained the order dated 23-12-1946 with
reference to Richpal and Gajadhar, and set it aside
only so far as "Bhagat Ram ,Mohanlal, Hindu undivided family" which was registered as partner on
23-8-1940, was concerned. He further directed that
Rs. 11,514-5-0 which had been refunded to it should
be collected.
1956
Firm of Bhcrgat
Ram Mohanlal
v.
The Commissioner
of Excess Profits
Tax, Madhya
Pradesh, Nagpur
and another
Venkatarama
AyyarJ.
148
SUPREME COURT REPORTS
[1956]
1956
The appellant thereupon moved the High Court of
Nagpur under article 226 fbr a writ of certiorari
FirmofBhagal quashing the order of the Commissioner dated
Ram Mohanlal
v.
15-3-1950 and for a writ of prohibition restraining
Th• Com•nissioner the authorities from collecting Rs. 11,514-5-0 under
ofBxcessProfils that order. By their judgment dated 22nd August
Ta•, Muahya
1950, the learned Judges agreed with the CommisPra":.;'":::,.gpur sioner that by reason .of the partition there was a
a
0
"
change in the persons who carried on the business,
Vcnkalarama
and that the order dated 23-12-1946 was contrary to
AyyarJ.
section 8(1) of the Act.
They also held that as the
mistake appeared on the face of the record, the
Commissioner had jurisdiction under section 20 of
the Act to pass the order which he did. In the result,
the writs were refused. Against this judgment, the
appellant prefers this appeal by special leave.
Two questions have been raised for our determination in this appeal: (1) whether by reason of the
partition of the joint family and the reconstitution
of the firm under the deed dated 17-10-1944 there was
a change in the persons carrying on business within
section 8(1) of the Act; and 12) whether the order of
i
the Commissioner dated 15-3-1950 is bad on the
ground that there was no mistake apparent from the
record, as required by section 20 of the Act. On the
first question, the contention of the appellant is that
when Mohanlal entered into partnership with Richpal
and Gajadhar on 23-8-1940 as karta of the joint
family, the other members of that family, Chhotelal
and Bansilal, also became in substance partners of
the firm, and that when they were mentioned eo
nominee as partners in the deed dated 17-10-1944 the
change was more formal than substantial, and that
further the fact that there was a re-allotment of
shares among the partners would not amount to a
change in the persons who carried on the business.
We agree that if all the five persons who were mentioned as partners in the deed of 1944 were partners
of the old firm, there would be no change in the persons carrying on the business within section 8(1) of
the Act by the mere fact ofreshuffiing of shares among
them. But the real question that has to be decided
S.C.R.
SUPREME COURT REPORTS
149
is whether Chhotelal and Bansilal were partners in
the firm, which was constituted on 23-8-1940. The
appellant contends that they were, both according to
the Hindu law and even apart from it, under the
general law relating to partnerships.
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 db not ipso facto become partners in that firm.
They have no right to take part in its management
or to sue for its dissolution. The creditors of the firm
would no doubt be entitled to proceed against the
joint family assets including the shares of the nonpartner co-parceners for realisation of their debts.
But that is because under the Hindu law, the karta
has the right when properly carrying on business to
pledge the credit of the joint family to the extent of
its assets, and not because the junior members become partners in the business. In.short, the liability
of the latter arises by reason of their status as coparceners and not by reason of any contract of partnership by them. It would 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 partners therein.
It is argued that when that firm was constituted
on 23-8-1940 the persons who entered into the contract
of partnership were not merely Mohanlal as karta of
the joint family but also Chhotelal and Bansilal in
their individual capacity, and that therefore they
became partners under the ordinary partnership law.
But the registration certificate of the firm while
showing "Bhagat Ram Mohanlal, Hindu undivided
family" as a partner, makes no mention of either
Chotelal or Bansilal as partners.
The contention
that they also became in their individual capacity
partners appears therefore to be an afterthought, and
is opposed to the findings of the learned J uges of the
High Court. This is sufficient, without more, to dispose of this contention.
But even apart from this1
20
1956
Firm of Blia gat
Ram Molian/al
v.
The Co11111tijsfouer
of Excess Profits
Tax, Madhya
Pradesh, Nagp11r
and a11ot!tcr
Venkatarn111a
Ayyar,J.
150
SUPREME COURT REPORTS
[1956)
19,5
it is difficult to visualise the situation which the appellant contends for, of a Hindu joint family enterFfrm of Bhagat ing into a partnership with strangers through its
Ram Mohanlal
v.
karta and the junior members of the family also beTh• Commissioner coming at the same time its partners in their personal
of Excess Profits capacity. In Lachhman Das v. Commissioner of IncomeTax, Madhya
tax('), it was held by the Judicial Committee that the
Prad•t· Nt~gpur karta of a joint Hindu family could enter into partan ano "
nership with an individual member of the coparcenary
Venkatarama
quoad his separate property. It was also held by the
;lyyarJ.
Privy Council in Sundar Singh Majithia v. Commissioner of Income-tax(') that there was nothing in the
Income-tax Act to prohibit the members of a joint
Hindu family from dividing some properties, while
electing to retain their joint status, and carrying on
business as partners in respect of those properties
treating them as its capital. But in 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.
If members of a coparcenary
are to be regarded as having become partners in a
firm with strangers, they would also become under
the partnership law partners inter se, and it would
cut at the very root of the notion of a joint undivided family to hold that with reference to coparcenary
properties the members can at the same time be both
coparceners and partners.
To get over this difficulty, it was suggested that
all the three coparceners might be regarded as having
entered into the contract of partnership as 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.
(1) [1948] 16 I.T.R 35.
(2) [1942] 10 I.T.R. 457.
...
S.C.R.
SUPREME COURT REPORTS
151
The contention, therefore, that Chhotelal and Bansi1956
lal should be held to have become partners in the old
Firm of Bhagat
firm under the agreement dated 23-8-1940 cannot be
Ram Mohanlal
maintained.
v.
The question whether there was a change in the The C-Ommissioner
persons carrying on the business may now be consi0f Excess Profits
dered independently of the principles of Hindu Law P Ta;, ~aihy';..
or the general law of Partnership and with special
'";n:sa~oti7!. ,.
reference to the provisions of the Indian Excess
Profits Tax Act.
Section 2(17) of the Act defines a
Venkatarama
'person' as including a joint family.
Applying this
AyyarJ.
definition, who were the members of the firm when it
was constituted on 23-8-1940? Rich pal, Gajadhar and
"Bhagat Ram Mohanlal, Hindu undivided family"
consisting of three coparceners, Mohanlal, Chhotelal
and Bansilal, it being immaterial for 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 h!J,ving
ceased to exist by reason of the partition, there was,
having regard to the definition in section 2(17) of the
Act, a change in the persons who carried on the business.
That was the view taken in Shanmugavel
Nadar and Sons v. Commissioner of Income-tax(1), 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.
(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 conten-
!ll [1948J 16 I.T.R. 355.
1956
Firm of Bhagat
Ram Mahan/al
v.
The Conunissioner
of Excess Profits
Tax, Madhya
Pradesh, Nagpur
and another
Venkatarama
Ayyar J.
152
SUPREME COURT REPORTS
(1956]
tion 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 section 20, namely, the
constitution of the firm on 23-8-1940 and the changes
effected therein on 17-10-1944 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 Ta.x 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 section 26-A of the
Income-tax Act and the returns made by the firm
discl.osing 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 section 20 of the Act, because the
record referred to and contemplated by that section
must be the record of the excess profits tax proceed·
ings, 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 assess-
-
-
S.C.R.
SUPREME COURT REPORTS
153
ment of income-tax on the appellant, and the deficiency of profits is 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.
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 per13ons mentioned in the deed dated 17-10-1944, and the
dec;iision in Shapurji R&llonji v. Commissioner of lncome-taxe) was relied on in 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 benefited 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 t.hat this contention does not appear to have
been put forward before the Commissioner when
notice was issued to the appellant under section 20
of the Act. If any such contention had been raised,
it would have been open to the Commissioner to have
taken action under section 19 of the Act.
In the result, the appeal fails, and is dismissed
with costs.
(1) (1945] 13 I.T.R. 113.
1956
Firm of Bhagat
Ram Mohanlal
v.
The Commissioner
of Exec ss Profits
Tax, Madhya
Pr«desh, Nagpur
and another
Venkatarama
AyyarJ.