1960 PLP 249 (PTD)

AMIN AHMED, C. J.-In these two cases rules were issued at the instance of the Commissioner of Income-tax, East Pakistan, on two applications under subsection (2) of section 66 of the Income tax Act, which we shall hereinafter call the Act. The Rule Application No. 2 of 1959 is in the following terms; "Let a Rule nisi issue calling upon the respondent to show cause why the Income-tax Appellate Tribunal, Dacca Bench, Dacca should not be directed to state the case and refer to this Court for decision on the following question of law, namely :- "Whether on the materials and in view of the facts and circumstances before the Tribunal it could be a proper and legal inference that there was partition of the Hindu undivided family during the relevant accounting year within the meaning of section 25-A of the Income-tax Act" or such other or further order or orders made as to this Court may seem fit and proper" And similar Rule was issued in respect of the Application No. 3 of 1959 in the following terms; "Let a similar Rule issue in respect of the similar other application No. 3 of 1959 for reference to this Court for decision on the following questions of law, namely,-- "(a) Whether on the materials before the Tribunal it could be inferred that there was a firm in existence during the account ing year relevant to the assessment year 1952-53. (b) If the answer to the first question is in the affirmative, whether the firm could be registered under section 26-A of the Income-tax Act." Copies of these Rules were ordered to be served on the Appellate Tribunal. The present proceedings relate to the Assess ment year 1952-53, the previous accounting year being 1951-52, i.e., the Bengali year 1358 B. S. Before the assessment order the assessee was throughout assessed on the basis of their status as a Hindu undivided family. In course of the assessment for the period in question the assessee claimed before the department that the two brothers Nabadwip Chandra Saha and Haran Chandra Saha, proprietors of the Kalighat Bid Factory Purana Bazar, Chandpur; who used to run the undivided family business, i.e., Biri Factory and stationery business, had separated on the 31st of Chaitra, 1357 B. S., in definite portions and the Hindu undivided family was disrupted and they had since continued in partnership business in the name of Haran Chandra Nabadwip Chandra Saha claiming 8 annas share each since the 1st of Baisakh 1358, B. S. The stationery shop having been closed after running it in partner ship Jaishatha 1358, B. S., though the Biri Factory was being carried on in partnership. Before the Income-tax Officer the assessee made two applica tions, one under section 25-A of the Act claiming that the pro perties, movable and immovable, of the entire undivided family business was partitioned with effect from the 31st of Chaitra 1357, B. S., and the other under section 26-A of the Act for registration of the new partnership business which came into existence on the 31st of Chaitra 1357, B. S. In support of this the assessee also put in a deed of partnership dated the 10th of April 1952, between the two brothers Nabadwip Chandra Saba and Haran Chandra Saha, which recites the main facts that have already been set out, and particularly mentions that the terms of the partnership deed will have effect from the 1st of Baisakh 1358, B. S. It also mentions that as the two brothers had some ill-feeling among them "the parties became separate in mess and fooding in Baishakh 1357, B. S., and also had amicably partitioned their capital, goods, debts and liabilities of business and all movable and immovable properties in definite portions and also had determined the shares of each in business on the 31st day of Chaitra 1357 B. S." The Income-tax Officer refused both the applications under sections 25-A and 26-A of the Act holding among other things that despite their claim for partition from the 31st of Chaitra 1357, B. S., "the accounts were deliberately kept open for giving effect to the fact of partition by drawing up a Nikash and by making, relevant entries in the account books. The fact, however, remains that partition was not given effect to in the books of accounts even in August 1951, not to speak of 31st Chaitra 1357, B. S., i e., April 1951." On appeal to the Appellate Assistant Commissioner the orders of the Income-tax Officer were upheld. The assessee thereupon filed three appeals in respect of these orders to the Income-tax Appellate Tribunal. The Appellate Tribunal set aside the orders of the department and held that the assessee's claim under section 25-A of the Act should be admitted and the assessment should be made on the status of a firm and registration if otherwise in order, should be allowed. As the Tribunal refused to make a reference under section 66 of the Act against these orders of the Tribunal the Rules set out above were obtained by the Commissioner of Income-tax. In support of the Rule obtained in the Application No. 2 of 1959, Mr. Mesbahuddin urges the same argument as was advanced before the income-tax Officer, namely, inasmuch as the account was kept open till August 1951, the claim of the assessee for partition under section 25-A and that under section 26-A of the Act were rightly rejected and the Tribunal had no materials to reverse the finding of both the Income-tax Officer and that of the Appellate Assistant Commissioner. Although the Rule has been issued in the form set out above, we asked Mr. Mesbahuddin as to how he could establish that the points involved here were those of law. Mr. Mesbahuddin in answer says that the finding of the Tribunal was based on no materials and evidence and therefore that the inference drawn by them is unwarranted and, therefore, questions of law are involved. As capital was made of the state of accounts of the assessee, though we are concerned only with the question of law, we wanted to examine the books of accounts or copies thereof in order to satisfy ourselves as to whether this comment of the learned Advocate for the Commissioner of Income-tax has any basis or justified. But we are told by the learned advocate for the Commissioner of Income-tax that the department has returned the books of accounts without retaining copies thereof and they cannot be produced. Then we asked Mr. Mesbahuddin as to whether he could at least give us a copy of the deed of partnership on which the assessee bases his claims both under section 25-A and section 26-A of the Act. The learned Advocate produced a copy and the learned counsel for the assessee made over the original of that deed. Mr. Hussain, the learned counsel for the respondent, who opposes this Rule, has relied on the case of Rangalal Modi v. Commissioner of Income-tax, Bihar and Orissa, reported in ((1950) 18 I T R 383), in which the headlines are as follows; "Whether the entire joint family has, in fact, become disrupted in status and where the properties of the family have been partitioned between the members thereof in definite portions, the assessee would be entitled to an order under section 25-A (1) notwithstanding that some items of the family property, which are comparatively small in proportion to the entire family assets and which produce only a substantially small income in relation to the total income of the family properties, are kept undivided for solid and substantial reasons whether of practicability, convenience or reasonable sentiment not affecting the general bona fide intention of becoming completely separated units for all purposes." We have indicated some of the terms of the partnership deed and we find it difficult to hold that there is any substance in the con tention of the learned Advocate for the Commissioner of Income-tax that the points involved are questions of law or that the finding of the Appellate Tribunal was based on no materials or evidence. This will appear from the following extract from the order of the Appellate Tribunal dated the 16th of December 1957; "What is surprising in this connection is that there is another order not signed by the same Income-tax Officer admitting the fact of partition and allowing the claim of the assessee. It appears that something happened in between and the Income-tax Officer had to modify his opinion. The learned pleader Mr. Osman admits that for some months after 31st Chaitra 1357, B. S., the accounts were open and they had to be kept open as the accounts had already been unadjusted and no balance sheet had been prepared prior to 1357, B. S. It is stated that the accounts were regularised and the capital which was found on taking the balances into account was divided and shown as capital in the beginning of 1358, B. S., in two equal shares among the two brothers. We are informed that the United Bank of India, Chandpur Branch, was informed on 24-7-1951, that this was a partnership firm and the two partners were Gour Nithai Saha and Haran Chandra Saha. Gournithai was the son of Nabadwip Chandra Saba. It may be that the books had been open for some time and that when the books were first seen by the Income-tax Officer who made the assessment of the earlier year the capital had not been divided. We consider that this fact is not fatal to the claim of the assessee. We direct that the assessee's claim under section 25-A should be admitted for the assessment year 1952-53, and that the assessment should be made on the status of a firm and if the application for registration is otherwise in order the registration should be allowed in this case and the partners assessed separately on their share of income. The three appeals are accordingly allowed." Mr. Hussain has also referred to the following extract of the order of the Tribunal dated 20th of September 1958; "Our view was that though the books of accounts may have been open for some time in the relevant accounting period and they were found to be so open by the Income-tax Officer in the course of assessment proceedings in the preceding year and the capital did not appear to be divided at that time we held that this fact was not fatal to the claim of the assessee under section 25-A of the Income-tax Act and all the circumstances including the documents executed by the parties should be taken into con sideration simultaneously and a reasonable conclusion was to be drawn. We directed that the claim under section 25-A should be admitted for the assessment year 1952-53 and that the assessment should be made, on the status of a firm and if the application for registration was otherwise in order the registration should be allowed in this case." We may mention that no Rule was obtained regarding the question of status, as it will appear from what we have already stated. It is well-settled and known that this Court in hearing applications for reference of this nature is concerned only with the questions of law and it can express its opinion only on such questions. But in the present case the Appellate Tribunal which is the final Court of facts, after examining the partnership deed and considering the books of accounts and other materials to which reference has been made in the above two extracts from the orders of the Appellate Tribunal, came to a definite finding of fact that this partnership firm did come into existence from the 1st of Baishakh, 1358, B. S., and carried on business as such and it cannot at all be urged that they came to this finding without any basis or materials. The extract referred to by us speak for themselves and need hardly any comment by us. These two Rules, are therefore, discharged. As both the applications were heard together, we award one set of costs against the petitioner and that will be five gold mohurs only. ASIR, J.-I agree with my Lord the Chief Justice. Rule discharged.