JUDGEMENT
S.RANGANATHAN, J. -
(1.)THESE references under S. 256(1) of the INCOME TAX ACT, 1961, relate to the assessment of Shri Sohan Singh
for the asst. yrs. 1963 -64 to 1969 -70. The relevant previous years are the financial years 1962 -63
to 1968 -69.
(2.)TWO common questions of law have been referred for the opinion of this Court. They arise out of the same set of facts. These references can, therefore, be disposed of by a common order. The
assessments of Shri Sohan Singh for the asst. yrs. 1963 -64 to 1969 -70 were originally completed
by taking into account his income by way of salary from two private limited companies, his income
from dealing in shares and also his income by way of interest, the full details of which are not
relevant for our present purposes. These assessments have since been reopened under S. 147(a)
of the INCOME TAX ACT, 1961, and reassessments have been made by including in the total income of the
above assessee, the income ostensibly earned by a firm known as Preetpal Singh and Company. It
is the correctness of these reassessments that is being challenged in these references.
Preetpal Singh and Co. was constituted as a firm under a partnership deed dated December 7, 1961. The partners were said to be Smt. Satwant Kaur (mother of Shri Sohan Singh), Shri Preetpal Singh, Shri Harvinder Pal Singh and Km. Kamal Anand (minor children of Shri Sohan Singh) and
Shri Surinder Singh Kohli. Under the instrument of partnership, Shri Surinder Singh Kohli was
entitled to a 10per cent share in the profits and losses of the firm. The balance of 90per cent was
to be shared equally by Smt. Satwant Kaur and the minor children admitted to the benefits of the
partnership when there were profits, but to be borne entirely by Smt. Satwant Kaur in the event of
the firm making losses. The business of the firm was to deal in shares and other commodities on
forward transactions or otherwise as agreed to between the partners. On February 27, 1967, Smt
Satwant Kaur died. The firm was thereafter reconstituted under an instrument of partnership dated
May 25, 1967. By this time, Shri Preetpal Singh and Shri Harvinder Pal Singh had become majors
and the partnership was now said to consist of Shri Surinder Singh Kohli, Shri Preetpal Singh and
Shri Harvinder Pal Singh with Km. Kamal Anand, the minor, admitted to the benefits of the
partnership. As before, Shri Surinder Singh Kohli was entitled to a share of 10per cent in the profits
and losses and the balance was to be shared among the other three partners, when there were
profits in the ratio of 35 : 35 : 20, but in case there were losses, they were to be borne equally by
the two adult partners.
(3.)THE first assessment of the firm constituted as above came up for consideration before the ITO, District VIII -B (Addl.), New Delhi, for the asst. year 1963 -64. In the course of these proceedings, the
above ITO summoned Shri Surinder Singh Kohli and examined him at length on March 28, 1968.
The officer came to the conclusion, for reasons which were set out in the assessment order, that
the income of the firm known as Preetpal Singh and Company in fact belonged to Shri Sohan Singh
and not to a firm as claimed. However, he also proceeded to frame a protective assessment on the
firm in respect of the income shown by it and in the light of this, he also passed an order granting
registration to the firm under S. 185 of the INCOME TAX ACT, 1961. Similar assessments of a protective nature
on the firm as a registered firm were apparently made for the other assessment years with which
we are here concerned.
The above information was communicated by the ITO, District VIII - B (Addl.), to the ITO who was
in -charge of the assessments of Shri Sohan Singh. On receipt of this information and on examining
the assessment order passed in the case of the firm, the ITO assessing Shri Sohan Singh had
reason to believe that the assessee had concealed the full particulars of his income in the original
returns inasmuch as the income of the firm styled Preetpal Singh & Co. really appeared to belong
to his assessee, Shri Sohan Singh. He, therefore, reopened the assessments of Shri Sohan Singh
under S. 147(a) with the approval of the CIT. In the course of further proceedings before him, he
examined the partnership deeds, recorded statements from Shri Sohan Singh, Shri Gurbachan
Singh (the brother of Shri Sohan Singh) and certain brokers Shri Bhagwan Dass Gupta, Shri P. S.
Khambate & Co. and Shri H. P. Mehta. He also recorded a statement of Shri Hindpal Singh, an
employee of Shri Sohan Singh. Ultimately, he came to the conclusion, for the reasons set out in a
detailed order passed in relation to the asst. year 1963 -64, that Preetpal Singh & Co. was only
benami concern of Shri Sohan Singh himself and that Shri Sohan Singh was the beneficial owner of
the income said to have been earned by the firm. He, therefore, included the income which had
been assessed (protectively) in the name of Preetpal Singh & Co. by the officer assessing the firm
in the total income of Shri Sohan Singh. Similar orders were passed in relation to the asst. yrs.
1964 -65 to 1969 -70. The appeals of Shri Sohan Singh against these assessment orders having been rejected by the AAC as well as the Tribunal, the following two questions of law have been
referred to this Court at the instance of the present assessee, Shri Sohan Singh :
"1. Whether, on the facts and in the circumstances of the case, the Tribunal erred in holding that the ITO validly assumed jurisdiction in initiating proceedings for reopening the assessment, under s. 147 of the INCOME TAX ACT, 1961 ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that a registered firm could also be held as a benami concern of an individual who was not a partner of that firm ?"