JUDGMENT For the assessment year 1960-61 the petitioner was assessed by the Income-tax Officer, Aligarh, as an "individual". During the assessment proceedings it was contended by the petitioner that a partition had taken place on August 2, 1957, of the Hindu undivided family to which the petitioner belonged, and that, as its share, the petitioners branch received, among other properties, a sum of Rs. 4,000 in cash. The petitioner was already carrying on his separate business in the name and style of Messrs. Asharfi Lal Radhey Shiam. He says that he deposited the sum of Rs. 4,000 in that business. It is further said that there were some disputes in his family resulting in a partial partition, and the sum of Rs. 4,000 was divided between him and certain members of the family. On July 11, 1959, the petitioner entered into partnership with these members of the family and the sums received upon the division of Rs. 4,000 were introduced as capital by those members. It was alleged that the partnership took over the business of Messrs. Asharfi Lal Radhey Shiam and commenced to carry it on. In the assessment order made by the Income-tax Officer against the petitioner as an "individual" for the assessment year 1960-61, the income-tax officer did not accept the claim of partial partition and held that no partnership firm had come into being, so that the profits or losses alleged to belong to the partnership firm in reality belonged to the petitioner who had all along continued the business of Messrs. Asharfi Lal Radhey Shiam. The Income-tax Officer determined a loss of Rs. 10,053 in the income of the petitioner for the period up to July 10, 1959, on which date he had closed the books of the business carried on by him and estimated the income of the remaining three months of the year, which was said to represent the proceeds of the business carried on by the alleged partnership at Rs. 7,000. The total loss was, therefore, computed at Rs. 3,053. Against that assessment order, the petitioner went in appeal. The Appellate Assistant Commissioner dismissed the appeal, and in respect of the quantum of income observed :
"So far as the quantum of income is concerned, I find nothing wrong or arbitrary with the additions made by the Income-tax Officer. The addition of Rs. 7,000 is obviously on a provisional basis subject to rectification when the accounts of the alleged firm fall to be examined in the next accounting period."
He confirmed the finding of the Income-tax Officer that there was no partial partition and that the entire business income was liable to assessment in the hands of the petitioner. The petitioner then applied in revision to the Commissioner of Income-tax. The Commissioner called for a report from the Income-tax Officer and after considering the contentions raised in the revision application and the report of the Income-tax Officer and after perusing the record of the case, he dismissed the revision application by his order dated February 25, 1965. He also expressed the opinion that the claim of partial partition had been rightly rejected, that no partnership firm had come into existence and that therefore the business said to have been done by the partnership had really been done by the petitioner in his individual capacity. In respect of the addition of Rs. 7,000 he observed :
"Regarding the addition of Rs. 7,000 the assessee should have no grievance on merits as the addition was made on a provisional basis subject to rectification when the accounts of the firm fall to be examined in the following accounting periods."
The petitioner has filed the instant petition for certiorari challenging the assessment order, the appellate order and the order dismissing the revision application.
The first contention of the petitioner is that the Commissioner, when deciding the revision application, should not have relied upon the report of the Income-tax Officer which had not been put to the petitioner, and that if he intended to consider it, he should have afforded an opportunity to the petitioner to produce material in rebuttal of all the evidence mentioned in the report and in any event to make his submissions against the contentions set out in the report. In order to examine the contents of the report, I permitted the respondents to file a supplementary affidavit annexing a copy of the report and also directed that the record of the proceedings before the Commissioner should be made available for perusal. After examining the report of the Income-tax Officer, I am unable to say that the Income-tax Officer referred to any material which was not already on record. Consequently, it was not necessary for the Commissioner to afford an opportunity to the petitioner to produce further evidence. As regards the petitioners claim to an opportunity to make his submissions upon the report of the Income-tax Officer, it seems to me that the Commissioner did not contravene any principle of natural justice in omitting to extend this opportunity. The petitioner filed his revision application and a copy of it was sent to the Income-tax Officer for its comments thereon. In the report submitted by him, the Income-tax Officer merely set out his version of the case. I have been unable to discover any rule of law requiring the Commissioner to serve a copy of the report upon the assessee and so hear his submissions thereon. But although the Commissioner is not bound to afford this opportunity to an assessee, it is in the interest of fairplay and would conduce to a more effective administration of justice if a copy of such report was made available to the assessee before the revision application was disposed of. The Income-tax Officer has an opportunity to acquaint himself with the case set up by the assessee when a copy of the revision application is forwarded to him. It seems to me that the ends of justice would be served more fully if a copy of the report or comment of the Income-tax Officer was also made available to the assessee. The assessee would thus be in a position to appreciate whether the Income-tax Officer had travelled beyond the material existing on the record.
The petitioner next points out that the Appellate Assistant Commissioner as well as the Commissioner did not fine that the sum of Rs. 7,000 was liable to be included in the assessment of the petitioner and all that they observed was that the sum could be provisionally included subject to rectification when the accounts of the firm were examined for subsequent accounting periods. It does appear that neither the Commissioner nor the Appellate Assistant Commissioner have clearly found that the sum of Rs. 7,000 was liable to be included in the petitioners assessment for the assessment year 1960-61. The total income of an assessee can include a sum only if it is found that the sum represents income liable to be taxed in the hands of the assessee for the relevant assessment year. It cannot be included in the assessment on a provisional or tentative basis. Such exception to this rule as exist are expressly provided or necessarily implied by the stature. One such exception is the case where the share of a partner in the profits of a firm is tentatively determined and included in his individual assessment, and that assessment is open to rectification when the share is finally calculated upon the determination of the total income of the firm.
In the instant case, when both the Appellate Assistant Commissioner and the Commissioner had endorsed the view that the business had all along been carried on by the petitioner in his individual capacity and that no partnership firm had come into existence, no question arose of determining the profits on a provisional basis subject to rectification "when the accounts of the firm" fell to be examined subsequently. According to their finding, there was no firm at all. If the income had to be estimated, the estimate should have been made finally, and not provisionally, in order to include the item in the assessment. In my opinion, the Commissioner of Income-tax erred in holding that the sum of Rs. 7,000 could be included in the petitioners assessment on a provisional basis. It was necessary for him to determine finally whether the same could be added at all.
The petitioner has also challenged the validity of the findings of the Income-tax Officer, the Appellate Assistant Commissioner and the Commissioner that there was no partial partition of the family and that no partnership firm had come into existence and, therefore, the business said to have been done by the partnership firm was in fact the business done by the petitioner in his individual capacity. Learned counsel for the petitioner has been unable to show that the findings are vitiated by any manifest illegality. In particular, it is difficult to hold that there is any apparent error of law vitiating the finding that the alleged partnership had not been proved to have come into existence.
The result is that the petition is allowed in part. The order of the Commissioner of Income-tax dated February 26, 1965, in respect of the addition of Rs. 7,000 in the assessment of the petitioner is quashed. The parties shall bear their own costs.
Petition allowed in part.