JUDGMENT R.S. Pathak, J.
1. The Income-tax Appellate Tribunal has referred the following questions:
"1. Whether the appeals filed by Kishorilal Khemka before the Appellate Assistant Commissioner from the assessment orders made in the case of the Bharat firm, which had become the subject-matter of appeals by another partner, Joti Bhushan Gupta, and whose appeals were earlier disposed of by the Appellate Assistant Commissioner, were competent ?
2. Whether Kishorilal Khemka has been rightly held to be a partner of the Bharat firm ?"
2. On December 1, 1942, a partnership firm was constituted consisting of Raja Jwala Prasad and Jyoti Bhushan Gupta for undertaking engineering and construction works under the name and style "Bharat Engineering & Construction Company". The terms of the partnership were reduced to writing by a deed dated February 6, 1943. The deed contained special provisions relating to the rights and liabilities of Raja Jwala Prasad, and paragraph 15 declared:
"The second party (namely, Jyoti Bhushan Gupta) shall be entitled to take Mr. Kishorilal Khemka, Mr. Dwaraka Prasad Jhunjhunwala and Mr. Venkatla G. Pittie as partners in the firm but without affecting the rights and liabilities of the first party in any way under this deed."
3. For the assessment years 1944-45, 1945-46 and 1946-47 (the relevant accounting periods being the years ending March 31, 1944, March 31, 1945 and March 31, 1946), the firm filed returns of its income in which the partners disclosed included Kishorilal Khemka. There is nothing in the statement of the case to show how the firm consisting originally of Raja Jwala Prasad and Jyoti Bhushan Gupta came to its present constitution so as to consist of Jyoti Bhushan Gupta, Kishorilal Khemka and D. P. Jhunjhunwala. We can only guess that by virtue of paragraph 15 of the partnership deed o! February 6, 1943, Kishorilal Khemka and D. P. Jhunjhunwala were taken in as partners, so that the firm then consisted of four partners including Raja Jwala Prasad, and subsequently Raja Jwala Prasad died reducing the partnership to its present composition. It is not disputed before us that the firm under consideration for the relevant assessment years was a continuation of the original firm.
4. The Income-tax Officer assessed the firm for the assessment years 1944-45, 1945-46 and 1946-47 in the status of an unregistered firm and showed Kishorilal Khemka as one of the partners. The assessments were challenged in appeal by Jyoti Bhushan Gupta in the name of the firm before the Appellate Assistant Commissioner and thereafter he filed second appeals before the Income-tax Appellate Tribunal.
5. About the time when Jyoti Bhushan Gupta filed the appeals before the Appellate Assistant Commissioner, Kishorilal Khemka also filed appeals against the assessments. These appeals remained pending and were disposed of some time after the appeals filed by Jyoti Bhushan Gupta were decided. The Appellate Assistant Commissioner dismissed the appeals filed by Kishorilal Khemka as incompetent in the view that, as one set of appeals had already been filed by the firm against the assessment orders, namely, the appeals filed by Jyoti Bhushan Gupta, a second set of appeals against the assessment orders was not competent. The Appellate Assistant Commissioner observed that two appeals against the same assessment order, one by the firm and the other by one of the partners, were not "envisaged in law. The Appellate Assistant Commissioner also held that having, regard to the material before him, it was clear that Kishorilal Khemka was a partner of the firm. It appears that some reference to the execution of a supplementary deed dated February 15, 1943, was made under which Kishorilal Khemka was taken in as a partner, but a copy of this deed was never produced before the income-tax authorities.
6. During the pendency of the appeals before the Appellate Assistant Commissioner, Kishorilal Khemka died and the proceedings were carried on by his son, Mohanlal Khemka. Against the orders of the Appellate Assistant Commissioner three appeals were filed by Mohanlal Khemka as legal representative of Kishorilal Khemka. The three appeals were dismissed by the Tribunal.
7. This reference has now been made by the Tribunal.
8. The first question referred by the Tribunal is whether the appeals filed by Kishorilal Khemka were competent. If the first question is understood as raising the point in the light of the circumstance that earlier appeals by the firm filed by Jyoti Bhushan Gupta against the same assessment orders had already been disposed of, we would hold that such a question does not arise out of the appellate order of the Tribunal. Before the Tribunal it was pointed out that the firm had discontinued its business and, therefore, by virtue of Section 44 of the Indian Income-tax Act, 1922, Kishorilal Khemka, along with the other partners, was jointly and severally liable to assessment and thus he was entitled to be considered as an assessee with a right of appeal against the assessments made on the defunct firm. The Tribunal rejected the contention on the ground that the conditions of the second proviso to Section 30(1) were not satisfied inasmuch as Kishorilal Khemka was not "individually assessable on his share". The firm had been treated as an unregistered firm.
9. Section 30 of the Indian Income-tax Act, 1922, so far as is material, provided:
"30. Appeal against assessment under this Act.--(1) Any assessee .... denying his liability to be assessed under this Act .... may appeal to the Appellate Assistant Commissioner against the assessment . . .
Provided further that where the partners of a firm are individually assessable on their shares in the total income of the firm, any such partner may appeal to the Appellate Assistant Commissioner against any order of an Income-tax Officer determining the amount of the total income or the loss of the firm or the apportionment thereof between the several partners, but in respect of matters which are determined by such order may hot appeal against the assessment of his own total income."
10. Now, as the law stood during the relevant assessment years, the partners of a firm were individually assessable on their shares in the total income of the firm in either one of two cases. One case was where the firm had been registered under Section 26A and the provisions of Section 23(5)(a) were applied, so that while the total income of the firm was assessed, the sum payable by the firm itself was not determined but the total income of each partner of the firm, including therein his share of the income, profits and gains of the previous years, was assessed and the sum payable by him on the basis of such assessment was determined. The other case was where the firm was treated as an unregistered firm but under Section 23(5)(b), the Income-tax Officer, finding it to be to the benefit of the revenue, proceeded in the manner laid down in Section 23(5)(a) as applicable to a registered firm. In either case, the partners of the firm would be individually assessed on their shares in the total income of the firm, and the case would then fall within the scope of the second proviso to Section 30(1). The proviso does not apply where the firm has been treated as an unregistered firm and the Income-tax Officer determines the sum payable by the firm itself. The Tribunal has found that neither Section 23(5)(a) nor Section 23(5)(b) has been applied to the present case and, accordingly, the second proviso to Section 30(1) is not attracted. That is a conclusion with which we agree.
11. But it was also urged before the Tribunal that the assessee had a right of appeal under the substantive provision of Section 30(1) which declared that "any assessee ...denying his liability to be assessed under this Act... may appeal to the Appellate Assistant Commissioner against the assessment ...." The Tribunal rejected the plea on the ground that Kishorilal Khemka did not deny his liability to be assessed under the Act but merely disputed that he was a partner of the firm. It seems to us that the Tribunal has failed to appreciate the true significance of the expression "denying his liability to be assessed under this Act". An assessee denies his liability to be assessed under the Act not only when he contends that the Act has no application to him at all but also when he urges that he cannot be assessed in a particular assessment proceeding taken under the Act. The words of Section 30(1) are wide enough. A provision granting the right of appeal to the subject should be construed liberally. It is a valuable right. A narrow construction unreasonably limiting or curtailing the right cannot be justified, See also Gopi Lal v. Commissioner of income-tax [1957] 65 I.T.R. 477, 481 (Punj.) per S. K. KAPUR J.
. The Supreme Court, in Commissioner of Income-tax v. Kanpur Coal Syndicate, [1954] 53 I.T.R. 225, 229; [1964] 8 S.C.R. 85 (S.C.).
observed :
"The expression 'denial of liability' is comprehensive enough to take in not only the total denial of liability but also the liability to tax under particular circumstances. In either case the denial is a denial of liability to be assessed under the provisions of the Act."
12. It was open to the assessee, we think, to appeal against the assessment orders on the ground that he was not a partner of the firm and those appeals were competent under the substantive provisions of Section 30(1). That he has such a right of appeal was pointed out by the Bombay High Court as long ago as Gokuldas v. Kikabhai Abdulali, [1958] 33 I.T.R. 94, 104, 105 (Bom.). Tendolkar J., speaking for the court, observed:
"..... and where after notice to all the alleged partners the Income-tax Officer proceeds to determine who the partners are and what their shares, obviously an appeal against this part of his order shall lie under Section 30 at the instance of any one who denies his liability to be a partner and from the decision of such appeal a further appeal shall in an appropriate case lie to the Tribunal. If the Income-tax Officer determines the question without notice to the parties concerned, then his determination will be liable to be set aside in appeal at the instance of an aggrieved party because the determination in the absence of the party concerned cannot bind him ; and if the Income-tax Officer does not exercise his power and perform his duty to determine who the partners of an unregistered firm are, the Income-tax Officer would have no right or authority to seek to enforce the payment of the tax against an alleged partner, whose liability has not been adjudicated upon by him in the assessment proceedings. Such, we conceive, is the true position on the construction of the relevant sections to which we have already drawn attention."
13. The Madras High Court also, in Vedantham Raghaviah v. Third Addl. Income-tax Officer, [1963] 49 I.T.R. 314, 321 (Mad.).
pointed out:
"...... if the petitioner was aggrieved because of the fact that he was deemed to be a partner of that firm, his remedy was to have filed an appeal against the order of assessment on the firm."
14. It is apparent, therefore, that the finding of the Tribunal that the assessee had no right to file the appeals cannot be sustained in law. The first question is answered in the affirmative.
15. The second question is whether Kishorilal Khemka has been rightly held to be a partner of the Bharat Engineering & Construction Co. There was ample material before the Tribunal on the basis of which it could come to the finding that Kishorilal Khemka was a partner of the firm. There was, first, the circumstance that the original partnership deed of February 6, 1943, contemplated that Kishorilal Khemka could be taken in as a partner. Reference has been made to a supplementary deed dated February 15, 1943, which gave effect to that provision. It is true that the supplementary deed was never filed before the income-tax authorities, but there are other circumstances which point heavily to the conclusion that he was inducted as a partner into the firm. The several applications made under Section 26A for the assessment years under consideration were signed by Kishorilal Khemka as a partner of the firm and disclosed his share as partner. No explanation has been attempted to indicate why he signed those applications as a partner of the firm. That act on his part supports the statement in the returns filed by the firm that he was one of the partners. In our opinion, the second question must be answered in the affirmative.
16. Accordingly, the two questions are answered as follows :