Law: Income Tax Act, 1922

Section: 34,34(1)(a)

[Indian Income Tax Act, 1922 (XI of 1922)]......Section 34(1)(a) Re-assessment Hindu undivided family-Members partners in firm-Original assessment; In assessment of family made without including shares of members in profits Of firm-Subsequent information that partners represented the family-Reassessment to include shares of profit- Whether valid-Held yes. Shankarlal and Ratanlal were members of a Hindu undivided family, An oil mill owned by the family was given on lease to a firm of which Shankarlal and Ratanlal were also partners. In the return submitted by the family for the relevant year, it was stated that they were partners in their individual capacity and the family had no interest in the firm's business, and assessment was completed without including their shares of the profits of the firm. Subsequently, in proceedings under Section 26A of the Indian Income Tax Act, 1922, for the registration of the firm, the Income Tax Officer discovered that: (i) Shankarlal and Ratanlal had reserved to themselves the right of leasing the machinery; (ii) the family had advanced moneys to the firm to a large extent and no interest was charged thereon; and (iii) large amounts were borrowed by the firm for its business on the credit of the family. The Income Tax Officer thereupon initiated proceedings under Section 34(1)(a) for the purpose of including the 'shares of Shankarlal and Ratanlal in the total income of the Hindu undivided family on the ground that they were partners in the firm not in their individual capacity but as representing the family: Held that:- (i) The action taken under Section 34(1)(n) was legally valid; (ii) The fact that the account books of the family, disclosing that large amounts were advanced to the firm, were produced before the Income Tax Officer during the original assessment did not amount to disclosure of the fact that Shankarlal and Ratanlal were partners in their representative capacity: (iii) The assessment of a family and the assessment of a firm in which some members of the family claimed to be partners in their individual capacity could not be said to be inter-connected assessments. Cases referred to:-- D.R. Dhanwate V. Commissioner…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492