Law: Income Tax Act, 1922

Section: 34(1)(a)

Section 147 of the Income-tax Act, 1961 [Corresponding to section 34(1)(a) of the Indian Income-tax Act, 1922] - Income escaping assessment - Position prior to 1-4-1989 - Assessment year 1953-54 - Assessee - HUF was owner of oil mill - Said oil mill was given on lease to a partnership firm of which partners were namely 'S', 'R' and 'B' - 'S' and 'R' were brothers and were also members of assessee-HUF - Assessee-HUF filed its return stating that two of its members namely 'S' and 'R' were partners in firm in their individual capacity and HUF had no interest in business of firm - Thereupon, assessee's assessment was completed and share of income, profits and gains of aforesaid two partners, namely 'S' and 'R' was not included in total income of assessee - Subsequently, in course of assessment of partnership firm, revenue authorities found that partners 'S' and 'R' had reserved to themselves right of leasing machinery - It was further noticed that assessee-HUF had given large amount of loan to firm on which no interest was being charged - Besides, large amount invested in business of firm had been borrowed on credit of assessee-HUF - Taking said aspects into consideration, revenue authorities opined that 'S' and 'R' were partners in firm only as representing assessee-HUF - Revenue authorities, thus, initiated proceedings under section 34(1)(a) of 1922 Act seeking to include income derived by 'S' and 'R' from partnership firm in assessable income of assessee HUF - Whether in view of aforesaid uncontroverted findings of revenue authorities, Tribunal was right in holding that action taken against assessee-HUF under section 34(1)(a) of 1922 Act was legally valid - Held, yes. FACTS The assessee-HUF was the owner of an oil mill. The said oil mill was, prior to the year of assessment, given on lease to a partnership firm of which the partners were S, R and one B, S and R were brothers and were also members of the aforesaid HUF. The assessee filed its return on 13-1-1954. In its return the assessee stated that it was the owner of the Oil Mills, that it had leased the oil mill to the firm and that two of its members, namely, 'S' and 'R', were partners in the firm in their…

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