Law:

Section:

Section 148, read with section 143(2), of the Income-tax Act, 1961 [Corresponding to section 34, read with section 23(2), of the Indian Income-tax Act, 1922] - Income escaping assessment - Issue of notice for - Assessment year 1937-38 - Whether provisions of section 34 of 1922 Act cannot be rendered in applicable merely because income which is alleged to have escaped from assessment of a particular person was included in income of another person - Held, yes - Firm in question was registered firm and consisted of two partners, 'L' and his sister 'G' - Subsequently, disputes arose between partners and firm's property was partitioned - ITO recorded partition - Assessment was made individually on 'L' and file of 'G' was transferred to ITO where she was residing - Subsequently, ITO proceeded to assess income of 'L', both from firm and other sources - Successor ITO reopened matter by issuing notice under section 23(2) of 1922 Act to 'L' and 'G' and taxed firm and ordered tax thereon to be recovered therefrom 'L' and 'G' jointly and severally - Whether proceedings taken by successor ITO were essentially proceedings which could only be taken under section 34 of 1922 Act - Held, yes - Whether, therefore, a notice under section 34 of 1922 Act was necessary for resuming assessment proceedings - Held, yes FACTS Firm 'KD' was assessed as a registered firm from 1931-32 to 1935-36. It consisted of two partners, 'L' and his sister 'G'. In 1937, 'G' filed in the High Court a suit for partition against her brother. The litigation resulted in a preliminary decree in May 1937 and a final decree in May 1938. In the course of assessment for the year 1937-38, the ITO was informed by 'L' that the firm's property had been partitioned and that the firm no longer existed. The ITO recorded a preliminary finding in the case of the firm that the property held jointly by 'L' and 'G' had been partitioned and the firm did not exist, that the assessment had been made individually on 'L' and the file of 'G' had been transferred to the ITO Bombay, where she was residing. After recording this preliminary order the ITO on 21-9-1938, proceeded to assess the income of 'L', both from the firm and…

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