Law:

Section:

Section 147 of the Income-tax Act, 1961 (Corresponding to section 34 of the Indian Income-tax Act, 1922) Income escaping assessment - General - Assessment years 1954-55 and 1955-56 - Assessment of assessee was originally completed as registered firm - Subsequently, ITO finding discrepancy about constitution of partnership as recited in partnership deed and as reported to Bank with which assessee-firm had current account, cancelled registration under rule 6B of Income-tax Rules, 1922 - Thereupon, ITO reassessed total income of assessee-firm for assessment years in question in status of 'AOP' under provisions of section 34 of 1922 Act - Whether, on facts, proceedings under section 34 of 1922 Act were validly initiated - Held, yes FACTS The assessment of the assessee was originally completed for the two earlier assessment years as registered firm. Subsequently, the ITO found the discrepancy about the constitution of the partnership as recited in the partnership deed and as reported to the Bank with which the assessee had a current account. The ITO, thus, passed an order of cancellation of registration under rule 6B of the Income-tax Rules, 1922 for the relevant assessment years. Thereafter, he reassessed the total income as originally computed for the two years in the status of an 'association of persons' under the provisions of section 34 of the 1922 Act. On appeal, the AAC confirmed the order of the ITO. On second appeal, the Tribunal confirmed the order of the AAC. On reference: HELD The proceedings under section 34 of 1922 Act were initiated after the order under rule 6B was passed cancelling the registration of the assessee's firm for the years 1954-55 and 1955-56. Whether that order was right or wrong, this was not the proper stage to consider that. The assessee might have gone in appeal against that and agitated that question at different stage as provided under the law. That the assessee did not do. In the instant proceeding under section 66 of the 1922 Act, it would not be possible for the assessee to agitate about the propriety of the order passed under rule 6B cancelling the registration of the firm by the ITO. It appeared from the order of the…

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