LexFIRM OF BHAGAT RAM MOHANLAL versus THE COMMISSIONER OF EXCESS PROFITS TAX, MADHYA PRADESH, NAGPUR AND ANOTHER.
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S.C.R. SUPREME COURT REPORTS FIRM OF BHAGAT RAM MOHANLAL v. 143 THE COMMISSIONER OF EXCESS PROFITS TAX, MADHYA PRADESH, NAGPUR AND ANOTHER. (S. R. DAs, ACTING C.J., BHAGWATI and VENKATARAMA AYYAR JJ.] Indian Income-Tax Act, 1922 (XI of 1922), s. 26-A-Excess Profits Tax Act, 1940 (Act XV of 1940), ss. 7, 8(1) and 20-Registra- tion of appellant firm-Partners-Hindu undivided family consist- ing of karta and his two brothers and two others-Made profits in two accounting years and assessed to excess profits-Loss during 'the succeeding year-Profits set off against loss under s. 7 of the Excess Profits Tax Act-Partition of joint family-Appellant firm reconsti- tuted under fresh agreement-Consisting of five partners-Erstwhile karta and his two brothers and two previous partners-Whether a change in the persons carrying on business within the meaning of a. 8(1) of the ExcessProfits Tax Act-Whether previous order paying back excess profits to assessee a mistake apparent on the record within the meaning of s. 20 of the Excess Profits Tax Act. The firm of Bhagat Ram Mohan Lal-Appella.nt-constituted on 23-8-1940 wa.s registered under s. 26-A of the Indian Income- tax Act, the partners of the firm according to the registration certi- ficate being (1) Bhagat Ram Mohan Lal (Hindu undivided family), (2) Richpal and (3) Gajadhar, their shares being respectively 8 annas, 4 annas and 4 annas. Mohan Lal was the karta of the aforesaid family, which consisted of himself and his two brothers, Chhotelal and Bansilal. The firm made profits during the accounting yea1'S ending 1943 and 1944 on which it was assessed to excess profits tax respectively of Rs.10,023/5/-andRs.13,005/5/-.Duringthe year 1944- 1945 it susta\ned a loss of Rs. 15,771 and adding thereto Rs. 37,800 the standard profits for the business, the Excess Profits Tax Officer determined the deficiency of profits for the year at Rs. 53,571. Acting under s. 7 of the Excess Profits Tax Act the Excess Profits Tax Officer passed an order on 23-12-1946 whereby after setting off the profits of the firm for the years ending 1943 and 1944 against the deficiency of profits during the year ending 1945, he directed a refund of Rs. 23,028/10/- which had been paid by the appellan~ as excess profits tax for those years. At the commencement of the assessment year 1944-1945 there was a partition in the joint family of which Mohan Lal was erst- while karta, he and his two brothers becoming divided in status. As a result thereof the appellant firm was reconstituted under an agree- ment dated 17-10-1944, the partners of the firm being five in num- ber. There was a reconstitution of the firm with respect to persons 1956 February 15 1956 Firm of Bhagat Ram MoT1anlat v. The Commissioner of Exctss Profits Tax, Madhya Pradesh, NagPur and, another 144 SUPREME COURT REPORTS [1956] and their shares. According to s. 8(1) of the Excess Profits Tax Act the change in the persons is deemed to bring about a disconti· nuation of the old business and the commencement of a. new one and if that section applied no relief could have been granted to the appellant under s. 7 of the Act. The facts as to the reconstitution of the firm having come to the knowledge of the Com'\lissioner of Excess Profits Tax be issued a notice under s. 20 of the Excess Profits Tax Act calling upon the appellant why the order of Excess Profits Tax Officer dated 23-12-1946 should not be set aside on the ground of mistake as he had failed to take into consideration the change in the -constitution of the firm which took place on 17-10-1944. After hearing the ap- pellant the Commissioner held by his order dated 15-3-1950 that on the facts disclosed there was a change in the persons and that the a.ward of relief under s. 7 of the Act by the Excess Profits Tax Officer was a mistake. He set aside order only so far as Bhagat Barn Mohan Lal was concerned maintaining it with regard to two others. On an application for a writ of certiorari and for a writ of pro· hibition under Art. 226 of the Constitution the High Court upheld the order of the Commissioner. On an appea!'by Special Leave to the Supreme Court: Held (1) that by reason of the partition of the joint family and the reconstitution of the firm under the deed dated 17-10-1944 there was a change in the persons carrying on business within s. 8(1) of the Act. If all the five persons who were mentioned as partners in the dee
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