M/S. SARUPCHAND HUKAMCHAND & CO. versus UNION OF INDIA AND OTHERS

Citation: [1959] SUPP. 2 S.C.R. 986 · Decided: 05-05-1959 · Supreme Court of India · Bench: NATWARLAL HARILAL BHAGWATI · Disposal: Appeal(s) allowed

Judgment (excerpt)

986 
SUPREME COURT REPORTS [1959] Supp. 
<959 
the setting apart of the money was not a paying out 
or away of these sums irretrievably. 
The Indian 
Molasses co. 
In our opinion, the question was correctly answered 
(Private) Ltd. 
by the Calcutta High Court. 
We, therefore, dismiss 
v. 
the appeal with costs. 
The 
Commissioner 
of Income-tax, 
West Bengal 
H idayatullah J. 
I959 
May 5. 
Appeal dismissed. 
M/S. SARUPCHAND HUKAMCHAND & CO. 
v. 
UNION OF INDIA AND OTHERS 
(S. R. DAS, C. J., N. H. BHAGWATI and 
M. HIDAYATULLAH, JJ.) 
Income-tax--Assessment of unregistered firni treated as regis-
tered by Income-tax Officer-Appeal against orders of assessment-
Finding of profit reversed and fresh ·assessment dirccted-Effect-
Duty of ·Income-tax Officer-Indian Income-tax Act, I922 (XI of 
I922), SS. 23(5)(b), 24(2)(d) and JI(4). 
The Income-tax Officer found that the assessee, an unregis-
tered firm, had made a profit in the assessment year I940-4r. He 
treated it as registered under s. 23(5)(b) of the Act, assessed 
the partners and carried the profit to their individual returns, 
making no demand on the firm. 
For the next t\vo assess1nent 
years, hoVv·ever, the firm \\'as assessed as unregistered firm. 
For 
all the three assessment years, the Income-tax Officer treated the 
firm as" resident and ordinarily resident". The firm appealed 
against all these assessments. 
The appeals were all consolidated 
and heard together by the Appellate Assistant Commissioner. 
He found that the firm was non-resident, the computation of 
income n1ade by the Income-tax Officer was erroneous, that in 
the assessment year 1940-41 there was a loss and during the 
subsequent years the firm had made profits. 
He, therefore, 
directed the Income-tax Officer to modify the assessments 
accordingly. 
Thereupon the Income-tax Officer gave relief to 
the partners for the year 1940-41 and directed certain refunds to 
be made to them. The firm was not satisfied and moved both 
the Income-tax Officer and the Appellate Assistant Commissioner 
, 
(2) S.C.R. 
SUPREME COURT REPORTS 
987 
under s. 35 of the Act, claiming that inasmuch as it had been 
c959 
found to have incurred a Joss in the first of the three assessment 
years, it could not for that year be treated as a registered firm M /s. Sarupchand 
and was entitled to carry forward the Joss to the subsequent Hukamchand & Co. 
years. 
They declined to interfere on the ground that the direc-
v 
tion of the Income-tax Officer under s. 23(5)(b), not being appeal-
Union of India 
able, had become final and the time within which the original 
& Others 
order of the Income-tax Officer could be rectified had also run 
out. The firm went up to the Commissioner and the Central 
Board of Revenue, but to no effect. Thereafter it moved the 
High Court under Art. 226 of the Constitution. The single Judge 
who heard the matter declined to interfere. The Division Bench 
on appeal agreed with the single Judge. The firm appealed to 
this Court. The question for decision was whether after the 
finding of profit made by the Income-tax Officer had been turned 
to one of Joss by the Appellate Assistant Commissioner on appeal, 
the original decision of the Income-tax Officer to treat the· 
firm as a registered one under s. 23(5)(b) could remain intact. 
Held, that since the Income-tax Officer could treat an un-
registered firm as a registered one under s. 23(5)(b) of the 
Indian Income-tax Act only if there was a profit, the reversal 
of the finding of profit made by him by the Appellate Assis-
tant Commissioner must automatically take away the jurisdic-
tion of the Income-tax Officer to act under that section and 
his order made thereunder must fall through. 
It made no difference in the instant case, whether the 
Appellate Assistant Commissioner's order was one under cl. (a) 
of s. 31(3} or under cl. (b) of that section, for the effect of the 
order in law in either case would be the same, namely, the 
annulment of the assessment resulting in the restoration of the 
case back to its original position. 
It was not correct to suggest that under proviso ( d) to 
s. 24(2) of the Act the losses of an unregistered firm could be 
carried to the partners' account as if the firm was registered. 
That proviso was not intended to enable the Income-tax Officer 
to forego the obligation laid on him by cl. (b} of s. 23(5), i.e., 
to find out the interest of the Revenue, and thus to render the 
words 'during any year ' in proviso

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