TaxTMI 
TaxTMI 
1955 (8) TMI 40
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....nership between three persons, Kailash Nath, Harish Chandra and Satish Chandra, Kailash Nath and Harish Chandra were the brothers of one Purshottam Narain who was the son-inlaw of the sister of Gopi Nath Agarwal and who had been in the service of the assessee for a period of about 25 years. The third partner, Satish Chandra, was the minor son of Purshottam Narain. The name of the new firm was Harish Chandra Satish Chandra. The business of this firm was the same as was being carried on by the Hindu undivided family, viz., dealing in cloth. It was found by the Income-tax Officer that this firm Harish Chandra Satish Chandra was financed by Gopi Nath Agarwal. In the assessment proceedings of Firm Harish Chandra Satish Chandra, tax was not assessed separately on that firm on the ground that the business of that firm was a branch business of the Hindu undivided family business of the assessee. In the proceedings for the assessment of the assessee firm, notice was issued to the assessee to show cause why the profits of Firm Harish Chandra Satish Chandra should not be assessed as the income of the assessee. The assessee filed an application in reply supported by an affidavit and, on the da....
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....f the fact that, on most of the points raised by the assessee, all that the Income-tax Appellate Tribunal did, was to say that it was not prepared to believe the assessee's explanation without giving any logical reasoning for it. When this reference was heard by us, we called upon Shri Jagdish Sarup, learned counsel for the department, to formulate before us the facts which have been relied upon by the income-tax authorities as leading to the inference that this firm belonged to the assessee and that the profits of this firm were the income of the assessee. Shri Jagdish Sarup stated that the following facts may be taken to have been found by the Income-tax Appellate Tribunal:- (1) That Purshottam Narain was a partner in the other firm, Messrs. Khunnu Lal Purshottam Narain, the income of which was also sought to be assessed as the income of the assessee, and had brought a capital of ₹ 3,400 at the time of starting that firm but was not a partner in Firm Harish Chandra Satish Chandra. (2) That, during the assessment proceedings of Firm Harish Chandra Satish Chandra, the Income-tax Officer had held that that firm was not liable to be assessed as a separate entity on the ....
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....t the Tribunal was not entitled to mention a fact in the statement of the case, which it had not found at the time of deciding the appeal and if it was necessary to find such a fact, appropriate proceedings should have been taken for giving findings on new facts which could only be done if the finding of the Tribunal had been called for on any such new fact in dispute; the manner in which the Tribunal dealt with this contention about the withdrawal of the sum of ₹ 23,000 for the marriage of Harish Chandra and Satish Chandra, is a clear example of the Tribunal rejecting a fact without giving any logical reasoning at all; all that the Tribunal has stated in the order is that it was not prepared to accept the contention but it has given absolutely no reason why it could not accept it. A reason was given by the Income-tax Officer who had held that Harish Chandra had been previously employed on ₹ 30 per mensem and it could not be believed that a sum of ₹ 23,000 would be spent on his marriage. That reasoning was not adopted by the Tribunal, presumably, because that reasoning was clearly fallacious inasmuch as the sum of ₹ 23,000 was withdrawn at a time when this f....
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....as again to be completely disregarded, because, in the relevant account year, Gopi Nath Agarwal was carrying on his business as a Hindu undivided family consisting of himself and his two sons and there could be no question of admitting a stranger to a Hindu undivided family business. The main ground relied upon is the fact that Gopi Nath Agarwal financed this firm by advancing money to carry on its business. The mere fact that a business is being carried on by means of money obtained from a certain individual cannot lead to any reasonable conclusion that that business must belong to that individual. Such an inference can only follow if it be found that the money was advanced as capital for carrying on the business and the person advancing the money retained his interest in the business in the capacity of the person providing the capital. No such findings were given in this case. It was not held that, in financing. this firm, Gopi Nath Agarwal retained any interest in the firm. On the other hand, it appears from the order of the Income-tax Officer that Gopi Nath Agarwal was charging interest on the money advanced by him from this firm. This fact that interest as being charged by Gop....