1966 (9) TMI 15

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....re income from the above firms as returned by the assessee. It was noted in the assessment orders that the share incomes were being accepted subject to rectification later. In the assessment year 1958-59, the assessee's share in M. M. Madalappa & Bros. was a loss and was not taken into account in the original assessment. In 1959-60, neither income nor loss was taken into account. In the assessment year 1960-61, a loss of Rs. 4,941 from this firm was deducted. Against the share income from the other two firms in the assessment for 1958-59, it was noted " tax earned ". In the other two years, no mention has been made as to the nature of the share income from the two firms. Subsequently, the assessments of the three firms came to be completed.....

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....ax Officer, treating these as unearned income. The Income-tax Officer passed orders under section 154 of the Income-tax Act, 1961, in all the three years on August 28, 1963, levying a special surcharge on the share incomes. The assessee filed appeals to the Appellate Assistant Commissioner, objecting to the treatment of the share of profit from the firms as unearned income. The Appellate Assistant Commissioner, however, upheld the orders of the Income-tax Officer, observing as under : " The section does not restrict the scope to the alteration of the quantum only. The nature or character of the income can also be corrected, if there is a mistake in the original assessment ..... In case the character or nature of the share income is diffe....

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....copy of the Appellate Tribunal's order is annexure " B " and forms part of the case. The question of law is : " Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the Income-tax Officer, while passing the order under section 155 of the Act, was not justified in treating the share income of profit from the partnership firms as unearned ? " After setting out the statement of case as above, HEGDE J. continued. This is a reference under section 256(1) of the Income-tax Act, 1961 (to be hereinafter referred to as the Act). This reference comes to be made at the instance of the Commissioner of Income-tax, Mysore, Bangalore. The question of law referred for the opinion of this court is : " Whet....

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.... a portion of that income is more because the same is unearned income. Before rectifying the assessment orders the Income-tax Officer purporting to act under sections 154 and' 155 called upon the assessee to show cause why the proposed enhancement of tax should not be made. But in the course of his final order, he purported to revise the assessment orders under section 154. In paragraph 6 of its order, the Appellate Tribunal came to the conclusion that on the facts of the case, the Income-tax Officer could not have acted under section 154 and he should be deemed to have acted only under section 155. This is what the Tribunal said in that regard : " We shall first deal with the objection that section 154 did not apply to the case at all, b....