1941 (11) TMI 18

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....spondent. JUDGMENT Leach, The case for the Income-tax authorities set out in the reference by the Commissioner of Income-tax cannot be accepted. The facts are very simple. In the year 1936-37 one Muhammad Ibrahim was the agent of the Standard Oil Company in Trichinopoly. There were two agencies for the Burmah Shell Company in that district, one being conducted by Ramakrishna Chettiar and ....

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....ivasalu. On the 1st May 1938, Ibrahim and Srinivasalu commenced to trade jointly as a firm and on the 7th February 1939 a formal deed of partnership was drawn up with effect from the 1st May 1938. The firm was then registered under Section 26-A of the Income-tax Act. For the year 1938-39 the firm returned a loss of Rs. 7,014 in respect of the year 1937-38. The firm was not, however, liable to a....

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.... in partnership, but in conjunction with one another. These sums had received the attention of the Income-tax Officer when he was assessing Ibrahim in 1937-38. He considered the whole question then and came to the conclusion that Rs. 20,000 of the sums entered in the suspense account represented secret profits. He assessed Ibrahim accordingly. When it came to assessing the firm of Ibrahim and S....

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.... directing the Commissioner to state a case under Section 66 (3) This Court directed that this should be done and framed the question as follows :- "In including the sum of Rs. 26,699 in the amount of the taxable income for the year of assessment 1938-39 were the Income-tax authorities acting in accordance with law?" It is obvious that the Income-tax authorities were not acting in acco....