r958 pay only three sets of costs for the hearing, namely, one set each to the petitioners represented by Shri Sh1ee Vinod Kuma' &- 0 ,,. Achhru Ram, Shri D. R. Prem and Shri Y. Kumar v.
respocti vely an<l also one set of hearing fees for each State of Ilimachal of the au vocates-on-record. Prridesh Das C. ]. October r4. Petitions allowed. THE COMMISSIONER OF INCOME-TAX,
BIHAR AND ORISSA v. SRI RAMAKRISHNA DEO (VENKATARAMA ArYAR, GAJENDRAGADKAR and A. K. SARKAR, JJ.) focome Tax-Forest trees-Income from sale of-Whether agricultural income-Exemption from taxatio1>-Burden of proof- Findings of the Tribunal-When binding on High Court-Indian Income-tax Act, r922 (XI of r922), ss. 2(r), 4(3) (viii), 66(r). The respondent, the proprietor of an estate, derived income from the sale of trees growing in his forests and claimed that it was agricultural income as defined in s. 2(1) of the Indian Income-tax Act, 1922, and that it was exempt from payment of income-tax under s. 4(3)(viii). The Appellate Tribunal found that the evidence to show that there was plantation by the estate authorities was meagre and unsubstantial, that the trees in question must have been of spontaneous growth and that the respondent had failed to establish facts on which he could claim exemption. On reference, the High Court took the view that though trees in the forest had not been planted by the estate authorities, the latter had performed subsequent operations of a substantial character for the maintenance and improvement of the forest, and that the income vvas, therefore, agricultural incorne.
It also held that the onus was on the income-tax authorities to prove that the income derived from the sale of trees was not agricultural income and that they had failed to show that the income fell outside the scope of the exemption mentioned in s. 4(3)(viii) of the Act.
Held, that the High Court erred in placing the burden on the income-tax authorities to prove that the income sought to be taxed was not agricultural income. The principle has been well- established that where a person claims the benefit of an exemp- tion under the provisions of the Act, he has to establish it. Commissioner of Income-tax v. Venkataswamy Naidu, [1956]
z958 291.T.R. 529, followed. -. . The question whether the trees were of spontaneous growth The Commissioner or were products of plantation was essentially a question of fact 0( lncome·T~x,
and the finding of the Tribunal on this point was binding on the Bihar and Orissa High Court in a reference under s. 66(1) of the Act. v. Sri Ramakris/111a Held, further, that the mcome received by the resI?ondent
by the sale of trees in his forests was not agricultural income as eo the trees had not been planted by him, and that it was immaterial that he had maintained a large establishment for the purpose of preserving the forests and assisting in the growth of the trees.
The Commissioner of Income-tax, West Bengal, Calcutta v. Raja Benoy Kitmar Sahas Roy, [1958] S.C.R. IOI, explained and followed. CIVIL APPELLATE JURISDICTION: Civil Appeal No. 426 of 1957.
Appeal from the judgment and order dated April 21, 1955, of the Orissa High Court at Cuttack in Special Jurisdiction Case No. 179 of 1951. A. N. Kripal, R. H. Dhebar and D. Gupta, for the
appellant. A. V. Viswanatha Sastri, M. S. K. Sastri and R. J agannatha Rao, for the respondent. 1958. October 14. The Judgment of the Court was delivered by VENKATARAMA AIYAR, J.-This is an appeal against
the judgment of the High Court of Orrissa in ar eference under s. 66(1) of the Indian Income-tax Act, 1922, hereinafter referred to as the Act, and the point for decision is whether income received by the respondent
by the sale of trees groing in his forests is agricul- tural income exempt frm taxation under s. 4(3)(viii) of the Act. The respondent is the proprietor of the impartible zamin of Jaipur in Koraput District. The estate is of
the area of 12,000 sq. miles of which 1540 sq. miles are reserve forest and 100 sq. miles, protected forest. The respondent derives income from the forests by the sale of timber such as teak, salwood, lac, myrabolam,
tamarind, cashewnuts and firewood. There is no Venkatarama Aiyar. J. z95B dispute either as to the receipt of such income or as to C -. . its quantum. All that appears in the account books
The on-imissio1ier d Th of 1"come-Tax, of the respc_m .ent. . e pomt m controversy _is _as to lliha• cmd o.i<sa whether this mcome IS chargeable to tax. It IS the v. contention of the respondent that this is agricultural
s,; Ramah.is/ma income as defined in s. 2(1) of the Act, and that it is, Deo in consequence, exempt under s. 4(3)(viii). By his order dated ,January 31, 1943, the Income-tax Officer
Venkatarama held that the forests in question had not been proved iyar, to have been planted by the respondent, that the trees were of spontaneous growth, and that the income there-
from was not within the exemption under s. 4(3)(viii) ; and this order was confirmed on appeal by the Appel- late Assistant Commissioner. The respondent took the matter in further appeal to the Appellate Tribunal,
and there put forward the contention that the Income- tax Officer had failed to take into account a letter of the Dewan dated June 3, 1942, w.hich gave a detailed account of the operations carried on by the estate in
the rearing and maintena.nce of forests and that on the facts mentioned in that letter, his finding that there had been no plantation of trees was erroneous. By its order dated April 9, 1946, the Tribunal accepted this
contention, and directed a fresh enquiry into the facts mentioned in, the said letter. Pursuant to this order, the Income-tax Officer again enquired into the matter. He observed that though he
gave ample opportunities to the respondent to prove that there was plantation of trees by the estate, no materials were placed in proof of that fact and that neither plantation books nor any working plans for
timber plantation had been produced. He accordingly held that the forests had grown naturally, and that the income therefrom was assessable to tax. On this report, the appeal again came up for hearing before
the Tribunal. The main contention urged by the respondent at the hearing was that the facts showed that the forests which had yielded income during the years of account could not have been the virgin forests
which had originally grown spontaneously on the hills, because they had been periodically denuded by the hill tribes in the process of Podu cultivation carried on by them. What this Podu cultivation means is thus
z958 stated in the District Gazetteer, Vishakapatnam, 1907: Th c -. . e omnussioner " This consists in felling a piece of jungle, burning of Income-Tax, the felled trees and undergrowth, sowing dry grain Bihar and OriSS11 broadcast in the ashes (without any kind of tilling) for
v. two years in succession, and then abandoning the plot 5" Ra;; 0krishna for another elsewhere." The argument of the respondent was that as a result Venkatarama of the Podu cultivation, the original forests should
Aiyar, J. have disappeared and that the· trees that had sub- sequently grown into forest and sold as timber must have been planted by human agency and their sale proceeds must accordingly be agricultural income.
Dealing with this contention, the 'I.'ribunal observed that though there had been extensive destruction of forests in the process of Podu cultivation, nevertheless, considerable areas of virgin forests still survived, that
the evidence of actual cultivation and plantation by the zamin authorities was meagre and unsubstantial, that no expenses were shown to have been incurred on this_ accoµnt prior to 1904, that the amount shown as
spent during that year was negligible, that the trees planted then could not have been the trees sold as timber during the assessment years, and that the respondent had failed to establish facts on which he
could claim exemption. It should be mentioned that this order covered the assessments for five years from 1942-43 to 1946-47, the facts relating to the character of the income being the same for all the years. On
the application of the respondent, the Tribunal referr- ed the following question for the decision of the High Court: " ·whether on the facts and in the circumstances the income derived from forest in this case is taxable
under the Indian Income-tax Act." The reference was heard by Panigrahi, C. J., and Misra, J., who answered it in the negative. They observed: "It appears to us that the cases as set out by both
parties have been put too high. The department takes the view that unless there is actual cultivation of the SUPREME COUR'r REPORTS [1959] Supp. r958 soil the income from the forest trees cannot be regard-
c-.. ed as agricultural income. The fact that the assessce The ommm•onu h d 1 d 1 bl of Income-Tax. as spent S<?me mone;y- . an p ante va ua e trees m Bihar and o,;,,. some areas IS not sufficient to free the income out of v.
the extensive forests which owe their existence to Sri Ramakdshna spontaneous growth, from its liability to taxation. The Deo assessee on the other hand seeks to create an impres-
sion that there is not a single tree of spontaneous V enk~taYama Aiyar, J. growth, in these forests, and such trees as now con- stitute forests have sprung up out of the stumps left
by the hillmen as a result of the system of' Podu' cultivation adopted by them. It appears to us that neither of these claims can be regarded as precise or correct." The learned Judges then observed that the forests in
the Koraput area had been under Podu cultivation for a long period, and that as the result of that cultivation they had practically disappeared even by the year 1870, that the trees had subsequently grown into
forests and they had also been destroyed by about the year 1901, and that therefore there could not have been any virgin forest left surviving. Then they referred to the fact that the respondent had been main-
taining a large establishment for the preservation of the forests, and that there had been organised activi- ties (1) "in fostering the growth of the trees and preserving them from destruction by man and cattle;
(2) in cultivation of the soil by felling and burning trees from time to time ; (3) in planned exploitation of trees by marking out the areas into blocks; (4) in systematic cutting down of trees of particular girth
and at particular heights; (5) in planting new trees where patches occur ; and (6) in watering, pruning, dibbling and digging operations carried on from time to time". And-they stated their conclusion thus:
"All these and similar operations which have been undertaken by the assessee through his huge forest establishment, show that there has been both cultiva- tion of the soil as well as application of human skill
and labour, both upon the land and on the trees them- selves. It cannot be assumed therefore that all the trees are of spontaneous growth. '.l'he indications, on the other hand, appear to be that most of them are
r95s sprouts springing from burnt stumps. There is no -. . b . 1' h d b h The Comm1ssto'1ct as1s ior t e assumpt10n ma e y t e ncome-tax of 1,,come-Tax, Department that all the trees are forty years old and Bihar and orissa that they owe their existence to spontaneous growth.
v. Apart from that it will be noticed that what distin- Sri Rmnakrislma guishes the present case from all the reported decisions Dea is that practically the whole of the forest area has been
Vr.nlwtarama subjected to process of 'Podu' cultivation spreading Aiyar, J. over several decades so that it is impossible to say that there is any virgin forest left. The onus was certainly upon the department to
prove that the income derived from the forest was chargeable to tax and fell outside the scope of the exemption mentioned in Section 4(3)(viii)." In this view, they held that the Department had failed
to establish that the income derived from the sale of trees wa.s not agricultural income, and answered the reference in favour of the respondent. The learned Judges, however, granted a certificate to the appellant
under s. 66(A)(2) of the Act, and that is how the appeal comes before us. At the very outset, we should dissent from the view expressed by the learned Judges that the burden is on
the Department to prove that the income sought to be taxed is not agricultural income. The law is well settled that it is for a person who claims exemption to establish it, and there is no reason why it should be
otherwise when the exemption claimed is under the Income-tax Act. The learned Judges were of the opinion that their conclusion followed on the principle of the law of Income-tax that "where an exemption
is conferred by a statute, the State must not get the tax either directly or indirectly", and support for this view was sought in the following observations of Lord Somervell, L. J ., in Australian Mutual Provident Society
v. Inland Revenue Commissioners {1): "The rule must be construed together with the exempting provisions which, in our opinion, must be regarded as paramount. So far as the rule, if taken
(I) [1946] I All E.R. 528. r95B in is.olation, would have the effect of indirectly depriv- Th• Commi5'ion" ing the company of any part of the benefit of the of Income-Tax. exemption, its operation must be cut down, so as to Bihar and Orissa prevent any such result, and to allow the exemption v.
to operate to its full extent." Sri Ramakrishna Deo These observations have, in our opinion, no bearing on the question of burden of proof. They merely lay Venkata;ama down a rule of construction that in determining the
Aiyar. J. scope of a rule, regard must be had to the exemptions engrafted thereon, and that the rule must be so con- strued as not to nullify those exemptions. No such ques- tion arises here .. There is ample authority for the view
that the principle that a person who claims the benefit of an exemption has to establish it, applies when the exemption claimed is under the provisions of the Income-tax Act. Vide the observations of the Lord
President and of Lord Adam in Maughan v. Free Church of Scotland (1) and the observations of Lord Hanworth, M. R., in Keren Kayemeth Le Jisroel Ltd. v. The Commissioners of Inland Revenue (2) at p. 36 that
" the right to exemption under Section 37 must be established by those who seek it. The onus therefore lies upon the Appellants", and of Lord Macmillian at p. 58 that, "In my opinion, the Appellants have failed to
bring it within any one of these categories and con- sequently have failed in what was essential for them to make out, namely, that this Company is a body of persons established for charitable purposes only."
The decisions of Indian Courts have likewise ruled and quite rightly that it is for those who seek exemption under s. 4 of the Act to establish it. Vide Amritsar Produce Exchange Ltd. In re (3) and Sm. Charusila
Dassi and others, In re ('). So far as exemption under s. 4(3) (viii) is concerned, the matter is concluded by a decision of this Court given subsequent to the decision now under appeal. In Commissioner of Income-tax v.
Venkataswamy Naidu ('), this Court held, reversing the judgment of the High Court of Madras, that it (1) (1893) 3 Tax Cas. 207, 210. (2) (1931) 17 Tax Cas. ;!.J. (3) [1937] 5 r:r.R. 307, 327.
(4) [1946] 14 l.T.R. 362, 370. (5) [195G] 29 I.T.R. 529, 534. was for the assessee to prove that the income sought z95B to be taxed was agricultural income exempt from taxa- Th c-. . d
(3)( … ) Bh . J d 1. th e omm1ss1oner t1on un er s. 4 vn1 . agwat1, ., · e 1vermg e of Income-Tax, judgment of the Court observed: Bihar and Orissa " … the High Court erroneously framed the ques-
v. tion in the negative form and placed the burden on the Shri Ramakmhna Income-tax Authorities of proving that the income Deo from the sale of milk received by the assessee during
venkaiarama the accounting year was not agricultural income. In Aiyar, J. order to claim an exemption from payment of income- tax in respect of what the assessee considered agricul-
tural income, the assessee had to put before the Income-tax Authorities proper materials which would enable them to come to a conclusion that the income which was sought to be assessed was agricultural
income. It was not for the Income-tax Authorities to prove that it was not ~gricultural income. It was this wrong approach to the question which vitiated the judgment of the High Court and, led it to an erroneous
cone l usion.'' On the merits, the question what is agricultural income within s. 2(1) of the Act is the subject of a recent decision of this Court in The Commissioner of Income-tax, West Bengal, Calcutta v. Raja Benoy Kumar
Sahas Roy (1). There, it was held that before an income could be held to be agricultural income, it must be shown to have been derived from land by agriculture or by one or the other .of the operations described in
els. (i) and (ii) of s. 2(l)(b) of the Act, that the term "agriculture" meant, in· its ordinary sense, cultiva- tion of the field, that in that sense it would connote such basic operations as tilling of the land, sowing of
trees, plantation and the like, and that though sub- sequent operations such as weeding, pruning, watering, digging the soil around the growth and removing undergrowths could be regarded as agricultural opera-
tions when they are taken in conjunction with and as continuation of the basic operations mentioned before, they could not, apart from those operations, be regarded as bearing the character of agricultural
operations. (1) (1958] S.C.R. IOI, 155, 158, 160. 1~58 " It is only " observed Bha.gwati, J., delivering Th C the judgment of the Court, " if the products are raised e ommwioner f'
h 1 d b h f h b · of bicome-Tax rom t e an y t e per1ormance o t ese as10 Bihar .,,,z o,;,.;. operations that the subsequent operations attach them- v. selves to the products of the land and acquire the
Sri Ramakri.slma characteristic of agricultural operations … " 'J)eo fh "But i t esebasic operations a.re wanting the sub- Yenk•tarama sequent operations do not acquire tho characteristic of
Aiyar, ;. agricultural operations." Dea.ling with trees which grow wild, Bhagwa.ti, .J., observed: "It is agreed on all hands that products which grow wild on the land or are of spontaneous growth
not involving any human labour or skill upon the land a.re not products of agriculture and the income derived therefrom is not agricultural income. There is no process of agriculture involved in the raising of these
products from the land.'' The law being thus settled, in order to decide whether the income received by the respondent by the sale of trees in hi.ii forests was agricultural income or
not, the crucial question to be answered is, were those trees planted by the proprietors of the estate, or did they grow spontaneously? If it is the latter, it would be wholly immaterial that the respondent has main-
tained a large establishment for the purpose of preserv- ing the forests and assis~ing in the growth of the trees, because ex hypothesi, he performed no basic operations for bringing the forests into being. Now, the Tribunal
has clearly found that there were no plantations of trees by the. estate authorities worth the name, and that the trees, the income from which is the subject. matter of the assessments, must have been of sponta..
neons growth. That is a. finding of fact . which is binding on the Court . in a. reference under s. 66( l) of the Act. The learned Judges declined to accept this finding, because they considered that the Tribunal had
not appreciated the true significance of Podu cultiva- tion. That, in our opinion, is a. misdirection. If the point for decision had been whether the forest was a virgin forest or whether it had subsequently sprung up,
the evidence relating to Podu cultivation would have been very material. But the point for decision is not whether the forests were ancient and primeval, but h h h l d b d b h h . The Commissioner
,~. et er t ey 1a een p ante . y ~ e estate aut on- of Income-Tt1x, ties, and on that, the Podu cult1vat10n would have no Bihllr and o,;s.<a hearing. As a result of the Podu cultivation, the origi-
v. nal forests would have disappeared. But the question s,; Ramakrishna would still remain whether the forest which again Deo sprang t,1p was of spontaneous growth, or was the result,
Venkatarama of plantation. Now, there is no evidence that as and Aiyar 1. when the jungle had disappeared under Podu cultiva- tion, the estate intervened and planted trees on the areas thus denuded. On the other hand, the learned Judges
themselves found that after the destruction of the original forests in the prncess of Podu cultivation, there was a fresh grnwth of forests from the stumps of the trees which had been burnt. If that is the fact,
then the new growth is also spontaneous and is not the result. of any plantation. In fairness to the learned Judges, it must be observ- ed that at the time when they heard the reference there
was a conflict of judicial opinion on the question whether subsequent operations alone directed to the preservation and improvement of forests would be agri- cultural operations within s. 2(1) of the Act; and the
view they took was that such operations when con- ducted on a large scale as in the· present case would be within s. 2(1) of tb.e Act. It was in that view that they observed that "it is therefore idle to regard till-
ing as the sole and indispensable test of agriculture". The decision of the learned Judges was really based on the view that though trees in the forest had not been planted by the estate authorities, the latter had
performed subsequent operations of a substantial character for the maintenance and improvement of the forest, and that, in consequence, the income was agri- cultural income. This view is no longer tenable in
view of the decision of this Court in The Commissioner of Income-tax, West Bengal, Calcutta v. Raja Benoy K itmar Sahas Roy (1 ). It is contended by Mr. Viswunatlrn S1tstri for the
(1) [1958] S.C.R 101, 155, 15q, xGo. SUPREME COURT REPOR'fS [l!J59] 8upp. respondent that on the facts established in the evi- dence, the proper conclusion to come to is that the trees
r:; 1~~;:,7;'.~:,~:, ·' sold by. ~he respondent had b~e? planted by ~he e~tate J;;1.,,, """ Od."a itnthonties, and that the dec1s10n of the High Court v. that the income thus realised is within the exemption
s,; 11 .. ,,,,,,,,.,;,1,,,,, nnrler s. 4(3)(viii) could be supported even on the view Deo of la.w tt1ken in The Commissioner of Income-tax, West Bengal, Calcutta v. Ra•a Benrn1 Kumar Sahas Roy ( ').
1·e11/~11trirama ;J ":J Aiyar ]. The argument was that there was unimpeachable evidence that the old forests had disappeared under Podu cultivation, that the estate had been regularly
cng11ged in planting trees at least from the yea.r l!l04, as is shown by the accounts of the zamin, thitt it wa.s a reasonable inference to make that there had been similar plantations even during the years
prior to 1904 notwithstanding that no accounts were produced for those years, because it would not be reasonable to expect that such accounts would now be available, that though the amount shown as spent
for plantation might not be considera hie, that was understandable when regard is had to the fact that the agricultural operations were conducted on tho hills and not on the plains,. that, on these facts,
it would be proper to conclude that the forests were in their entirety the result of plantation. It would be an erroneous approach, it was argued, to ca.II upon the assessee to prove tree by tree that it was planted.
Now, these are matters of appreciation of evidence on what is essentially a question of fact, viz., whether the trees were of spontaneous growth or were products of plantation. On this, the Tribunal has given a
clear finding on a consideration of all the material oviclence, and its finding is final and not open to challenge in a reference under s. 66 (1) of the Act. Evon the learned Judges of the High Court who cone
sidered themselves free to review that finding-and, as already pointed out, without justification, could only observe that the trees must have mostly grown from the s~umps left when the forests were burnt for pur-
poses of Podu cultivation-a finding which is. fatal to the. contention now urged for the respondent that they {1) [1958] S.C.R. IOI, 155, 158, 16o. (1) S.C.R. wero the result of plantation. We are of opinion that
'958 there are no grounds on which the finding of the Tri- The Cornmis-<ioner bunal could be attacked in these proceedings. oJ Income-Tux. It remains to deal with one other contention urged IJih"' "''d Oris.a on behalf of the respondent, and that is based on the ., .. R v •.. 1
fact that the amounts spent in the upkeep of the for- ·" "';:;"' ""' rests were large in comparison with the receipts there- from. The following are the figures relating to tho Ve11lwtarama
forest receipts and expenses for the years with which Aiyar J. the present assessments are concerned : Years Receipts Expenses 1942-43 Rs. 438,894 Rs. 174,437 1943-44 H,s. 407,447
Rs. 209,SlJ;) 1944-45 Bs. 552,122 Rs. 228,830 1945-46 Rs. 372,971 Rs. 247,216 1946-47 Rs. 689,366 Rs. 460,369 The argument is that from the high proportion of the expenses in relation to the receipts it could be inferred
that the income from trees planted by the estate formed a substantial portion of the income derived from the forests. And support for this conclusion is sought in the following observations in The Commis-
sioner o.f Income-tax, West Bengal, Calcutta v. Raja Benoy Kumar Sahas Roy (1) : " The expenditure shown by the assessce for the maintenance of the forest is about Rs. 17,000 as against a total income of about Rs. 51,000.
Having regard to the magnitude of this figure, we think that a substantial portion of the income must have been derived from trees planted by the proprietors them- selves." To appreciate the true import of these observations,
we must have regard to the context in which they occur. The facts found in that case were that portions of the forest which was originally. of spontaneous growth had gradually been denuded, that the proprie-
tor haJ planted trees in the areas so denuded, that this had gone on for a period of over 150 years, and that therefore " the whole of the income derived from (I) (1958) S.C.R. IOI, 155, I58, 160.
SUPREME COURT BEPORTS [1959] Supp. the forest cannot be treated as non-agricultural in- -. . come". It was then observed that "If the enquiry 1;; 1~;:~.:··;':~'." had _been directed on proper lines, it. ~ould have be~n Uiha• and o,;,sa possible for the Income-tax author1t1es to ascertam v.
how much of the income is attributable to forest of ,,, 11amak•;,1 .. a spontaneous growth and how much to trees planted by Deo the proprietors", but that, in view of the long lapse of
time, it was not desirable to remand the case for en- v c11/u1tara111a b quiry into the matter. Then fo low the o servations Aiyur ]. on which the respondent relies, and when read in the
light of the findings that the plantations made by the proprietors were not negligible, they mean nothing more than that out of the total income a substantial portion was likely to be agricultural income, and that
it was therefore not a fit case for ordering fresh en- quiry. These observations do not lay down that if considerable amounts are expended in the mainten- ance of forests, then it must be held that the trees
were planted by the proprietors. They only mean that if a considerable portion of the forests is found to have been planted, a substantial portion of the forest income rnav be taken to have been derived
therefrom. And tl1is too, it must be remarked, is <'nly ·a presumption of fact, the strength of which must depend on all the facts found. In the face of the clear Jinding in the present case that the forests with which
the assessment years are concerned were of sponta- neous growth, the observations quoted above can be of· no assistance to the respondent. It is scarcely necessary to add that the obsenations " If the enquiry
had been directed on proper lines, it would have been '_pos~ible fm the Income-tax authorities to ascertain how much of the income is attributable to forest of spontaueous growth and how much lo trees planted
by the proprietors " quoted above cannot be read, as was sought to be done for the respondent, as throw- ing on the Department the burden of showing that the income so11ght to be taxed was not agricultural income.
That, in their context, is not the true meaning of the observations, and the law is as laid down in Commis- sioner of I ncoine-tax v. Venkataswamy N aid-u (' ). (1) [1956] 29 I.T.R. 529, 534.
(1) S,C.R. SUPREME COURT H.EPOl{iTS In the result, this appeal is allowed, tho order of the Court below is set aside and the reference is answered in the affirm<\tive. 'fhe respondent will
pay the costs of the appellant here and in the Court below. The Con1111issim1er of luconw-Tax. /11har and Orissa Appeal allowed. Shri Uuniakrisll'na lJ<'O Y. NAP.AYANA CHETTY & ANOTHER
v. THE INCOME-TAX Ol!'F'ICER, NI!~LLORE AND OTHERS (VENKATARAMA AIYAR, GAJENDRAGADKAlt and A. K. SARKAR, JJ.) Income-tax-Rule empowering Income-tax Officer to cancel r.:gistration of firm found not he genuine-Validity of-Registered firm, if an assessee-Service of notice on firm through partner, if valid a11d proper-Writ P.ctition, ijlies 11gai11st illegal assessment- Indian Income-tax Act, z922 (XI of z922), ss. 23, 34-:-Income-tax Rules, r. 6B-Constitution of India, Art. 226.
Two persons, B ai;id C, formed a partnership firm on April 20, i936, and the firm was dissolved on March 31, i948. B ancl .c aloug with R formed a second firm on July 3'>. HJ41, an<! it was dissolved on March 31, 1949· B and C along with five others formed a third firm on December l, 1941, and it was dissolved on January I, 1949· All the three firms were carrying on business in yarn and cloth and all of them were registered under s. 26-A of the Income-tax Act. For the years 1943-44 and 1944-45 the
said firms were treated as separate entities and separate assess- ment orders were passed in respect of the income of each one of them for the said years. Subsequently, the Income-tax Officer served notices under s. 34 of the Act on C on behalf of the firms and after hearing the parties he held that the firms were ficti-' tious and so cancelled their registration under r. 68 of
tl1t~ income-tax Rules and passed fresh orders of assessment against them on the basis that they were unregistered firms. One Y who was a partner in the third firm and C filed four writ peti- tions under Art. 226 of the Constitution in the High Court chal- knging the validity of the orders passed. The High Court di~ missed the petitions but granted certificates of fitness to appeal Vfokularatna
Aiyur ]. October 15.