BEAUMONT, C.J. - This is a reference made by the Commissioner of In come tax raising the following question :-
'Whether there was any evidence before the Income tax officer and/or the Appellate Assistant Commissioner so as to warrant the views each of them has taken, namely, that the said sum of Rs. 1,600 being the share of the minors in the profits of the said firm of Rameshchandra & Co., for the Samvat year 1994 could be the income of the petitioner so as to include in his total income for the said year'.
The facts are that there is a firm of Lallubhai Amichand in which the present assessee and his minor son Jagmohandas are partners, and there are four other partners, namely the brother of the assessee and three outside parties. So far as regards that, it is clear that under Section 16(3) of the income tax act the income of the minor son can be included in the income of the assessee, because the assessee is a partner in that firm. Then there is a second firm which was started either in the year 1938 or 1939. It is suggested that it was in May 1938, but the partnership deed was only registered in 1939; the exact date at which it was started is irrelevant. In that firm the assessee is not a partner, but his minor son Jagmohandas is a partner, and so is his second minor son Rameshchandra. His brother, who is a partner in the first firm is a partner in the second firm; and one on the outside parties, who is a partner in the first firm is a partner also in the second firm; and a brother of each of the other two outside parties. Who are partners of the first firm, is a partner in the second firm. So that obviously the personality of the two firms is very closely associated. On the finding of the Commissioner their business are also closely associated. But the question is whether the income derived but he two minor sons of the assessee, their father. It is not suggested that Section 16(3) of the Income-tax Act applies, because the assessee is not a partner in the second firm, as he must be in order to bring that Section into operation. But the Income-tax officer found as a fact that the income of the two minor sons derived from the second firm is really the income of the assessee, and the question is whether there is any evidence to support that finding.
CXC I may mention that the second firm was registered under Section 26A of the Income-tax Act showing the minor sons as partners, and, therefore, they fall to be assessed under Section 23(5). But I will assume that, so far as registration is concerned, it would be open to the Income-tax Officer to treat the income of the minors as part of the income of the assessee.
The facts relied on as justifying the finding of the Income-tax Officer, which was confirmed, as is usual, by the Assistant commissioner, and subsequently adopted by the commissioner, are : first, the large interests which the minors had in the second firm; they had II annas share in the rupee; secondly, the age of the minors, which is nine years and three years respectively; thirdly, the younger minor brought in no capital, though the elder minor brought in about Rs. 24,000 capital which was transferred from moneys standing to his credit in the first firm; fourthly, the uncle, who is a common partner in the two firms, gets a substantial salary form the first firm, but is not shown to receive any salary from the second firm; fifthly, the second firm was financed, at any rate to very great extent, by the first firm, sixthly, the businesses of the two firms are closely connected, and the personality of the two firms is, as is have maintained, also closely connected. Now, all those facts undoubtedly give rise to a suspicion that the two minor sons are really nothing but nominees of the assessee. The question really is whether those facts not only give rise to a suspicion, but justify the inference of fact drawn by the Income tax Officer that the minors were mere nominees of the assessee. I do not think that they do justify such an inference, though they certainly give rise to suspicion. The evidence consisting of two affidavits by the assessee and the other partners in the second firm shows that the assessee had no interest in the second firm. Not unnaturally, the books of the second firm do not show that the shares of the minors have been carried to the credit of the assessee. That may be natural enough, but still the facts that the evidence produced is beside and that the other evidence is easily accounted for does not provide evidence, and there is no evidence whatever that the assessee took any part in the business of the second firm. No doubt, the two firms are closely connected, but that cannot justify us in holding that the assessee, having a share in the first firm, must necessarily have had a share in the second firm. In my opinion, all the facts relied on by the Commissioner do not afford any evidence on which he could properly come to the conclusion either that the assessee is a partner in the second firm, or that the minor sons of the assessee are mere nominees of their father, and that their income derived in the second firm is really his income.
Therefore, we must answer the question in the negative. The Commissioner to pay costs.
KANIA, J. - I agree.
Reference answered in the negative.