1. The following questions of law have been referred to this court for its opinion, by the Income-tax Appellate Tribunal, Indore Bench, Indore, under Section 256(1) of the I.T. Act, 1961, at the instance of the assessee :
'(1) Whether, on the facts and in the circumstances of the case, the Tribunal has erred in upholding the action of the ITO under Section 147(a) of the Income-tax Act, 1961 ?
(2) That whether, on the facts and in the circumstances of the case, the Tribunal has erred in not quashing the notice under Section 148 on the ground of limitation '
2. The facts of the case as per the statement of the case submitted by the Tribunal may be stated thus : A deed of partnership was executed on June 23, 1961, in the name of M/s. Pagoda Hotel & Restaurant, in which Shri Ramlal Sethi, Vikramjit Sethi, Inderjit Sethi were equal partners with equal shares. The said partnership was made effective from June 16, 1961. This firm had two activities, of which one was of running hotel and restaurant known as Pagoda Hotel & Restaurant and the second was running of wine shop in the name of 'M/s. Sethi Wine Stores', Hamidia Road, Bhopal, dealing in foreign liquor. M/s. Sethi Wine Stores was run as a branch of M/s. Pagoda Hotel & Restaurant. The return was filed in the name of M/s. Pagoda Hotel & Restaurant showing the income from the hotel business as well as the wine business and the status claimed was that of a registered firm. The assessing ITO for the assessment years 1962-63 to 1965-66 noted that since the licence for running the wine business was in the name of Ramlal Sethi, no legally constituted firm came into existence because of Rule 6 of the Excise Rules as framed by the M.P. State Government, according to which no transfer or sub-letting of the licence wouldbe permissible without the written permission of the Collector. The ITO, therefore, rejected the claim for registration by the assessee and assessed the income from both the wine and hotel business in the status of an AOP (Association of persons).
3. The matter ultimately came up before the Tribunal which by its order dated September 21, 1972, allowed registration in respect of the hotel business by observing as under :
'The activities of conducting wine shop were illegal and income derived from that activity cannot be taken to be an income of the validly constituted firm. It will still remain the income of an AOP consisting of the partners of the firm. In any case, income from the wine shop cannot be clubbed with the income of the registered firm. It is, therefore, necessary to bifurcate this income and to assess them separately, as the status itself is changed.'
4. At the instance of the Commissioner, the Tribunal made a reference to this court under Section 66(1) of the Indian I.T. Act, 1922, which was as under :
'Whether, on the facts and in the circumstances of the case, the assessee-firm was an illegal firm not entitled to registration ?'
5. This court answered the question as under :
'That the partnership so far as it relates to the wine shop is illegal and cannot be registered, but so far as it relates to the hotel business, it is a valid partnership and is entitled to be registered under the Income-tax Act.'
6. This decision is reported in CIT v. Pagoda Hotel & Restaurant : 93ITR271(MP) .
7. The ITO, accordingly, passed a consequential order and assessed M/s. Pagoda Hotel & Restaurant in respect of its hotel income in the status of a registered firm.
8. For the assessment year 1965-66, the ITO took action under Section 147(a) of the I.T. Act, 1961, in respect of the income of M/s. Sethi Wine Stores relating to the period April 1/1964, to February 28, 1965, for the assessment year 1965-66. This assessment order was taken up by the assessee before the Tribunal and by its order dated October 6, 1976, the Tribunal held that the assessment has been made on a non-existent person, since M/s. Sethi Wine Stores came into effect only from March 1, 1965, and earlier to that, i.e., from June 23, 1961, to February 28, 1965, the person to be assessed was M/s. Pagoda Hotel and Restaurant of which M/s. Sethi Wine Stores was only a branch.
9. After the passing of the order by the Appellate Tribunal, the ITO again initiated action under Section 147(a) on M/s. Sethi Wine Stores and completed the assessment, vide order dated March 27, 1981, in respect of these years. Against these subsequent orders of the ITO, the assessee took the issue before the AAC contending that for those years the assessment was done on a non-existent assessee, namely, M/s. Sethi Wine Stores, as AOP on the ground that the assessment in respect of the wine business was already made in the status of an AOP much earlier by the ITO. The AAC, relying on the decision of this court referred to above, upheld the action of the ITO who made the original assessment, refusing to grant registration to the firm as the licence for the wine business was only in the name of one of the partners and the assessee was not entitled to transfer or sub-lease the licence, though it is not in dispute that the partners of M/s. Pagoda Hotel & Restaurant were also the partners of M/s. Sethi Wine Stores which firm came into existence on March 1, 1965.
10. The matter again went up before the Tribunal for the assessment years 1962-63 to 1965-66, which by its order dater December 20, 1982, came to the conclusion that the earlier decision of the Tribunal in respect of M/s. Sethi Wine Stores related to the assessment year 1966-67 only and could not apply to the facts of the assessee of M/s. Sethi Wine Stores for the earlier years during which the wine business was carried on as a branch of M/s. Pagoda Hotel & Restaurant, that the AOP to which the income from the wine business continued to belong had not filed any return as such and, therefore, such income from the wine business had not been assessed in the hands of the said AOP, though the members of the AOP were the same persons, who were the partners of M/s. Pagoda Hotel & Restaurant. In other words, it came to the conclusion that the present AOP or the members thereof are not strangers to the proceeding as such. Therefore, the Tribunal was of the opinion that the action of the ITO under Section 147(a) and the subsequent issue of notice under Section 148 were quite proper and valid. Hence, this reference.
11. The learned counsel for the petitioner contended that no person in the name of M/s. Sethi Wine Stores existed during the period from June 23, 1961, to March 28, 1965, on which assessments could be framed. He also submitted that according to the earlier orders of the Tribunal, the assessment of income of the wine business in the status of an AOP was done earlier and, therefore, the reassessment of the same income in the same status was not permissible in law. He also submitted that the assessee, M/s. Pagoda Hotel & Restaurant, had placed full facts and the necessary materials for the assessment before the ITO in which they had also shown the income derived from the business carried on in the name of M/s. Sethi Wine Stores which was a department run along with thehotel and restaurant business of which income was also shown in their returns. He, therefore, submitted that there was no omission of any nature on the part of the assessee to enable the ITO to take action under Section 148 of the I.T. Act. He, therefore, submitted that as the earlier assessment was already made as AOP, the same could not be reassessed by issuing a notice under Section 147(a) of the I.T. Act, as has been done in this case, and in support of his submission, he placed reliance on the decisions in Narayanappa Setty & Co. v. CIT : 100ITR17(AP) , ITO v. Chandi Prasad Modi : 119ITR340(Cal) , Addl. CIT v. Automobile Association of Southern India : 127ITR730(Mad) , CIT v. Kurban Hussain Ibrahimji Mithiborwala : 82ITR821(SC) , Sewlal Daga v. CIT : 55ITR406(Cal) , CIT v. Rao Thakur Narain Singh : 56ITR234(SC) and Manoo Lal Kedarnath v. Union of India : 114ITR884(All) .
12. On the other hand, the learned counsel for the Revenue contended that the Tribunal by its detailed and exhaustive order has considered the facts of this case and has also placed reliance on certain decisions which have been referred to by them in that order. He, therefore, submitted that the earlier assessment, though made in the capacity of an AOP, did not relate to M/s. Sethi Wine Stores of which the partners were the same as that of M/s. Pagoda Hotel and Restaurant. He, therefore, submitted that it was the duty of the owners to file their returns for the income derived from the wine business which having not been done, it is not necessary to interfere with the view taken by the Tribunal and in support of his submission, he placed reliance on the decisions in Daffader Bhagat Singh and Sons v. ITO : 71ITR417(SC) , Gladys S. Koder v. ITO : 104ITR220(Ker) , CIT v. Rajinder Nath : 85ITR296(Delhi) and Rajinder Mohan Bhandari v. ITO : 111ITR407(Cal) .
13. After hearing the learned counsel and after going through the authorities cited on behalf of the assessee, we are of the opinion that the authorities cited on behalf of the assessee are distinguishable on facts. There can be no doubt that under the scheme of the I.T. Act, 'Association of persons and firm' are treated as separate units of assessment and the return submitted in the status of a firm could not be considered to be a return submitted by an association of persons. Section 4 of the Act provides that income-tax shall be charged in respect of the total income of the previous year or years in respect of every person. Therefore, in the return submitted by M/s. Pagoda Hotel & Restaurant, the names of the persons who carried on the business in the name of M/s. Sethi Wine Stores as a department of the said concern were shown, it having been found by this court that the same has to be bifurcated and it is only the income of M/s. Pagoda Hotel & Restaurant which can be taken into consideration asa partnership firm of which registration could be granted under the I.T. Act. Therefore, it is clear that though M/s. Sethi Wine Stores by name as such did not exist prior to the partnership firm in the same name but came into existence in 1965, still, in our opinion, the submission of the learned counsel for the petitioner that as initially they were assessed as an AOP, there could not be a reassessment for that period, cannot be accepted as, admittedly, no returns were filed earlier by them.
14. It may be noted that the High Court, on a reference before it, does not act as a court of appeal. The jurisdiction is advisory and no more. The High Court is empowered to decide the question of law referred to it and to return its answer to the Appellate Tribunal. The Appellate Tribunal then takes up the appeal and then disposes it of in conformity with the answer returned by the High Court. It is not part of the jurisdiction of the High Court to interfere and modify or set aside the appellate order of the Tribunal. Considered in this light, we are of the opinion that the questions referred to this court have to be answered against the assessee and in favour of the Revenue.
15. Our answer to the questions, therefore, are as follows :
'(1) On the facts and in the circumstances of the case, the Tribunal has not erred in upholding the action of the ITO under Section 147(a) of the I.T. Act 1961.
(2) On the facts and in the circumstances of the case, the Tribunal has not erred in not quashing the notice under Section 148 on the ground of limitation.'
16. The reference is answered accordingly with no order as to costs.