G.K. Misra, C.J.
1. The petitioner, Messrs Gill Brothers, contractors at Umerkote in the district of Koraput, is a partnership concern. It has been assessed to sales tax for the quarters ending 30th September, 1960, to 30th September, 1961.
N.S. Gill, R.S. Gill and M.S. Gill are three brothers. The petitioner's case is that during the relevant period the business was carried on by Mr. N.S. Gill in his individual capacity and that there was no partnership amongst the three brothers, and that in respect of the liability of Mr. N.S. Gill the partnership of Messrs Gill Brothers cannot be assessed. The partnership of Messrs Gill Brothers came into existence on 14th June, 1961, and was registered in the sales tax department on 17th July, 1961.
2. The assessing officer assessed the petitioner on the finding that supplies of metals were made in' the name of Mr. N.S. Gill who happens to be the partner of the firm. He did not examine the matter carefully and did not formulate the points that arose for consideration.
3. The following points arise for determination:
(i) Was there a partnership of three brothers under the name and style of Messrs N.S. Gill during the relevant period, or whether the business so run was in the individual capacity of Mr. N.S. Gill ?
(ii) Whether the partnership of Messrs Gill Brothers carried on and continued the business of Messrs N.S. Gill, if there was any such partnership?
4. The assessing officer, without fully understanding the problem in issue, simply said that Mr. N.S. Gill was supplying the metals and as he was a partner of the firm of Messrs Gill Brothers, the partnership would be assessed to sales tax during the relevant period.
5. The matter was more closely scrutinised by the Assistant Commissioner of Sales Tax who constitutes the first appellate authority. He looked into the copy of the agreement No. 77 of 1959-60 entered into with the Dandakaranya Project Authorities. The cover of that agreement contained the name of the contractor as Messrs N.S. Gill. He made some enquiries from the Executive Engineer concerned, who revealed to him that the agreement was entered into by the said authorities with Messrs N.S. Gill and not with Mr. N.S. Gill in his individual capacity. He also took into consideration a further feature that Mr. R.S. Gill, one of the brothers who was a partner of the subsequent partnership, used to receive payments from the Executive Engineer on behalf of Messrs N.S. Gill. Keeping these features in view, the Assistant Commissioner came to the conclusion that Messrs N.S. Gill was a partnership concern of all the three brothers, and the subsequent partnership involved a mere change of name, without any change of business, and could be legally assessed to sales tax in respect of the transactions of the earlier partnership. Doubtless the first appellate authority did not express his conclusion in the way we have put it, but in essence it was so.
6. The assessing authorities should not have overlooked the concept of 'partnership' as defined in the Partnership Act and the necessary evidence in support of the conclusion that a partnership had come into being. Section 4 of the Partnership Act defines a partnership as relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. The various features relied on by the first appellate authority should be examined in order to come to a finding whether, in fact, there was a partnership or whether an inference as to the existence of partnership was made merely because of the relationship among the three partners as brothers.
7. Section 5 of the Partnership Act says that the relationship of partnership arises from contract and not from status. Three brothers may carry on business but if there is no contract amongst them that the business was being carried on amongst them for the purpose of sharing the profits, it would not be a partnership.
8. Section 6 lays down that the real relationship between the parties as shown by all relevant facts taken together, must be determirted in order to come to the conclusion that it is a partnership.
9. The law is well settled that the principles of the Evidence Act have no application to proceedings under taxation statutes ; but all the same if any material is collected against an assessee or dealer and the assessing authorities propose to utilise the same for making the assessment, reasonable opportunity must be given to the assessee or dealer to have his say in the matter, and to furnish his explanation against adverse circumstances arising against him on the basis of that material.
In this case, the first appellate authority made certain enquiries from the Executive Engineer. His order does not indicate if those materials were made part of the record or were brought to the notice of the assessee before the hearing was closed. One of the grounds taken before the Tribunal was that without calling for these materials from the Executive Engineer, they should not have been used against the dealer behind his back. In any event, there is no material before us to show that the information gathered by the first appellate authority, in the course of his enquiry, was kept on the record. Mr. Mohapatra, learned Standing Counsel was called upon to file an affidavit that the said materials are on the record. He was not in a position to say whether in fact the materials were kept on the record.
10. When the matter came up before the Tribunal, he did nothing more than quoting the finding of the first appellate authority. At the instance of the assessee a letter was written by the Executive Engineer that the transactions during the relevant period were made by Mr. N.S. Gill in his individual capacity and not by Messrs N.S. Gill. The Tribunal took serious objection to this letter being addressed by the said officer, without being called upon by the Tribunal itself.
Whatever that may be, one pertinent fact that requires to be noticed is that if certain materials collected during the course of the enquiry behind the 'back of the assessee are utilised against him he must be given reasonable opportunity to rebut the same and if he had no earlier opportunity, it was open to him to produce the necessary documents and evidence, in rebuttal, before the Tribunal.
11. From the aforesaid discussions, the following conclusions arise:
(i) Excepting the finding of the Assistant Commissioner, there is no material on record to show that the receipts were granted by Mr. R.S. Gill and that he was receiving payments on behalf of Messrs R.S. Gill.
(ii) No investigation has been made as to the constitution of Messrs N.S. Gill. It is well known that even individuals can carry on business under the name and style of a partnership or a company. Nomenclature by itself does not affect juristic status. The assessing authorities should, therefore, have made a probe into the question as to whether Messrs N.S. Gill was itself a partnership and, if so, when it was constituted, and also into the various pieces of evidence on the basis of which such a conclusion is reached. The papers which the Assistant Commissioner examined in the office of the Dandakaranya Project Authorities should have been brought to the notice of the assessee and they should have been made a part of the record. - In the absence of these procedures, we have no alternative but to hold that the principles of natural justice have been violated and such materials should not have been admitted into evidence without the assessee being given a reasonable opportunity to challenge the same.
12. Learned Standing Counsel then raised a contention that at no point of time any objection was raised by the assessee that he had no opportunity of knowing those materials. Originally, two questions had been framed by the petitioner. They were as follows:
(a) Whether in the facts and circumstances of this case, the assessment made on the petitioner-firm Messrs Gill Brothers, is valid and binding on the firm.
(b) Whether in the facts and circumstances the order of the learned A.C.C.T. is vitiated in law inasmuch as information and materials collected by him were used against the petitioner without giving it an opportunity to explain or rebut the same.
At the time of hearing, the Advocate for the petitioner reframed question (a) as follows:
Whether in the facts and circumstances of the case, a partnership between N.S. Gill and R.S. Gill can be held to exist and whether the assessment made against Messrs Gill Brothers as a partnership firm, is valid.
The first question was referred to this court but the second question was not referred as the Tribunal observed that the assessee had ample opportunity to explain the materials gathered against him.
Mr. Roy contends that the first question covers the second also. We accept his contention.
Even in regard to the first question, the Tribunal has committed a mistake. The admitted position is that Messrs Gill Brothers is a partnership consisting of three brothers, N.S. Gill, R.S. Gill and M. S. Gill. So the first part of the question would be:
Whether in the facts and circumstances of the case, a partnership amongst N.S. Gill, R.S. Gill and M. S. Gill can be held to exist.
The second part of the question is:
Whether the assessment made against Messrs Gill Brothers can take within its sweep the question as to whether the various grounds or findings on which the aforesaid conclusion was reached, were in accordance with law.
Judged from this point of view, the admissibility of the evidence collected in the course of the enquiry held behind the back of the assessee would be a question of law coming within the sweep of the second part of the question. In our opinion, the results of the enquiry could not have been utilised against the assessee without his being given a reasonable opportunity of having his say in the matter.
13. Learned Advocates for the parties say that the case should go back to the Tribunal to make a further enquiry into the matter in the light of the points formulated above. Thereafter the Tribunal would dispose of the case after giving both parties an opportunity to place all materials and to lead evidence in support of their respective cases. The assessee will also get full opportunity to give rebutting evidence against any materials used against him.
The references are disposed of accordingly and the case is remanded to the Tribunal. In the circumstances, there will be no order as to costs.
S. Acharya, J.