Suhas Chandra Sen, J.
1. As no one was appearing on behalf of the assessee in this case, at our request Mr. R.N. Dutt appeared as amicus curiae. We are grateful for the assistance rendered by Mr. Dutt to the court in this case.
2. This reference application arises out of a consolidated order of the Tribunal disposing of the two appeals filed on behalf of the assessee-firm, M/s. N. Ch, R. Row & Co., against the order passed by the AAC in the appeal filed by the said firm against the assessment for the assessment year 1963-64. One appeal (I.T.A. No. 2092 (Cal.) of 1969-70) was filed by one partner, Sri P. Jagannathan, and the other appeal (I.T.A. No. 7205 (Cal.) of 1969-70), was filed by Sri P. Bhaskara Rao claiming to be a partner of the said firm. It is necessary to mention here how two different appeals came to be filed on behalf of the assessee-firm against the same order of the AAC.
3. The assessee-firm was registered under the I.T. Act and was carrying on business at Calcutta. The partners of the firm, according to the partnership deed, were N. Ch. R. Rao and P. Jagannathan. The return of the income of the firm for the assessment year 1963-64 was filed on 18th December, 1963, by N. Ch. R. Rao as a partner. In the return N. Ch. R. Rao and P. Jagannathan were shown as the two partners of the assessee-firm. The application for registration was also signed by these two persons. The assessment for the assessment year 1963-64 was completed by the ITO on a total income of Rs. 1,03,106. By an order dated 22nd February, 1968, under Section 158 of the I. T. Act, the ITO allocated the assessed income in equal shares between the two partners, N.Ch.R. Rao and P. Jagannathan. The total income on which the assessee-firm was assessed to tax was inclusive of Rs. 50,000 added as income from undisclosed source on the basis of peak credit and Rs. 26,829 being the interest on the hundi loans, deduction on which was claimed by the assessee-firm but disallowed by the ITO. It was on the basis of a disclosure petition filed by the partners of the assessee-firm before the Commissioner of Income-tax, West Bengal, on 15th November, 1965, that the aforementioned sum of Rs. 50,000 was treated by the ITO as assessee's income from undisclosed source and added in the assessment under the head 'Other sources'.
4. The additions in respect of hundi loans and interest made by the ITO in the assessment order was challenged in appeal filed by the assessee. The AAC, however, sustained the addition made by the ITO.
5. Being aggrieved by the order of the AAC, P. Jagannathan as partner of the assessee-firm, filed an appeal before the Tribunal (I.T.A. No. 2092 (Cal) of 1969-70). During the pendency of the appeal both the partners, N. Ch. R. Rao and P. Jagannathan, died. Their legal representatives did not respond to the notices issued to them and P. Bhaskara Rao claiming to be a partner of the assessee-firm, filed an application seeking to intervene in the appeal (I.T.A. No. 2092 (Cal) of 1969-70), filed by P. Jagannathan on behalf of the assessee-firm. He also filed a separateappeal (I.T.A. No. 7205 (Cal)/(969-70) as a partner of the assessee-firm against the order of the AAC. The reasons given by Sri Bhaskara Rao in support of his prayer to be brought on record as a party to the proceeding were that P. Bhaskara Rao was the real partner and N. Ch. R. Rao was merely a benamidar of P. Bhaskara Rao. It was argued that the business in Calcutta, was being conducted by Sri P. Jagannathan and Sri N. Ch. R. Rao under the name and style of N. Ch. Row & Co. In the year 1955, those two persons approached Sri Bhaskara Rao for finance and for bank guarantee. Accordingly, Sri P. Bhaskara Rao stood guarantee to the banks and also contributed a capital of Rs. 45,000 from out of the amount realised by him by the sale of the closing stocks of his business in Vizianagaram. Sri Bhaskara Rao was given a share of 85% in the firm in consideration of the capital contributed by him and in consideration of his standing guarantee to the banks. It was, however, understood among the partners that the name of P. Bhaskara Rao should not appear on record as a partner. In the partnership deed Sri N. Ch. R. Rao and Sri P. Jagannathan only were shown as the partners, each having 50% share. But Sri N. Ch. R. Rao was merely the benamidar of Sri P. Bhaskara Rao and the entire 50% share of N. Ch. R. Rao belonged to P. Bhaskara Rao. Out of the remaining 50% share only 15% belonged to P. Jagannathan and the remaining 35% belonged to P. Bhaskara Rao. The former was also a benamidar of P. Bhaskara Rao to the extent of 35%. Later, there was a change in the profit sharing ratio. Between April 1, 1961, and March 31, 1963, the share of P. Bhaskara Rao was 75% and between April 1, 1964, and March 31, 1965, he held 9/16ths share in the above firm. P. Bhaskara Rao had no share in the assessee's firm with effect from April 1, 1965. The amount due to him as on March 31, 1965, from the firm was worked out at Rs. 2,40,000. This amount due to Bhaskara Rao was arrived at without treating the hundi loans recorded in the accounts as profits of the firm. All these facts were set out in the agreement executed by N. Ch. R. Rao, Sri P. Jagannathan and Sri P. Bhaskara Rao jointly on 29th May, 1965. P. Jagannathan and N. Ch. R. Rao thereafter filed a disclosure petition under Section 271(4A) before the Commissioner, West Bengal on 19th November, 1965, admitting that certain hundi credits appearing in the firm's accounts represented the firm's undisclosed income and offering to be assessed on peak credit basis with some spread over during the assessment years 1961-62 to 1964-65. This petition was filed by those two persons behind the back of P. Bhaskara Rao. The disclosure petition was not bona fide. Sri N. Ch. R. Rao and Sri P. Jagannathan filed the disclosure petition owing to the strained relations between themselves and Sri P. Bhaskara Rao. P. Bhaskara Rao himself filed a disclosure petition on 19th January,1966, before the Commissioner, Hyderabad, disclosing his beneficial interest in the assessee-firm. He was directed by the Commissioner, Hyderabad, to file the necessary returns before the ITO, Vizianagaram. While allocating the assessed income of the firm for the assessment year 1963-64 between N. Ch. R. Rao and P. Jagannathan half and half, the ITO, 'H' Ward, Hundi Circle, Calcutta, forwarded a copy of his allocation order under Section 158 to the ITO, Vizianagaram. Accordingly, in the individual assessment of P. Bhaskara Rao for the assessment year 1963-64, the ITO, Vizianagaram, included Rs. 1,28,043 being 75% of the total income cm which the assessee-firm was assessed to tax by the ITO at Calcutta for the same assessment year. The I.T. Dept. thus recognised P. Bhaskara Rao as a partner of the assessee-firm having a share of 75% in the profits of that firm.
6. The Tribunal held that Sri P. Bhaskara Rao could be permitted to come on record and prosecute the appeals at least as a person affected by the assessment under appeal, though not qua partner. The right to appeal to the Tribunal from an order passed by the AAC was not confined technically to the party who was a party to the appeal but was a much wider right which could be exercised by any person who became liable to pay tax by any order against which the appeal was preferred. In the present case, the order under Section 158 allocating the income of the assessee-firm as between the two partners was communicated by the ITO assessing the firm to the ITO, Vizianagaram, for taking necessary action in the assessment of Sri P. Bhaskara Rao, and the latter ITO included 75% of the firm's income in the assessment of Sri P. Bhaskara Rao. As Sri P. Bhaskara Rao thus became liable to pay the tax assessed on the assessee-firm, he had locus standi to intervene in the appeal filed on behalf of the firm and prosecute it, especially when the two partners of the firm died and their legal representatives were not showing any interest in prosecuting these Appeals.
7. The Tribunal also held that the disclosure petition should have beenaccepted as a whole. The Department made a mistake of law in accepting a part of the disclosure petition. In that view of the matter the Tribunal held on the basis of the disclosure petition that the disclosed incomeshould be spread over a number of years as claimed by the assessee in hiscase.
8. Being aggrieved by the aforesaid order of the Tribunal, the Commissioner applied under Section 256(1) of the I.T. Act, for referring certain questions of law arising out of the order of the Tribunal to the High Court. The Tribunal has referred the following questions of law :
'1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that P. Bhaskara Rao had the locus standi to intervene in the appeal filed on behalf of the assessee-firm and prosecute it ?
2, Whether, on the facts and in the circumstances of the case, the Tribunal misdirected itself in law in holding that the addition of Rs. 55,000 as income from undisclosed sources based on the admission made in the petition under Section 271(4A) of the Income-tax Act, 1961, was not made on a proper basis and in setting aside accordingly the orders of the Income-tax Officer and the Appellate Assistant Commissioner with direction for fresh determination on the point?'
9. Counsel on behalf of the Revenue has argued that P. Bhaskara Rao was not a partner of the partnership firm which was the assessee in this case. The partnership firm was registered and the profit of the firm was allocated between the partners according to their shares as shown in the deed of partnership along with the application for registration of the firm. It was contended that P. Bhaskara Rao not being a partner had no right to prefer an appeal and the Tribunal was in error in allowing P. Bhaskara Rao to intervene in this matter.
10. We are unable to accept this contention on behalf of the Revenue. The Tribunal's finding is that the order under Section 158 allocating the income of the assessee-firm as between two partners was communicated by the ITO assessing the firm to the ITO assessing P. Bhaskara Rao at Vizianagaram. The ITO at Vizianagaram included 75% of the firm's income in the assessment of P. Bhaskara Rao and, therefore, P. Bhaskara Rao became liable to pay the tax on the assessed income of the partnership firm. Section 246 of the I.T. Act provides, inter alia, that 'any assessee aggrieved by any of the following orders of an ITO may appeal to the AAC against such order'. Section 253, which provides for appeal to the Appellate Tribunal, is also similarly worded. The only question, therefore, in this case is whether P. Bhaskara Rao can be described as an assessee aggrieved by the order of the AAC in this case. An 'assessee' has been defined in Section 2(7) to mean a person by whom any tax or any other sum of money is payable under the Act, and includes:
'(a) every person in respect of whom any proceeding under this Act has been taken for the assessment of his income or of the income of any other person in respect of which he is assessable, or of the loss sustained by him or by such other person, or of the amount of refund due to him or to such other person;
(b) every person who is deemed to be an assessee under any provision of this Act;
(c) every person who is deemed to be an assessee in default under any provision of this Act.'
11. Now in this case the finding of the Tribunal is that 75% of the firm's income was being allocated to P. Bhaskara Rao and was being included in the income of P. Bhaskara Rao by the ITO at Vizianagaram. on allocation of the firm's income. Therefore, P. Bhaskara Rao was directly interested in the assessment of the firm and came within the description of 'an assessee aggrieved by the order of the AAC'. In that view of the matter the Tribunal was right in holding that P. Bhaskara Rao could be permitted to come on record as a person affected by the assessment under appeal and that as P. Bhaskara Rao became liable to pay tax assessed on the assessee-firm, he had locus standi to intervene in the appeal filed on behalf of the firm, especially when the two persons shown as partners of the firm had died during the pendency of the appeal and the legal representatives were not interested in prosecuting the appeals.
12. In the case of Adi Pherozshah Gandhi v. H.M. Seervai : 1SCR863 , the meaning of the phrase 'person aggrieved' came up for consideration before the Supreme Court. M. Hidayatullah C.J. pointed out (p. 387):
'The expression a 'person aggrieved' is not new, nor has it occurred for the first time in the Advocates' Act. In fact it occurs in several Indian Acts and in British statutes for more than a hundred years. In the latter a right of appeal to a 'person aggrieved' is conferred in diverse contexts. It occurs in the Ale House Act, the Bankruptcy Acts, Copyright Act, Highway Act, Licensing Acts, Milk and Dairies (Amendment) Act, Rating and Valuation Act, Summary Jurisdiction Act, Union Committee Act, Local Acts, in certiorari proceedings and the Defence of Realm Regulations to mention only a few. The list of Indian Acts is equally long.'
13. After a review of a long line of cases it was observed (p. 389):
'From these cases it is apparent that any person who feels disappointed with the result of the case is not a 'person aggrieved'. He must be disappointed of a benefit which he would have received if the order had gone the other way. The order must cause him a legal grievance by wrongfully depriving him of something.'
14. Now, in this case, the finding of the Tribunal is that as a result of the assessment of the firm, 75% of its income was included in the income of P. Bhaskara Rao. Therefore, as a result of the assessment order of the firm, P. Bhaskara Rao had to pay tax. It must be held that the assessment order caused him a legal grievance by imposing a tax which according to him was not lawfully payable.
15. A Division Bench of the Bombay High Court in the case of Kikabhai Abdulali v. Income-tax Appellate Tribunal : 32ITR762(Bom) , held that the right to appeal to the Appellate Tribunal from an order passed by the AAC was not confined technically to the party who was a party to the appeal but was a much wider right which might be exercised by any person who was liable to pay tax by any order against which the appeal was preferred.
16. Therefore, in the instant case, in our opinion, Mr. P. Bhaskara Rao had locus standi to intervene in the appeal filed and to prosecute it before the Tribunal.
17. In the second question the addition of Rs. 55,000 as income from undisclosed sources based on the admission made in the petition under Section 271(4A) of the I.T. Act has been challenged. It has to be borne in mind that the ITO in his assessment order for the assessment year 1963-64 has included a sum of Rs. 50,000 under the head 'Income from other sources' on the basis of the peak amount of investments in the year under question as compared to the previous year. The assessee in the disclosure petition stated.
'Hence, during the asstt. years 1963-64 and 1964-65, the disclosed amounts are Rs. 55,000 and Rs. 90,000 respectively and total of these two years are Rs. 1,45,000 which also we pray that you will kindly allow us a spreadover of the said sum during the assessment years 1961-62 to 1964-65, for the reasons submitted above.'
18. The Tribunal held :
'If the Department wanted to make the addition on the basis of the disclosure, then the disclosure should be taken as a whole and the addition made as desired by the assessee. Otherwise, the Department should have determined the quantum of income from undisclosed sources on the basis of material gathered in an independent enquiry. But it was not open to the Department to take one part of the admission contained in the disclosure petition and act upon it, ignoring the rest.'
19. The Tribunal, therefore, directed the ITO for a fresh determination of the issue in the light of the observations made by the Tribunal.
20. The Department's case before us is that the credits in question appeared in the books of account of the assessee. The Department was entitled to tax the entire amount. The Department's jurisdiction to tax was not limited to the difference in the peak credits year after year. The Tribunal was in error in sending the matter to the ITO for fresh determination of that issue. In support of this proposition reliance was placed on the case of CIT v. Rajaram Pannalal & Brothers : 127ITR679(Cal) . That case was a case of penalty. In that case it was held thatthough in assessment proceedings the Revenue was justified in adding the amounts shown as cash credits as the income of the relevant years in view of Section 68, because the unaccounted money was found in the accounts of the assessee for those years, that addition would not lead to the conclusion that penalty proceedings were proper. The question whether in a case, where a disclosure petition has been filed, the Department could rely on a portion of the disclosure petition and reject the rest was not gone into or decided in the said case. In the case of CIT v. Manick Sons : 74ITR1(SC) , the Supreme Court was considering a case where the Tribunal had reduced additions on account of unexplained cash credits by Rs. 21,000 as intangible additions, without giving any reasons therefor for the assessment years 1952-53 and 1953-54. The Supreme Court pointed out that the procedure adopted by the Tribunal was not warranted by the I.T. Act. The question, however, in this case is different. The question that has been raised is whether a part of the disclosure petition under Section 271(4A) can be accepted and acted upon and a part rejected by the I.T. authority. In the case of Tara Devi Goenka v. CIT : 122ITR14(Cal) , it was observed (p. 20):
'Having regard to the facts and circumstances of the case, we are of the opinion that there was no justification for the Tribunal to accept the explanation offered by the assessee in part.'
21. In the case of State of Gujarat v. Acharya Shri Devendraprasadji Pande : 1971CriLJ760 , it was observed at p. 868 :
'We are asked to infer the guilt of the accused No. 1 on the basis of the statement made by him under Section 342, Cr.P.C. We cannot split that statement into various parts and accept a portion and reject the rest. We have to either accept that statement as a whole or not rely on it at all. In his statement the accused pleaded that he was not guilty and if his statement is taken as a whole, it does not show that he was guilty of any offence.'
22. In the case before us the Tribunal thought fit on the basis of the disclosure petition filed under Section 271(4A) to spread over the income over a number of years. Whether income accrues or arises in a particular year or over a certain number of years is basically a question of fact. In the facts of the case before us it cannot be said that the Tribunal has committed any error of law in coming to the conclusion that it has done. The view of the Tribunal that in the facts of the case before it the disclosure petition should be taken as a whole cannot be said to be wrong in law. In our opinion the Tribunal's order was made on a proper basis and does not call for interference in reference.
23. In that view of the matter, the first question is answered in the affirmative and in favour of the assessee, the second question is answered in the negative and in favour of the assessee. Each party to bear and pay its own costs.
Sabyasachi Mukharji, J.
24. I agree.