1. V. V. KAMAT, J.---These six references are brought before us by the Revenue against the six partners-assessee related to the firm, National Cashew Co., Trivandrum. These six partners- assessee are also concerned with the purchase of a grape garden near Hyderabad by the sale- deed, dated November 16, 1966, for a total consideration of Rs.2,95,000 allegedly forming a partnership, the sale-deed, in fact, mentioning them individually as vendees. Out of the six partners, two were adults and remaining four were minors represented by their guardian father.
2. The consideration amount of Rs.2,95,000 was drained out through the firm, National Cashew Corporation, Trivandrum. In fact, this Trivandrum firm had an account styled as "Hyderabad Account" showing debits of the payments and in spite thereof, correspondingly the .Grape garden was not shown as an asset of the firm. With regard to the assessment year 1969-70, the balance- sheet as on March 31, 1969, showed only Rs.11.71 as due to the Trivandrum firm. This was as against the opening balance of Rs.3,45,063. This revealed that the bulk of payments were made in the accounting year in question. Correspondingly, in the books of the grape garden accounts, each of the partners---these six assessee---were credited with the profits of grape garden dividend equally between them.
3. Initially, the original assessm ent in respect of these six partners --assessee was made without noticing the income from the grape garden. However, the Income-tax Officer, while examining the assessm ent proceedings of one of them ---Shri Mohandas Rajan---found that the interest of these partners-assessee became apparent. This Mohandas Rajan is the assessee as one of the six partners.
4. As a result of this, the assessm ents of all were reopened and each of them came to be additionally assessed at an amount of Rs.57,790. This amount came to be reduced to Rs. 45,350 before the Appellate Authority. Needless to state that simultaneous penalty proceedings under section 271(1)
(c) of the Income Tax Act, 1961, were initiated resulting into the imposition of penalty amounting to Rs.50,000 each by the Inspecting. The Income-tax Appellate Tribunal as an appellate authority, cancelled the imposition of penalty. The contention of the assessee was accepted. The contention was that the concealment was by the firm and not by the partners. The rival contention of the Revenue was that they were not partners, but were co-owners. The authorities were kept busy in fording out certain distinction between co-ownership and partnership, proceeding to apply the principles in regard thereto. The Tribunal held that the assessee were partners and not co-owners.
5. This question was brought before this Court resulting in an order of remand to the Tribunal for considering the question in the right perspective.
6. The Tribunal reaching the finding that the income from the grape garden represented the assessee' income actually and, in fact, the assessee had given the colour of agricultural income to their otherwise taxable income. In the process of reasoning, the Tribunal reached the conclusion that, the six assessee were co-owners. It was contended by the Revenue that the question, whether the assessee are partners or co-owners was really unnecessary.
7. It is in these circumstances the Tribunal has referred as many as five questions expecting our answer as sought to be urged by the Revenue. We need not reproduce them because on taking into consideration the material on record, we feel that the real question is the justification for cancellation of the orders of penalty on the basis of the material on record. We propose to combine the purport of all the five questions to effectively deal with the situation. We find that the real question to be answered is unnecessarily and improperly split into as many as five questions.
8. We frame the following question as a result thereof: "Whether, on the basis of the material on record, the Tribunal would be justified in cancelling the orders of penalty under section 271(1)(c) of the Income Tax Act, 1961, on the ground that different authorities had taken different figures, had not rejected the explanations offered by the assessee making it a situation of probability that the assessee might have earned the income estimated by their?"
9. The Tribunal has also referred a question as a conditional one, depending on the answer to question No. 5 originally framed. For answering the said question, only to that extent, for the purpose of this judgment, we reproduce the said question (question No. 5) out of which flows the question framed as urged by the assessee. They are as follows: "5. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in allowing the assessee to raise a fresh ground about the legality of the penalty order in an order passed under section 260(1) of the Income Tax Act, 1961?
10. We have to answer these questions.
11. Necessary papers of the said rectification application are placed before us. We find that the judgment in R. Leela Vasanth Nair's case (1987) 167ITR 837 (Ker.), is dated April 6, 1987, and the rectification application appears to have been rejected thereafter by the order, dated September 3, 1987. Going through the order, it appears to. Us that the rectification application is rejected with an observation that the error is not apparent and there was some scope for a different impression regarding the High Court's order. All that we can say in the matter of this state of affairs is, that this is unfortunate.
12. The Tribunal at last should have taken the trouble of going through the decision of this Court, which was the basis for rectification application.
13. Be that as it may, this Court has taken the view on the similar situation relating to the acts of the assessee with regard to inflating the accounts of the grape garden, so that no tax should be leviable on account of the said income being agricultural income. This .Is the common feature and the proceedings of the references under our consideration get completely covered as a result of the said decision of this Court.
14. For all the above reasons, the refrained question is answered in the negative, in favour of the Revenue and against the assessee. With regard to the question framed at the instance of the assessee reproduced herein--before, the decision of the apex Court (CIT v. Smt. R, Sharadamma (1996) 219 ITR 671), is the complete answer to the position that the Inspecting Assistant Commissioner has all jurisdiction to deal with the proceedings under section 271(l)(c) of the .Income Tax Act, 1961.. This question is, therefore, answered in. The affirmative, in favour of the Revenue and against the assessee.
15. Lastly, we find I. T. Rs. Nos. l and 6 of 1993 that the assessee have expired. This Court (of which one of us---myself---dictated the judgment) in I.T.R. No.13 of 1991 (CWT v. S. V. Doshi (1998)229 ITR 671), decided on August 23, 1996, proceeded in a situation where the assessee had expired and efforts in the direction of bringing the legal heirs were not successful since the function of the reference Court is to answer the questions referred, taking the assistance of counsel appearing in the matter.
16. Even earlier, in a similar situation, in I.T.R. Nos.35 and 36. Of 1990, C.IT v. K. P. Varoo (1998) 229 iTR b67 (Ker.), decided on July 5, 1996, the same course was adopted and we continue to adopt the same in regard to these two references. Consequently, we direct the Income-tax Appellate Tribunal to adopt the necessary proceedings to bring the heirs and legal representatives on record and to pass consequential orders to enable the Revenue to proceed with the recovery as a consequence thereof.
17. A copy of this judgment, wider the seal of this Court and the signature of the Registrar, shall be forwarded to the Income-taxAppellate Tribunal Cochin Bench, as required by law.