Dipak Kumar Sen, J.
1. The material facts on record as found and admitted are, inter alia, that Sethi Pen Stores, a partnership firm, the assessee, proposed to enter into a settlement with the Income-tax Department and applied before the Commissioner of Income-tax, West Bengal-II, on January 25, 1968, offering for taxation a sum of Rs. 79,500 whichaccording to them represented genuine hundi loans but could not b6supported by evidence; It was proposed to spread over the said amountfor the accounting years 1962, 1963, 1964 and 1965.
2. An order was passed on the said application by the Commissioner of Income-tax on December 29, 1970, as follows:
'1. The peak amount of the alleged hundi loans amounting to Rs. 1,15,000 shall be assessable in the following assessment years :
Assessment yearsAmount assessable
Rs.1960-615,0001961-6228,5001962-6317,5001964-6527,5001965-6645,000
Interest debited in the books of accounts on these loans shall be disallowed in the respective assessment years.
Penalty equivalent to 20% of the tax sought to be evaded shall be imposed in respect of the amounts mentioned above as well as interest to be disallowed in the respective assessment years.
The tax and the penalty payable in respect of the assessment year 1960-61 shall be paid by the assessee by way of additional penalty for the assessment year 1961-62, as the assessment for the year 1960-61 is not open.......
The aforesaid income now proposed to be brought to tax shall betreated as earned income.
The assessee shall be allowed to introduce in its books of accounts 50% of the disclosed amount (50% of Rs. 1,15,000 = Rs. 57,500) or an amount equivalent to the tax and penalty liabilities arising as a result of this settlement, whichever is higher.'
4. Pursuant to the aforesaid, further assessments were made on the assessee for the said assessment years 1961-62 to 1965-66 and tax and penalty were levied. In the assessment year 1972-73, the accounting year ending on December 31, 1971, the assessee in terms of the settlement introduced in its accounts a sum of Rs. 1,13,471, half of the said amount, namely, Rs. 56,735.50, being credited to each of the partners.
5. The Income-tax Officer construed the order of settlement and took the view that the assessee was entitled to introduce either a sum of Rs. 57,500 or the tax and penalty liabilities arising as a result of the settlement. He computed such liability to be only Rs. 28,488 being the difference between the original assessments of the assessee and the final assessments for the said assessment years. The Income-tax Officer did not accept that the tax and penalty liabilities of the partners should also be permitted to be introduced in the books of the assessee but held that even if such tax and penalty liabilities of the partners were allowed to be introduced, the same would come to only of Rs. 28,474 which, added to the tax and penalty liabilities of the assessee, viz., the above amount of Rs. 28,488, would come to only Rs. 56,962, which was less than Rs. 57,000.
6. The Income-tax Officer accordingly treated Rs. 55,971, being the difference between Rs. 1,13,471 less Rs. 57,500, which was introduced into the account, as income from other sources and taxed the same.
7. Being aggrieved, the assessee preferred an appeal before the Appellate Assistant Commissioner. After considering the order of settlement, the Appellate Assistant Commissioner came to the conclusion that under the settlement, the assessee was to pay tax out of the disclosed income which had remained untaxed and introduce the balance of such income limited to Rs. 57,500 or the sum total of tax and penalties, whichever was higher. He found that what the assessee had introduced was only Rs. 56,509 being the difference between Rs. 1,13,471 minus Rs. 56,962 being the tax and penalties. The Appellate Assistant Commissioner allowed the appeal and directed deletion of the addition made by the Income-tax Officer.
8. From the order of the Appellate Assistant Commissioner, the Revenue went up in further appeal before the Income-tax Appellate Tribunal. The Tribunal found that the order of settlement and in particular Clause 7 thereof were clear and unambiguous and held that on a plain reading of the said clause, it would appear that the assessee was permitted to introduce either Rs. 57,500 or the aggregate of the tax and penalties arising out of the settlement, whichever was higher. The Tribunal accordingly found that the assessee had introduced more than what was permitted under the said clause and that the decision of the Appellate Assistant Commissioner amounted to a re-writing of the agreement between the parties. The Tribunal allowed the appeal of the Revenue, set aside the order of the Appellate Assistant Commissioner and restored the order of the Income-tax Officer.
9. On an application of the assessee under Section 256(2) of the Income-tax Act, 1961, the Tribunal was directed by this court to refer the following question as a question of law arising out of the order of the Tribunal for the opinion of this court:
'Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in restoring the addition of Rs. 55,971 under the head 'Income from other sources' as made by the Income-tax Officer?'
At the hearing, the learned advocate for the assessee submitted that on a plain reading of the terms of settlement, it was open to the assessee to introduce the entire tax and penalty liabilities of the assessee-firm as also of its partners for the said assessment years in its books and the assessee had rightly introduced the said amount of Rs. 1,13,471 which was the aggregate of the tax and penalty liabilities of the firm and its partners for the said assessment years. In support of his contentions, he cited the case of S. Sankappa v. ITO : [1968]68ITR760(SC) , for the proposition laid down by the Supreme Court that proceedings for the assessment of a firm did not come to an end merely on the computation of the income of the firm and determination of the tax payable by the firm on such income. Apportionment of the income of the firm, if it was registered, was also required to be made between its partners and notice of apportionment had to be given to the firm. The partners had a right to appeal in respect of such apportionment at that stage.
10. The learned advocate also cited V. Jaganmohan Rao v. CIT/CEPT : [1970]75ITR373(SC) , for the proposition laid down by the Supreme Court that once assessment was reopened under Section 34 of the Indian Income-tax Act, 1922, the previous assessment would stand set aside and the entire assessment proceedings started afresh. The Income-tax Officer not only had the jurisdiction but was enjoined to levy tax on the entire income that had escaped assessment in the relevant year.
11. The learned advocate also cited Juggilal Kamlapat Bankers v. WTO : [1984]145ITR485(SC) , for the further proposition laid down by the Supreme Court that the interest of a partner in the firm belonged to the partner and was exigible to wealth-tax.
12. The learned advocate for the Revenue contended to the contrary and submitted that the Tribunal had correctly interpreted the terms of settlement between the parties.
13. On a careful reading of Clause 7 of the terms, it appears to us that what the assessee was permitted to introduce in its accounts was either 50% of the disclosed amount or an amount equivalent to the tax and penalty liabilities arising as a result of the settlement, whichever was higher. If we assume in favour of the assessee that such tax and penalty liabilities included the tax and penalty liabilities of the partners, even then the assessee would have to establish that the amount introduced, namely, Rs. 1,13,471, was equivalent to the tax and penalty liabilities arising as a result of the settlement.
14. From the order of the Income-tax Officer where particulars have been given, it appears that the extra tax and penalty liabilities which arose on the basis of the disclosure by the assessee and the settlementwas only Rs. 56,962. The balance of the tax and penalty liabilities,if any, had accrued to the assessee in the said assessment years in thenormal course and de hors the settlement.
15. Therefore, we are unable to read the said Clause 7 in the settlement in the manner as suggested on behalf of the assessee. The clause did not permit the assessee to introduce in its accounts, the entire tax and penalty liabilities for the years involved arising both under the original assessments and the reassessments following the settlement.
16. For the above reasons, we answer the question referred in the affirmative and in favour of the Revenue. There will be no order as to costs.
17. The learned advocate for the assessee orally prayed for a certificate from us that this was a case fit for appeal to the Supreme Court. According to us, the matter involves only an interpretation of the terms of settlement and as no substantial question of law arises from our judgment, we are unable to entertain this prayer.
Shyamal Kumar Sen, J.
18. I agree.