M.N.CHANDURKAR, J. - (1.) THE assessee, M/s Brijlal Madanlal, is a firm which originally consisted of three partners, namely, Mandanlal Paliram, Kishorilal Fatehchand and Anardevi, widow of Brijlal Paliram. With effect from 1st November, 1959, Anardevi retired from the firm and Madanlal and Kishorilal continued to be the continuing partners of the firm. By an instrument of partnership dt. 6th April, 1960, the continuing partners are said to have admitted one Mrs. Chandrakaladevi Deviprasad, wife of Deviprasad Brijlal, in the partnership w.e.f. 1st November, 1959. An application for registration of the firm was made on 1st April, 1960, and a copy of the instrument of partnership was filed.
(2.) WITH a view to verify the genuineness of the new firm, the ITO wanted to examine the new partner, Chandrakaladevi, and he, therefore, issued a summons under S. 131 of the IT Act, 1961. She did not appear before the ITO on 2nd March, 1966, on which day she was summoned to appear. A letter, however, came to be written by someone on her behalf that she had gone to her native place in Rajasthan. An intimation was, therefore, sent to the firm about the absence of Chandrakaladevi and the two other partners were asked to produce Chandrakaladevi on 14th March, 1966. On that day also Chandrakaladevi did not appear and she was again stated to be out of Bombay at Khamgaon. The assessee's representative made a statement in writing before the ITO that Chandrakaladevi was admitted to the firm only because of her bringing in a capital of Rs. 50,000 and she had not been taking any active interest in the administration and management. She was stated to be only a financing partner. The ITO found that there was no reference to the contribution of Rs. 50,000 by Chandrakaladevi in the instrument of partnership. He took the view that merely by giving or advancing an amount to the firm did not make that party a partner in the firm unless it is specifically so stated in the terms and conditions of the deed. The ITO, therefore, took the view that it was not proved that Chandrakaladevi was a partner and that the firm had really only two partners, which position, however, was not reflected in the instrument of partnership. He, therefore, declined to grant registration. When the matter was taken in appeal to the AAC, he took the view that the ITO had summoned Chandrakaladevi because he wanted to collect evidence and wanted to find out whether the recitals in the partnership deed were correct. Evidence of Chandrakaladevi not having been made available, the AAC held that in respect of the asst. year 1961 62, the firm had failed to prove the genuineness of the constitution of the partnership in spite of reasonable opportunity being given to it. He, therefore, confirmed the order of the ITO. The firm took the matter in appeal to the Tribunal. The Tribunal took the view that whether Chandrakaladevi was a partner or not could only be found by subjecting her to cross examination and her refusal to appear before the IT authorities was sufficient to draw an adverse inference against the assessee in this respect. The Tribunal has observed in its order that the representative of the assessee was even unable to file a copy of the partnership deed before the Tribunal. Holding that the ITO sought to find out the truth about the partnership deed, but Chandrakaladevi had kept herself away from the ITO, the Tribunal reached the conclusion that Chandrakaladevi was a mere dummy. The appeal filed by the assessee, therefore, came to be dismissed.
(3.) AT the instance of the assessee, the question which has now been referred to us is : "Whether, on the facts and in the circumstances of the case, the claim for registration was rightly refused ?" Mr. Mehta, appearing on behalf of the assessee, has challenged the view of the IT authorities and the Tribunal that the genuineness of the partnership was not proved and it is argued that all the authorities have proceeded merely on a suspicion that Chandrakaladevi was not in fact a partner. It is difficult to see how on the facts found in this case it is possible for the learned counsel for the assessee to argue that registration of the firm has been refused merely on a suspicion. The application for registration was made under S. 26A of the Indian IT Act, 1922. The conditions which are essential for registration of the firm under S. 26A are well settled. They are : (1) On behalf of the firm an application should be made to the ITO by such persons and at such times and containing such particulars and being in such form and verified in such manner as are prescribed by rr. 2 to 6B. (2) The firm should be constituted under an instrument of partnership. (3) The instrument must specify the individual shares of the partners. (4) The partnership must be valid and genuine and must actually exist in terms specified in the instrument. ;