COMMISSIONER OF INCOME TAX Vs. SHANTILAL MEHTA AND COMPANY
LAWS(MPH)-1980-7-3
HIGH COURT OF MADHYA PRADESH
Decided on July 18,1980

COMMISSIONER OF INCOME-TAX Appellant
VERSUS
SHANTILAL MEHTA AND CO. Respondents





Cited Judgements :-

COMMISSIONER OF INCOME TAX VS. KONDRA DURGAIYA [LAWS(MPH)-1980-11-9] [REFERRED TO]
BADRI VISHAL JARIYA AND CO VS. COMMISSIONER OF INCOME TAX [LAWS(MPH)-1992-10-13] [REFERRED TO]


JUDGEMENT

G.P. Singh, C.J. - (1.)THIS judgment shall also dispose of Misc. Civil Case No. 111 of 1978.
(2.)THESE are references made by the Income-tax Appellate Tribunal and they relate to the same assessee. Misc. Civil Case No. 326 of 1976 relates to the assessment years 1968-69 to 1972-73. The questions of law referred in this reference are as follows ;
"I. Considering rule VI of the M.P. Excise Act, whether the partnership was a legal one enabling the assessee the benefit of registration for assessment year 1968-69 and continuation thereof for the subsequent years ?

2. Whether the notice dated December 20, 1973, under Section 263 issued by the CIT was a valid one ?"

Miscellaneous Civil Case No. 111 of 1978 relates to the assessment year 1973-74 and the question of law referred is as under;

" Whether, on the facts and in the circumstances of the case, the assessee is entitled to continuation of registration ? "

The facts briefly stated are that one Shantilal Mehta, who was taking liquor contracts for some years, was assessed to income-tax in the status of an individual. Contracts for the sale of foreign liquor at two places, i. e., Durg and Bhilai, for the period from 1st August, 1967, to 31st March, 1968, were auctioned on 24th July, 1967, and Shantilal was the highest bidder. On 1st August, 1967, Shantilal informed the Collector of Excise, through the District Excise Officer, that he took the contracts in his name on behalf of a partnership consisting of five members and that the contracts will be executed by the partnership. The licences were issued on 4th August, 1967, in the name of Shantilal. A partnership deed was executed in respect of the said contracts on 1st September, 1967. Shantilal wrote another letter on 4th September, 1967, to the Collector, stating therein that he was enclosing a copy of the partnership deed and that the Collector may do the needful in the matter. These applications remained pending with the Collector and no orders were passed on them. In the meantime, the liquor licences issued in the name of Shantilal were renewed year after year. The partnership applied for registration under Section 185 of the I.T. Act, 1961. Registration was granted for the year 1968-69 by the order of the ITO dated 6th January, 1972. The ITO granted continuation of registration for the subsequent years, i. e., 1969-70 to 1972-73. On 19th November, 1973, Shantilal again wrote to the Collector inviting his attention to his letters dated 1st August, 1967, and 4th September, 1967, and stating that the needful had not been done in the matter and that the same be done at an early date. The matter was examined by the District Excise Officer. On 29th November, 1973, the District Excise Officer reported to the Collector that a licensee cannot enter into a partnership without the written permission of the Collector and that "this breach may now be regularised and the proposed amendment may be ordered to be made in the F.L. licences". The Collector accepted this recommendation on 30th November, 1973. However, on the same date, the District Excise Officer proposed that as there was a continuing breach of General Licence Condition No. VI, a compounding fee of Rs. 200 be recovered in each case. This too was approved by the Collector on the same date. By letter dated 6th December, 1973, the District Excise Officer informed Shantilal to pay the composition fee of Rs. 200 for each of the licences. Shantilal was further informed that the name of M/s. Shantilal Mehta and Co., which is the name of the partnership, had been entered in both the licences. The Commissioner of Income-tax, on 20th December, 1973, issued a notice to the assessee under Section 2.63 of the Act. By an ex parte order dated 31st December !973, the Commissioner set aside the order of the ITO granting registration to the assessee-firm for the year 1968-69 and in consequence thereof also cancelled the continuation of registration for the years 1969-70 to 1972-73. The ground on which the registration was cancelled by the Commissioner was that as the permission of the Collector was not obtained for forming- the partnership, the partnership was illegal. The assessee filed five appeals (I.T.A. Nos. 775 to 779), which were allowed by the Tribunal by its order dated i9th August, 1975. The Tribunal held that in view of the order of the Collector dated 30th November, 1973, the defect of want of permission was completely cured and the partnership was not illegal.

(3.)FOR the assessment year 1973-74 the ITO treated the status of the assessee as an unregistered firm. The AAC, in appeal, by order dated 4th May, 1976, directed the ITO to grant renewal of registration in view of the order of the Tribunal dated 19th August, 1975. The Department went up in appeal to the Tribunal which was dismissed on 19th August, 1977.
On applications made by the Department, the questions of law set out above by us have been referred by the Tribunal.



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