Dipak Kumar Sen, J. - (1.) M/s. Dhaniram Gupta & Co., the assessee, was incorporated as a partnership by an indenture dated November 20, 1956. The assessee was granted registration under the Income-tax Act, 1961, for the assessment years 1961-62, 1962-63 and 1963-64. On January 12, 1970, the Income-tax Officer issued three notices to the assessee under Section 186(1) of the Act stating that, he was of the opinion that during the said three assessment years, no genuine partnership firm as registered was in existence and called upon the assessee to make its representations in respect thereof on January 20, 1970.
(2.) At the request of the assessee, the proceedings were adjourned till February 11, 1970, on which date the assessee asked the Income-tax Officer in writing for information about the material on which he had formed an opinion stating further that on receipt of such information further explanation would be submitted. It was contended that the assessee was a genuine firm in existence during the relevant years and registration has been duly granted to the assessee. There was no reason for the Income-tax Officer to change his opinion.
(3.) The Income-tax Officer without any further reference to the assessee proceeded on the basis of the material on record and noted as follows : (a) On January 20, 1956, when the assessee was incorporated with two partners, namely, K.T. Tan and Dhaniram Gupta, another deed was executed between Dhaniram Gupta, K.T. Tan and M/s. Kian Gwan Company Pvt. Ltd. (hereinafter referred to " as the company ") recording, inter alia, that K.T. Tan would be the nominee of the company in the partnership ; (b) the deed of partnership was registered under the Partnership Act, but the second deed was not so registered; (c) the assessee from time to time permitted the brother and the father of Dhaniram Gupta, a partner, to operate the bank account of the assessee contrary to trade practice ; (d) K.T. Tan, one of the partners, was out of India for two years; (e) Dhaniram Gupta held 539 shares out of a total 573 shares of the company; (f) the auditor of the company had reported that as the audited balance-sheet of the assessee was not available, no entries could be made in the investment account of the company.;