GENTLE, J. - (1.) : This is a reference by the Tribunal at the instance of the CIT, Calcutta. The facts concerned can shortly be stated as follows :For many years a business known as Gopal Pure Oil Mills was owned by a HUF the members of which were Gostha Behari Sadhukhan and his three nephews, Sarat Chandra Sadhukhan, Rabindra Nath Sadhukhan and Panchkari Sadhukhan. Up to and including the year of assessment 1941-42, this business was assessed as an HUF. On the 29th Oct., 1942, an application was made to the ITO under s. 26-A(1) of the IT Act to register a deed of partnership. The ITO refused to register it. The deed of partnerships is dt. 15th June, 1942, made between Gostha Behari of the first part, Sarat purporting and stating as representative of himself and his brothers Rabindra and Panchkari of the second part, and three other persons, Amulya Charan Samanta, Jugal Krishna Das and Kartick Chandra Pramanick, who were, and had been for many years employees of the business. The deed recites that the parties, which clearly means Gostha Behari and Sarat, had been carrying on the business jointly till the end of the year 1345 B. S. corresponding to the 13th April, 1939, and for better management of the business the parties agreed to carry on the business as partners. The shares in the partnership are divided as to Gostha 5 as. 6 ps., Sarat 5 as 6 ps., Amulya 2 as. 9 ps., Jugal 1 a. 3 ps., and Kartick 1. The ITO was not satisfied that previous to the execution of the partnership deed the business had been the subject of partition amongst the members of the family above mentioned and he refused to register the deed of partition and assessed the profits of the business on the basis of an HUF.
(2.) AN appeal by the assessee was dismissed by the AAC on the 23rd June, 1943, but a further appeal was allowed by the Appellate Tribunal by their order dated the 11th Dec., 1943. The CIT being dissatisfied with this order obtained a reference under s. 66 of the Act from the Tribunal for the following question to be answered by this Court : "Whether the relationship between the five persons as evidenced by the deed dt. 15th June, 1942, is one of partnership under the Partnership Act, 1932," or, in the alternative, "Is there any legal impediments to the recognition of the partnership." It is common ground that, before the deed of partnership could have been made between Gostha and Sarat and the other three parties in respect of the business, that property of the joint Hindu family would require previously to have been partitioned. Sec. 25-A (1) of the Act provides : "Where, at the time of making an assessment under s. 23, it is claimed by or on behalf of any member of a Hindu family hitherto assessed as undivided that a partition has taken place among the members of such family, the ITO shall make such inquiry thereinto as he may think fit, and, if he is satisfied that the joint family property has been partitioned among the various members or groups of members in definite portions he shall record an order to that effect : Provided that no such order shall be recorded until notices of the inquiry have been served on all the members of the family." Sub-s. (3) ibid provides : "Where such an order has not been passed in respect of a Hindu family hitherto assessed as undivided, such family shall be deemed, for the purposes of this Act, to continue to be an HUF." Learned Counsel on behalf of the assessee contended that the partnership deed shows there had been a partition of the business and it must and should have been taken by the ITO, as he says, at its face value, and that the statements in it should have been accepted unless the ITO, could have found anything on materials or evidence to disprove what it says. To support the contention that the document shows that there was a partition with respect to the business, learned Counsel pointed out that Sarat was executing the document as representative of himself and his three brothers. This, it was contended, should establish, at any rate, sufficiently for the ITO, that the business had been separated from the other assets of the family. Further in the document, learned Counsel argued, there is a recital that the parties had been carrying on business jointly till the end of the year 1345 B. S.; from that it should have been accepted by the ITO that on the 13th April, 1939, which corresponds to the date I have just mentioned in the Bengali calendar, there was a partition. He argued that the later statement was evidence, which should have been accepted, of such disruption. If that were correct then nothing would be easier for anyone than to place a piece of paper before the ITO who should be bound to accept what is stated in that paper and be obliged to act upon it. That is not as I read s. 25-A of the Act. That section requires that when a member of a Hindu family, hitherto assessed as undivided, alleges that a partition has taken place the ITO shall make an order recording the contention if he is satisfied that there has been a partition. That does not mean that he must accept the ipse dixit of the person whose paper, I have mentioned, is placed before him. The proviso to s. 25-A(1) is to the effect that no such order shall be recorded until notices of the inquiry have been served on all the members of the family. Clearly the section contemplates that when a claim of the nature with which we are now dealing has been made all those persons previously interested should be given an opportunity of attending before the ITO to dispute it, if such be the case. In the case of S.C. Mullick and Sons (1938) 6 ITR 99, it was held that though the recitals in a partnership deed may be evidence and even conclusive evidence as between the parties to it, the IT Department is not bound to accept them as correct and can call upon the executants thereof to prove the facts recited therein. In the present case there was no evidence of partition apart from the recital and statement in the deed of partnership, even assuming that that recital and statement bear the meaning for which learned Counsel for the assessee has contended. Nothing would have been easier than to have had some evidence of a previous partition, prior to the partnership deed having been executed.
(3.) IN the case of Jattu Shah Nathu Shah vs. CIT, Punjab and N. W. F. Provinces (1932) 6 ITC 162 : 14 Lah 134, two deeds were placed before the ITO, in one of which there was a statement that the joint family had already been disrupted, and in the other that the family had been divided since a long time. That was a case in which a decision under the provisions of s. 25-A of the Act was given and it was held that those bare statements in the two deeds were insufficient to establish a separation or partition of the property. In my opinion, there was nothing before the ITO which would justify him coming to the conclusion that the business known as Gopal Pure Oil Mills had ceased to belong to a joint Hindu family, the members of which were an uncle and his three nephews. Until there had been a partition none of the members of the family could enter into a partnership with three strangers in respect of that business. It is to be further observed that the Tribunal having arrived at a different conclusion to that to which the AAC and the ITO had come, I can see no reference in their order that notice should be given under the proviso to s. 25-A(1) of the Act to enable the other members of the joint family to appear and object to an order being made. In my view, the ITO arrived at the correct decision and conclusion and that the reversal of his finding and also that of the AAC by the Income-tax Tribunal was wrong. The questions which are referred are not too happily phrased but I answer the second alternative question "Is there any legal impediments to the recognition of the partnership" in the affirmative. ORMOND, J.:;