BANERJEE, J. - (1.) THIS reference, under s. 66(1) of the Indian IT Act, 1922 (hereinafter referred to as the Act), was made in the circumstances hereinafter stated in brief. Under an instrument of partnership, dt. 15th March, 1938, the firm of M/s Jewanram Gangaram was constituted of seven partners, viz., (i) Kanayalal Mimani, (ii) Mulchand Mimani, (iii) Surajmal Mimani, (iv) Chantratan Mimani, (v) Lunkaram Mimani, (vi) Chaitandas Mimani, and (vii) Lachmandas Mimani.
(2.) THIS firm was granted registration, under s. 26A of the Act. One of the partners, named Lachmandas Mimani died on February 24, 1947, leaving him surviving two minor sons, named Gokuldas Mimani and Jamnadas Mimani, and his widow, named Smt. Ram Piyari Devi. Partner Chandratan Mimani used to represent his HUF in the partnership of Jewanram Gangaram. There was a partition in this family and Chandratan and his brother, Chhoganlal, separated. Consequent upon the death of Lachmandas Mimani and the separation between Chandratan and Chhoganlal, it became necessary to reconstitute the firm. So as to bring some of the legal representatives of Lachmandas and also Chandratan and Chhoganlal in their separated status, into the firm, a new partnership deed was executed on 25th March, 1947. The parties to this deed were : (i) Kanayalal Mimani, (ii) Mulchand Mimani, (iii) Surajmal Mimani, (iv) Chandratan Mimani, (v) Lunkaram Mimani, (vi) Chaitandas Mimani, (vii) Chhoganlal Mimani, (viii) Gokuldas Mimani, minor by his guardian mother and next friend, Ram Piyari Devi, and (ix) Jamunadas Mimani, also a minor by his guardian mother and next friend, Ram Piyari Devi. The minors above-named were expressly admitted to benefits of the partnership. Clauses 6 (which should be 5), 7 and 8 of the deed provided as follows : "6. The profits and losses of partnership shall be distributed amongst the partners in shares as specified against the name of each of them given below : 1. Kanailal Mimani of the First Part ... One anna nine pies. 2. Mulchand Mimani of the Second Part ... Three annas. 3. Surajmal Mimani of the Third Part ... Three annas. 4. Chandratan Mimani of the Fourth Part ... One anna six pies. 5. Chhoganlal Mimani of the Fifth Part ... One anna six pies. 6. Lunkaram Mimani of the Sixth Part ... One anna nine pies. 7. Chaitandas Mimani of the Seventh Part ... One anna nine pies. 8. Gokuldas Mimani, a minor by his guardian mother and next friend, Srimati Rampiyari Devi of the Eighth Part ... Ten and hald pies. 9. Jamunadas Minani, a minor by his guardian mother and next friend, Srimati Ram Piyari Devi of the Ninth Part ... Ten and half pies. 7. Accounts of partnership shall be adjusted once is every year on the day preceding the Ramanavami and all assets and liabilities shall be taken into consideration. The balance-sheet and the profit and loss account shall be prepared in the separate statement to be made up every year and shall be approved by the partners or by whoever of the partners be present at Calcutta at the time and shall be open to inspection by all the partners in person or by their duly authorised representative at all reasonable times and the profit or loss of any year ending shall be duly credited or debited to the account of each of the partners in the books of accounts, in proportion to their respective shares hereinbefore specified. 8. The responsibilities of the management of the partnership concern shall equally rest with each of the partners hereto...." The firm had been originally registered by the Registrar of Firms and the change in the constitution of the firm, consequent upon the execution of the deed dt. 25th March, 1947, was also recorded in the Register of Firms, showing that Lachmandas, one of the partners had died on the 24th Feb., 1947, and his two minor sons, Gokuldas Mimani and Jamunadas Mimani, were admitted to the benefits of the partnership. Registration of partnership, under s. 26A of the Act, had been granted to the firm, as reconstituted under the deed dt. 25th March, 1947, for the first time for the asst. yr. 1947-48 and thereafter renewal of the registration was granted for every assessment year up to and including the asst. yr. 1957-58. On 13th Aug., 1962, the CIT sent a notice to the firm under s. 33B of the Indian IT Act, 1922, inter alia, couched in the following language: "I have examined your records in connection with the asst. yr. 1957-58, and have found that the order dt. 26th March, 1962, passed therein by the ITO under s. 26A of the India IT Act, 1922, is erroneous in so far as it is prejudicial to the interest of the revenue. You are hereby given opportunity to show cause and to make your submission by 29th Aug., 1962, in that connection since I am of the opinion that the firm as constituted under the instrument of partnership dt. March 25, 1947, consisting of 9 partners including 2 minors, which had been granted renewal of registration by the ITO is not valid or legal and could not therefore be registered under the Act . . ." In showing cause, the assessee, inter alia, took a preliminary objection to the effect that the proceeding under s. 33B was invalid, inasmuch as after the repeal of the Act of 1922 by the IT Act of 1961, no proceeding could have been taken under the repealed Act. The CIT repelled the contention by holding that under the notification issued by the Central Government under the provisions of s. 298 of the Act of 1961, all proceedings by way of appeals, references or revision in respect of any year made under the Act of 1922 should be disposed of as if the repealing Act had not been passed and as such the notice under s. 33B of the repealed Act was duly and validly issued. The assessee also disputed that the registration of the firm under s. 26A of the Act, was prejudicial to the interest of the Revenue. The Commissioner, however, held that under the partnership deed of 25th March, 1937, the minors, Gokuldas Mimani and Jamunadas Mimani, were admitted as full partners in the firm, through their natural guardian and mother, and not merely admitted to the benefits thereof. Thus, no valid partnership, worthy of registration under s. 26A of the Act, came into existence under the aforesaid deed. The Commissioner also found that the application for renewal of registration for the asst. yr. 1957-58, of which the original was missing and a duplicate was furnished by the assessee, was purported to be signed by Gokuldas Mimani and Jamunadas Mimani themselves. As the signatories were minors, the CIT expressed the opinion that the application did not fulfil the technical requirements of s. 26A of the Act. On these grounds the CIT held that the renewal of registration was wrongly allowed to the firm for the asst. yr. 1957- 58, and that being an order prejudicial to the interest of the Revenue, the registration of the firm under s. 26A should be cancelled. He further directed that the ITO shall treat the firm as an unregistered firm and tax accordingly.
(3.) AGAINST the decision by the CIT, the assessee appealed before the Tribunal. Four contentions were raised before the Tribunal. The first contention was that s. 297 of the IT Act, 1961, repealed the Indian IT Act, 1922, as from the 1st April, 1962, and the CIT was not justified in taking action under s. 338 of the repealed Act in August, 1962. The second contention was that the order under s. 33B was passed in violation of the principles of natural justice because one of the grounds on which the CIT cancelled the registration, namely, that the application for renewal of registration did not fulfil the technical requirements of the Act, had not been communicated to the assessee in the notice given under s. 33B and the assessee was not given sufficient opportunity of showing cause against the same. The third contention was that the minors had not been taken as full partners under the partnership deed but merely admitted to the benefits of partnership any finding contrary thereto was wrong both in fact and in law. The last contention was that inasmuch as the Commissioner came to the conclusion that the firm had not been lawfully constituted, with the minors as full partners, he should not have directed the assessment of the firm as an unregistered firm after the cancellation of the registration of the firm. The Tribunal repelled the first contention by relying on a decision of this Court in Kalawati Devi Haralalka vs. CIT (1964) 53 ITR 314 (Cal). The Tribunal also repelled the second contention with the observations that the firm was represented by a competent lawyer, all the records of the proceedings were disclosed to the lawyer and the lawyer himself made submissions on the application filed for the renewal. Thus, it could not be said that any principle of natural justice had been violated. On the third contention, which concerned the merits, the Tribunal agreed with the CIT and observed : "The minors, Shri Gokuldas Mimani and Jamunadas Mimani, are described as parties of the 8th and 9th parts represented by their guardianmother and next friend, Smt. Ram Piyari Devi. Further, the parties so described, declared and mutually covenanted to become and be partners of the aforesaid business styled Jewanram Gangaram. In cl. 5 of the deed the minors, Gokuldas and Jamunadas, were each given 101/2 pies share in the profits and losses of the firm and in cl. 7 it was provided that the profits and losses of any year would be duly credited or debited to the account of each of the partners in the books of accounts. And lastly, the partnership deed was signed by Smt. Ram Piyari Devi representing Shri Gokuldas Mimani and Jamunadas Mimani. These facts could leave no doubt in one's mind that Gokuldas and Jamunadas were being made parties to the agreement though they were being represented by their mother and they were being entitled to the shares of profits and also liable for the shares of the losses of the firm and, in view of this decision of the Supreme Court in CIT vs. Dwarkadas Khetan (1961) 41 ITR 528 (SC), it must be held that the partnership deed was not valid and could not be registered under s. 26A of the IT Act, 1922." The last contention was also repelled by the Tribunal with the following observations : "It was lastly contended by the learned counsel for the appellant that as the CIT had directed the ITO to make the assessment on the appellant as unregistered firm the CIT had accepted that the firm existed. This is in conflict with his decision that the firm brought into existence by the partnership deed dt. 25th March, 1947, was not a valid firm. He, therefore, argued that either there was a firm in existence under the deed which was entitled to registration or no firm came into existence under the deed in which case no assessment could be made of the unregistered firm. We are unable to accept the contention. The registration under s. 26A is claimed on behalf of a firm constituted under an instrument of partnership. If it is found that no valid firm came into existence under the instrument, no registration could be granted but the business might be carried on by a firm brought otherwise into existence and it would be assessed as an unregistered firm. That on cancellation of registration the assessee could be assessed in the status of an unregistered firm finds support from the decision of the Supreme Court in CIT vs. Smt. Durgabati (1961) 43 ITR 228 (SC)." On the prayer of the assessee the Tribunal referred the following questions of law to this Court : "(1) Where, on the facts and in the circumstances of the case, the Tribunal was right in holding that after the repeal of the Indian IT Act, 1922, by the IT Act, 1961, the initiation of proceedings by the CIT under s. 33B of the repealed Act was properly taken ? If the answer to the above question is in the affirmative, then (2) Whether, on the facts and in the circumstances of the case, the order under s. 33B was passed by the CIT in violation of the principles of natural justice ? (3) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the order of the ITO granting registration to the assessee-firm was prejudicial to the interests of the Revenue ? (4) Whether, on the facts and in the circumstances of the case, and on a proper interpretation of the partnership deed dt. 25th March, 1947, the Tribunal was right in holding that no valid firm came into existence under the aforesaid instrument ? Mr. S. Roy, learned counsel for the assessee, in fairness, submitted that in view of several decisions of this Court against the contention of the assessee, he would not press for an answer to questions Nos. 1 and 2 but would not, at the same time, give them up, so that the assessee may agitate the points before a higher Tribunal. We record this submission and confine ourselves to questions Nos. 3 and 4 only in this reference. ;