BANERJEE, J. - (1.) THIS reference, under s. 66(1) of the Indian IT Act, 1922, has been made in circumstances hereinafter related.
(2.) THE assessment years, which are involved in this reference, are 1959- 60 and 1960-61, corresponding to accounting years ended on December 31, 1958, and December 31, 1959. In or about August, 1949, one Baidyanath Gorai commenced business as an electrical contractor, under the trade name of M/s Electro House. Up to the asst. yr. 1958-59, he was assessed as the sole proprietor of the business. On January 2, 1958, a deed purporting to convert the said business into a partnership came into existence between Baidyanath Gorai, his mother-in- law, Srimati Gouribala Dasi, and his son-in-law, Nemaichand Saha. According to the deed, the three partners were given the following shares in the partnership : The ITO accorded registration to the firm, under section 26A, for the successive two assessment years under appeal. The CIT of Income-tax, West Bengal, Calcutta, however, found on examination of the records that the orders of the ITO granting registration to the firm for the asst. yr. 1959-60 and the renewal of registration for the asst. yr. 1960-61 were erroneous and prejudicial to the interests of revenue. The CIT thereupon issued a notice to the assessee-firm to show cause why the registration granted by the ITO should not be cancelled. The material portion of the notice reads as follows : Baidyanath Gorai 40per cent Nemaichand Saha 30per cent Gouribala Dasi 30per cent "On a perusal of the orders under s. 26A passed by Income-tax Officer, 'A' Ward, Asansol, on 5th October, 1960, and 25th February, 1961, for the asst. yrs. 1959-60 and 1960-61, respectively, in the above case and the connected records, I consider that the said orders are erroneous and prejudicial to revenue inasmuch as registration under s. 26A of IT Act, 1922, for the asst. yr. 1959- 60 and renewal of registration under s. 26A of the said Act for the asst. yr. 1960-61 should not have been granted, as there are prima facie reasons and grounds to hold that the partnership brought into existence by the partnership deed dated 2nd January, 1958, is not a genuine one.
(3.) I, therefore, propose to cancel the orders under s. 26A of the IT Act, 1922, for the asst. yrs. 1959-60 and 1960-61 under powers vested in me under s. 33B of the IT Act, 1922, unless you show cause why the orders should not be so cancelled. I am prepared to hear your objections, if any, at 11 a.m. on 3rd August, 1962, at my office as noted above. Objections in writing, if any, submitted on or before the above date will also be duly considered.";