Rajesh Balia, J. - (1.) A question of law has been referred to this court at the instance of the Revenue by the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, arising out of its order dated August 8, 1978, in ITA No. 982/ JP of 1976-77 for the assessment year 1972-73.
(2.) THE facts as stated in the statement of case are that the assessee, Jai Mewar Wine Contractors, Udaipur, was a firm consisting of nine partners, namely, Birbal Khan, Shiv Narain, Sohan Lal, son of Hira Lal, Both Lal, Badru Khan, Narendra Kumar, Jagdish Lal, Sohan Lal, son of Mohan Lal and Kamal Chand. Before the commencement of the assessment year 1972-73 with effect from April 1, 1972, the assessee filed an application in Form No. 11 on March 30, 1972, for registration of the firm along with the partnership deed dated March 27, 1972. The Income-tax Officer was satisfied about the genuineness of details furnished in the form and therefore by order dated November 30, 1974, granted certificate of registration to the firm. In the partnership deed dated March 27, 1972, it was stated that the firm has commenced its business with effect from April 1, 1971, with the aforesaid nine partners. Out of nine partners, Kamal Chand died on September 25, 1971, and in his place, his wife and legal heir Smt. Tulsi Bai was inducted as partner to the firm. In the deed of partnership, the partners' share in the profits was defined against the name of each in terms of percentage. The Commissioner of Income-tax, however, while exercising his revisional powers under Section 263 of the Income-tax Act, 1961, by his order dated November 27, 1976, held that the. assessee failed to show that there was any contract or agreement according to which the firm could continue even on death of a partner. Accordingly, he set aside the order dated November 30, 1974, passed by the Income-tax Officer and directed him to pass another order, afresh, in accordance with law, after making necessary inquiry regarding genuineness and validity of the firm, Aggrieved by the order of the Commissioner dated November 27, 1976, the assessee preferred an appeal before the Income-tax Appellate Tribunal, which came to be allowed by it, holding that the order of the Commissioner could not be sustained in law, particularly when the Income-tax Officer gave clear finding that details furnished in the form were correct and, after considering all facts and genuineness of the firm, the Income-tax Officer granted certificate of registration. The Tribunal found that the learned Commissioner of Income-tax gave no finding as to how the order passed by the Income-tax Officer was erroneous in so far as it is prejudicial to the interests of the Revenue. As a matter of fact, on the facts of the present case and after hearing the parties, it was necessary for the learned Commissioner to state in what manner he considered the order of the Income-tax Officer was erroneous and prejudicial to the interests of the Revenue and what the basis was for such a conclusion. After indicating his reasons for such a conclusion, it would certainly have been open for him to remand the matter to the Income-tax Officer for such other investigation or enquiry as might be necessary. Instead of giving such finding or basis, the learned Commissioner of Income-tax set aside the order of the Income-tax Officer with the direction to make further enquiry. It was thus opined that unless there is such a finding, the order passed by the learned Commissioner of Income-tax under Section 263 of the Act cannot be sustained. It is in the aforesaid circumstances that an application came to be made by the Department of Revenue whereupon the following question of law has been referred for the opinion of this court : "Whether, on the facts, and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in setting aside the order under Section 263 of the Income-tax Act, 1961, passed by the Commissioner of Income-tax ?"
(3.) HEARD learned counsel for the parties. The undisputed facts of the present case are that the first application for registration of the respondent firm was filed on March 30, 1972, and the original deed of partnership executed on March 27, 1972, was also filed along with the said application. The assessment year, for which registration was sought, was 1972-73. The corresponding previous year of assessment ended on March 31, 1972. In the deed, the historical background of its execution had been stated in detail, pointing out that the firm was engaged in the business of liquor by taking contracts from Government for vending. It has been granted a vending contract for the financial year 1971-72, i.e. to say, operative with effect from April 1, 1971, to March 31, 1972. It was also stated in the part- nership deed that the firm consisted of the aforesaid nine persons including Kamal Chand husband of the present ninth partner, Smt. Tulsi Bai, in whose favour the contract for vending liquor was granted and the partnership firm was doing business with effect from April 1, 1971. The said Kamal Chand died on September 27, 1971. All the remaining partners decided to continue with the same firm by inducting the widow of the said deceased partner, Kamal Chand Khatik. All other conditions of partnership have been sustained, as has been agreed to between the partners at the commencement of the partnership business. According to the conditions of the partnership, the partnership shall be at will. In case anything happens to any of the partners, any alteration in the terms of the partnership shall be by majority and shall be binding on other partners. Thus, the partnership deed contained an agreement contrary to Section 42 of the Partnership Act. The relevant portion of the partnership deed, annexure-A, to the statement of case, is reproduced hereinbelow : ***** ;