- (1.) THIS is an application under S. 256(2) of the IT Act, 1961, for referring questions of law said to be arising out of Tribunal's order in IT No. 802/Jp/1973-74 for the asst. yr. 1966-67. On there being difference of opinion between the A.M. and J.M. of the Tribunal about issue whether any question of law arises out of Tribunal's appellate order, it was referred to Vice Chairman, who agreeing with the A.M. held that no question of law arises out of Tribunal's appellate order. This resulted in rejection of application under S. 256(1) of the Act of 1961.
(2.) THE question of law which were suggested to the Tribunal for making a reference, six in number, are as under : (i) Whether any enquiry on the application of registration of firm could be made without giving specific notice to the partners. (ii) Whether any enquiry in the matter of registration of the firm could be made on the basis of a notice given to erstwhile members of the family in connection with their application for an order under S. 171. (iii) Whether a composite enquiry regarding the partition of family and genuineness of the firm from two separate assessees (i.e., HUF and firm) can be made by recording a statement in connection with proceedings under S. 171. (iv) Whether on the facts and circumstances of the case the procedure adopted by the ITO in disposing of the applicant's application under S. 185 was legal, if not whether the proceedings were vitiated on account of the irregularity. (v) Whether the ITO was bound in law to bring to the notice of the applicant firm discrepancies in the statement of erstwhile co-partners; and giving to the firm an opportunity to rebutt; whether by not doing so, the provisions of natural justice were violated so as to make the order under S. 185 invalid. (vi) Whether, on the facts and circumstances of the case the Tribunal was justified in holding that no genuine firm was in existence during the relevant accounting year and thereby rejecting the claim for partition. The facts and circumstances as emanate from the order of the Tribunal, passed in appeal are as under : A Hindu undivided family (HUF) in the name and style of M/s Nanulal Sunderlal was carrying on business as an HUF firm. In the previous year, relevant to the asst. yr. 1966-67, one application was moved under S. 171 of the Act on behalf of M/s Nanulal Sunderlal, HUF, claiming that there is a partition of HUF. The application was moved for recording a finding about the partition of the HUF and to make an order to that effect Another application was moved by the firm M/s Nanulal Sunderlal, claiming to be a registered partnership firm, for seeking registration under the IT Act. The persons who constituted the firm as partners were members of the HUF M/s Nanulal Sunderlal by the same name. The AO rejected the application under S. 171 of the IT Act by holding that no partition of the HUF has taken place. While considering application by the firm for registration, on the premise that partition of HUF has not been recognised by the ITO under S. 171 he recorded a finding that no firm exit and refused the registration. On appeal, the learned AAC disagreed with the finding recorded by the ITO and directed the ITO to grant the registration to the firm for the year 1966-67 in question. On further appeal before the Tribunal there was difference of opinion between the A.M. and J.M., on the question of grant of registration to the firm. A.M. agreed with the ITO and was for refusal, J.M. held the contrary view. On reference to Vice Chairman he agreed with the view expressed by A.M. Thus, the order of AAC was set aside by upholding the order passed by ITO for refusing the registration of the firm. The only ground that prevailed for reaching this conclusion was that since claim for partition of HUF has not been accepted, the firm is not genuine. In view of the majority opinion, the appeal of the Revenue stood allowed by the order of 31st May, 1976. Thereafter, the applicant moved a petition under S. 256(1) of the IT Act and required the Tribunal to refer the aforesaid questions to this Court for its opinion along with statement of case. Again there was a difference of opinion between the A.M. and J.M. about the conclusion whether a question of law arise out of its appellate order. On being referred to the third member, he agreed with the A.M. that the Tribunal has rightly decided the issue that registration has rightly been refused by the ITO, and refused to refer the case and rejected the application.
(3.) HAVING heard learned counsel for the parties, we are of the opinion that the order of the Tribunal refusing to make a reference was erroneous inasmuch as in our opinion on the facts stated above questions of law do arise out of the Tribunal's order which were required to be referred to this Court.;