V.K.SINGHAL, J. - (1.) BOTH the petitions are disposed of by this common order, since the point involved is common. In Reference No. 29 of 1983 which arises out of the order dt. 26th Nov., 1981, in respect of the asst. yr. 1977 78, the Tribunal has referred the following two questions under S. 256(1) of the IT Act, 1961 : "1. Whether the Tribunal was right in law in not permitting the assessee to raise additional legal ground ? 2. Whether the Tribunal was right in law in holding that reconsideration on the point of status cannot be done in view of S. 185(5) of the IT Act, 1961?"
(2.) REFERENCE No. 46 of 1984 is in respect of the asst. year 1977 78 arises out of the order of the Tribunal dt. 19th Oct., 1981, and the following question has been referred by the Tribunal : "Whether the learned Tribunal was right in holding that the ITO was right in refusing to grant registration to the assessee under S. 185(5) of the Act?" The brief facts of the case are that the firm was constituted by four partners as per partnership deed dt. 10th April, 1968. Out of four partners, three were lady partners and two lady partners, namely, Smt. Meghi Devi and Krishan Kanta, retired from the partnership w.e.f. 31st July, 1976, and in their place two new lady partners, namely, Smt. Geeta Devi and Smt. Lila Devi, were taken and a new deed of partnership was executed on 1st Aug., 1976. The assessment for 1976 77 was completed under S. 144 and the registration was refused under S. 185(1)(b) of the IT Act. The reasoning which was taken by the ITO that since there was failure on the part of the assessee in accordance with the provisions of S. 143(2)/142(1) the assessment has been completed under s. 144, and, as such, the assessee is not entitled to registration under S. 185(5). It was also taken into consideration that the affidavit, as required in the assessment proceedings on 4th Oct., 1979, of the new partners was not filed nor the confirmations with regard to investments of the new partners were filed. This was also taken as a ground that the partners are not genuine. The personal attendance of the new partners was required, but, they were not produced and, therefore, it was considered that they are only dummy partners. The request for examining the said partners on commission through the ITO, Calcutta, was not accepted nor the request for issue of commission was considered because it was at the fag end of the proceedings and the commission could have been issued only for examination of witnesses and not for partners. In the deed of partnership, it was not provided that the lady partners would be the sleeping partners and, accordingly, the registration was refused. In appeal the CIT (A) confirmed the order so far as the refusal to grant the registration under S. 185(5) was concerned, but in respect of the grounds under S. 185(1)(b), the CIT (A) was of the view that it was the responsibility of the ITO to establish that the lady partners were benami and the capital contribution did not make them genuine. The lady partners were income tax assessees and having the capacity for the amount invested. Accordingly, the order passed under S. 185(1)(b) was not sustainable under law.
(3.) THE matter was challenged by the assessee as well as the Revenue before the Tribunal, where it was found that the assessment order under S. 144 and the appeal preferred against the order passed under S. 146 were dismissed by the Tribunal on 10th Sept., 1981, as the assessee failed to establish that it was prevented by sufficient cause from making compliance of their notice issued under S. 142(1) and 143(2). The failure on the part of the assessee under S. 144 was found established and, therefore, the action of the ITO to refuse the registration under S. 185(5) was held justified. In respect of the order passed under S. 185(1)(b), the order by the CIT (A) that the lady partners invested Rs. 55,000 and Rs. 70,000 as their contribution to the capital, and, therefore, were the genuine partners was upheld.;