COMMISSIONER OF INCOME TAX Vs. J B COAL TRADERS

JUDGEMENT

(1.) A statement of the case has been submitted by the Income-tax Appellate Tribunal, Patna Bench "B", Patna (hereinafter referred to as "the Tribunal"), under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the 1961 Act"), referring the following questions of law for the opinion of this court:

(2.) THE relevant facts of the case can be culled from the statement of the case and several relevant orders available on the records of the case. An application for registration in Form No. 31 was filed by the assessee-firm for the assessment year 1968-69 on December 4, 1967. As the application was not available on the record, the assessee filed a duplicate application on March 24, 1971. THE original application was subsequently traced out and was placed on the record by the Income-tax Officer. THE accounting year of the assessee ended on March 31, 1968, for the assessment year 1968-69. This goes to show that the accounting year of the assessee-firm was the financial year 1967-68. THE Income-tax Officer held that the application for registration was filed in time and was in order. Partners of the firm were Banarsi Das, Tilak Raj, Mahendra Kumar, Jaswant Rai and one minor, Prem Lal, was admitted to the benefits of the partnership. THE firm was evidenced by a deed of partnership which was executed on September 25, 1967. THE shares of the partners were specified in the deed of partnership and share of profit had been credited as per stipulation in the deed of partnership. THE firm was registered with the Registrar of Firms also. THE Income-tax Officer, therefore, held that the firm was genuine. He, therefore, granted registration to the firm for the assessment year 1968-69, vide his order dated January 31, 1972. This order of the Income-tax Officer has been annexed and marked as annexure A forming part of the statement of the case.

(3.) THE Commissioner of Income-tax has also held that under Section 184(1) of the 1961 Act, an application for registration of a firm may be made to the Income-tax Officer on behalf of any firm, if (i) the partnership is evidenced by an instrument, and (ii) the individual shares of the partners are specified in that instrument, and under Section 184(3) of the 1961 Act, the application for registration has to be signed by all the partners (not being minors) personally. THE Commissioner of Income-tax held that both the conditions were not satisfied. He has also held that the partnership is not evidenced by an instrument, inasmuch as there is no operative partnership deed for the relevant period and that the partnership deed dated September 25, 1967, is invalid because as per this deed, Prem Lal remained a minor for the whole period, while the fact is that on May 31, 1967, he had become a major and, accordingly, he should be a full-fledged partner sharing not only the profit but should also have been made responsible for loss. He has also held that the operative partnership deed was executed only on April 25, 1968, i. e., after the end of the relevant accounting period on March 31, 1968. He also held that the application for registration filed on December 4, 1967, after the date when Prem Lal attained majority as also after the date by which he should have elected to become a partner in the firm, was not signed by him. THE Commissioner, therefore, came to a finding that the two substantive requirements of the 1961 Act did not stand fulfilled in this case which rendered the application for registration fit to be rejected. THE Commissioner, relying on the decision in Kishore Chand Ramji Dass v. CIT [1970] 77 ITR 76 (P & H), held that the Income-tax Officer was not justified in allowing registration to the assessee-firm. He, therefore, cancelled the order of the Income-tax Officer, Arrah, passed under Section 185(1) of the 1961 Act on January 31, 1972, and directed the Income-tax Officer to treat the assessee-firm as an unregistered firm. This order of the Commissioner of Income-tax has been annexed and marked as annexureB forming part of the statement of the case.