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1998 Supreme(Pat) 605
HIGH COURT OF PATNA, (RANCHI BENCH)
S.K. Chattopadhyaya & Loknath Prasad, JJ.
Munshi Hussain – Petitioner
vs.
Income Tax Appellate Tribunal, Patna Bench, Patna & ors. - Respondents
Taxation Case No. 2 of 1997(R)
Decided On : 26.8.1998
For the petitioner: M/s Binod Poddar & Pradeep Modi.
For the Respondents: M/s K.K. Vidyarthi & K.K. Jhunjhunwala.
The question of whether a firm is genuine is a question of fact and not a question of law.
Headnote:
INCOME TAX - Reference to High Court - Question of law - Whether the existence of a genuine firm is a question of law or fact - Held, question of fact.
Fact of the Case:
The petitioner, an assessee, entered into a contract with a company to execute certain work. The Assessing Officer (AO) included the income from the contract in the petitioner's individual assessment, holding that the work was executed by the petitioner himself. The Commissioner of Income Tax (Appeals) (CIT(A)) allowed the petitioner's appeal, holding that the firm was genuine and that the income should be assessed in the hands of the firm. The Income Tax Appellate Tribunal (ITAT) reversed the CIT(A)'s order, holding that there was no evidence to show that the firm was genuine.
Finding of the Court:
The court held that the question of whether a firm is genuine is a question of fact. The ITAT had considered the evidence on record and come to a conclusion that there was no evidence to show that the firm was genuine. This finding was not a question of law that could be referred to the High Court under section 256(1) of the Income Tax Act, 1961.
Issues: Whether the question of whether a firm is genuine is a question of law or fact.
Ratio Decidendi: The court relied on the decision of the Allahabad High Court in Commissioner of Income Tax vs. Agra Wines, where it was held that the question of whether there is a genuine firm in existence or not is essentially a question of fact. The court also distinguished the decision of the Supreme Court in Nellikkottu Kolleriyil Madhavi vs. Kavakkalathil Kalikutty & ors., which dealt with the power of the High Court to grant perpetual injunction in Second Appeal and held that non-consideration of the material evidence is a substantial question of law.
Final Decision: The court dismissed the petition, holding that the ITAT's order was not a question of law that could be referred to the High Court.
Heard Mr. Poddar on behalf of the petitioner and Mr. Vidyarthi on behalf of the respondents.
2. Mr. Vidyarthi has taken a preliminary objection regarding maintainability of this case on the ground of limitation. We find that the grounds taken by the petitioner in his petition filed under Section 5 of the Limitation Act have not been controverted by the revenue by filing any rejoinder to that. As such, we condone the delay in filing this case and allow the limitation petition.
3. In this case the petitioner has impugned the ORDER :of the Income Tax Appellate Tribunal, Patna Bench, Patna dated 4.12.95 by reason of which the learned Tribunal has refused to make reference to the High Court.
4. Uncontroverted fact of the case are that in relation to accounting year, 1989-90 the Assessing Officer (respondent no. 4), considering the stands taker by the parties, held that the work was executed by the petitioner-assessee himself in his individual capacity and, as such income therefrom was included in his assessment. Total income was determined and clubbed both the heads at the hands of the petitioner and estimated the ratio of profit @ 10% on the said gross receipt. This ORDER :is annexure 2 to this application. Against that ORDER :the petitioner moved the Commissioner of Income Tax (Appeals), Respondent no. 3, Ranchi which was registered as I.T. Appeal No. 100/Ran/1 1990-91. By ORDER :dated 25.2.92, while agreeing with the submissions of the petitioner that he was eligible for 25% of the share income from the unregistered firm, held that the genuineness of the firm of M/s Munshi Hussain was proved and thus it was not necessary to make assessment of the firm as a protective measure and substantive assessment should be made at the hands of the firm. Respondent no. 3 further opined that there was no justification in inclusion of the income of the firm in the hands of the petitioner. This ORDER :is annexure 3 to this application.
Being aggrieved by the said appellate ORDER :, respondent no. 1 filed an appeal before the Income Tax Appellate Tribunal giving rise to I.T. Appeal No. 398(Pat)/92. The petitioner filed his cross objection and respondent no. 1, by ORDER :dated 13.3.95, disposed of the appeal reversing the conclusion and direction of the Respondent no. 3 in relation to the execution of the contract work and upheld estimation of net profit at 10% in relation to contract work as found by Respondent no. 4. Cross objection filed by the petitioner was also dismissed. From the ORDER :of respondent no. 1 it appears that the Tribunal perused the entire records of the case and has come to the conclusion that respondent no. 3, the Commissioner of Income Tax (Appeals) committed an error in coming to his conclusion. It also observed that no evidence was placed on records or before the Tribunal which could show that the firm, M/s Munshi Hussain, was actually in existence as a real firm. The Tribunal also took into consideration the fact that the contract was executed by the petitioner-assessee himself and the same was allocated to him. Not only that even the T.D.S. Certificate issued by the Company was in the name of the petitioner-assessee and not in the name of the unregistered firm of M/s Munshi Hussain and the petitioner could not satisfy the learned Tribunal (respondent no. 1) and so it reversed the finding of respondent no. 3 and agreed with that of respondent no. 4. The said ORDER :of the Income Tax Appellate Tribunal is annexure 6.
5. Thereafter, the petitioner filed an application under section 256(1) of the Income Tax. Act, 1961 before respondent no. 1 praying therein to refer the question of law arising out of the ORDER :dated 13.9.95 as contained in annexure 6, to the High Court and also to draw up statements of the case. As stated above. The prayer of the petitioner was refused resulting into filing of this case before this court.
6. Criticising the ORDER :of respondent no. 1, learned counsel for the petitioner submits that when
