Back
High Court Of Delhi
INCOME TAX REFERENCE PUNJAB CLOTH STORE - Appellant
Versus
COMMISSIONER OF INCOME TAX - Respondent
I.T.R. 185 of 1975
Decided On : 12/09/1977
INCOME TAX - Registration of firm - Rejection of application - Genuine firm - Assessment as association of persons - Validity - Double taxation - Avoidance - Sections 4, 183, 185, 2(31), 155 - Income Tax Act, 1961.
Fact of the Case:
The assessee, a firm dealing in cut pieces and terylene cloth on a wholesale basis, filed an application for registration under section 185 of the Income Tax Act, 1961 (the 1961 Act) for the assessment year 1967-68. The Income Tax Officer (ITO) rejected the application and proceeded to assess the assessee as an association of persons under section 143(2) of the 1961 Act. The assessee challenged the ITO's order before the Appellate Assistant Commissioner (AAC), who treated the assessee's application for registration as valid and admitted the appeal against the ITO's order. The AAC found that the assessee was not a genuine firm and dismissed the appeal. The assessee filed an appeal before the Tribunal, which also dismissed the appeal, holding that the question of whether the firm was genuine was a question of fact and that the assessee had failed to discharge the onus of proving the firm to be genuine. The assessee filed a reference application before the High Court, which referred the following questions to the High Court: (1) Whether on the facts and circumstances found by the Tribunal, there was material to come to the conclusion that the appellant's firm was not genuine? (2) Whether by merely maintaining a bank account in a slightly different constitution, the firm should be treated as in genuine under the facts and circumstances of the case? (3) Whether on the facts and circumstances of the case the applicant firm had discharged the onus of proving the firm to be genuine? (4) Whether the revenue could adopt the status of AOP simultaneously assessing the individual having known interest in the applicant's business as partners under section 143?
Finding of the Court:
The High Court held that: (1) The Tribunal was justified in holding that the assessee was not a genuine firm, as there was material on record to support the Tribunal's finding. (2) The mere maintenance of a bank account in a slightly different constitution did not make the firm genuine. (3) The assessee had failed to discharge the onus of proving the firm to be genuine. (4) The revenue could adopt the status of AOP simultaneously assessing the individual having known interest in the applicant's business as partners under section 143.
Issues: 1. Whether the Tribunal was justified in holding that the assessee was not a genuine firm? 2. Whether the mere maintenance of a bank account in a slightly different constitution made the firm genuine? 3. Whether the assessee had discharged the onus of proving the firm to be genuine? 4. Whether the revenue could adopt the status of AOP simultaneously assessing the individual having known interest in the applicant's business as partners under section 143?
Ratio Decidendi: 1. The question of whether a firm is genuine is a question of fact, and the assessee had failed to discharge the onus of proving that the firm was genuine. 2. The mere maintenance of a bank account in a slightly different constitution did not make the firm genuine. 3. The revenue could adopt the status of AOP simultaneously assessing the individual having known interest in the applicant's business as partners under section 143.
Final Decision: The High Court answered all the questions in the affirmative, thereby upholding the Tribunal's order and dismissing the assessee's reference application.
( 1 ) SINCE common questions of law arise in these petitions it would be appropriate to dispose them of by a single judgment.
( 2 ) INCOME Tax Case No. 183 of 1975 and Income Tax Reference No. 219 of 1975 pertain to the assessment year 1967-68 ; Income Tax Case No. 184 of 1975 and Income Tax Reference No. 220 of 1975 pertain to the assessment year 1968-69 and Income Tax Case 185 of 1975 and Income Tax Reference No. 221 of 1975 pertain to the assessment year 1969-70. The Income Tax Cases arise out of rejection of form No. 12 filed by the assessee along with its returns for the assessment years 1967-68, 1968-69 and 1969-70 seeking registration of the firm while the Income Tax References arise out of the quantum appears filed by the assessee.
( 3 ) THE assessee deals in the business of cut pieces and terylene cloth on wholesale basis. For the year 1967-68 (accounting period ending on 18th June, 1966) the assessee filed a return of income along with form No. 12 seeeking continuation of registration under section 184 (7) of the Income Tax Act, 1961 (herein called the 1961 Act ) as it had earlier applied for registration in form II along with return filed for the assessment year 1966-67. Since the application of the assassee for registration had been rejected by the Income Tax Officer while passing orders on the return filed by it for the year 1966-67, the Income Tax Officer by his order dated 24th March, 1972, filed the form No. 12 and proceeded to assess the assessee under section 143 (2) of the 1961 Act.
( 4 ) THE assessee feeling aggrieved by the aforesaid order of the Income Tax Officer filed appeals before the Appellate Assistant Commissioner both against the quantum order passed by the Income Tax Officer and his refusal to register the firm. The present case pertains to the rejection of the assessee s application for registration. At the time the assessee filed the return for the present assessment year (1967-68) it showed the status of the assessee as a firm and the assessee claimed that at that time its claim for registration under section 185 of the 1961 Act for the assessment year 1966-67 was pending before the Income Tax Officer. The claim for registration was rejected by the Income Tax Officer on the ground that there was no genuine firm which order was upheld both by the Appellate Assistant Commissioner and the Income Tax Appellate Tribunal.
( 5 ) IN the instant case before the Appellate Assistant Commissioner the stand of the assessee was that it did not file any application for registration of the firm even after the registration was refused for assessment year 1966-67 by the Income Tax Officer as it bona fide entertained a belief that registration for that year would be allowed to it in appeal. It was further contended that after rejecting its claim for registration for the year 1966-67 the Income Tax Officer did not allow an opportunity to the firm to file application for registration for the present assessment year 1967-68, and thus remove the defect of filing form No. 12 only. Considering that the assessee was entitled to be given an opportunity so as to rectify the technical defect in filing form No. 12 in its claim for registration, the appellate Assistant Commissioner treated form 12 filed by the assessee as valid claim for registration for the assessment year 1967-68. In taking this view the Appellate Assistant Commissioner followed the order passed by the Commissioner of Income Tax on 23rd September, 1969, in the case of M/s. Commercial Equipment. The Appellate Assistant Commissioner accordingly accepted the contention of the assessee that the order of the Income Tax Officer filing form 12 amounted to an order passed under section 185 of 1961 Act. He, therefore, admitted the appeal filed by the assessee against the order of the Income Tax Officer filing form 12. The Appellate Assistant Commissioner admitted the appeal with the observation that the substantial question for consideration in th
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
