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1986 Supreme(Raj) 45
High Court Of Rajasthan
Judgename : M.C. Jain,K.S. Lodha
Commissioner of Income-tax - Appellant
Versus
Manak Lal Porwal - Respondent
D.B. Income-tax Reference No. 33 of 1976
Decided On : 02/05/1986
Appearance :
B.R. Arora, for the Appellant
K.C. Bhandari and A.L. Mehta, for the Respondents
In assessment proceedings under the Income-tax Act, previous findings are generally not binding and conclusive on both the assessee and the Revenue. However, a different finding can be reached if there is fresh material or additional evidence that warrants a different conclusion.
Headnote:
INCOME TAX - REGISTRATION OF FIRM - GENUINENESS OF FIRM - DEPARTURE FROM PREVIOUS FINDING - FRESH EVIDENCE - VALIDITY - INCOME TAX ACT, 1922.
Fact of the Case:
The assessee-firm, M/s. Manaklal Porwal, applied for registration under the Indian Income-tax Act, 1922. The Income-tax Officer rejected the application, and the Appellate Assistant Commissioner upheld the rejection. The assessee appealed to the Income-tax Appellate Tribunal (ITAT), which also rejected the application. The assessee then approached the High Court, which rejected the application on August 24, 1965. For the assessment years 1958-59, 1959-60, and 1960-61, the assessee produced additional evidence, including letters, affidavits, and certificates, to support its claim for registration. The Income-tax Officer and the Appellate Assistant Commissioner again rejected the application. The assessee appealed to the ITAT, Bombay Bench "B", which granted registration to the firm.
Finding of the Court:
The High Court held that the ITAT, Bombay Bench "B", was justified in departing from the previous finding of the ITAT, Delhi Bench "C", that the assessee-firm was not genuine. The Court noted that the Bombay Bench had considered additional evidence produced by the assessee, including letters, affidavits, and certificates, which showed that the partners were actively involved in the business and had made withdrawals from the firm. The Court also noted that the Bombay Bench had taken into account the criteria propounded by the High Court in its earlier order dated August 24, 1965.
Issues: Whether the ITAT, Bombay Bench "B", was justified in departing from the previous finding of the ITAT, Delhi Bench "C", that the assessee-firm was not genuine.
Ratio Decidendi: The Court held that the ITAT, Bombay Bench "B", was justified in departing from the previous finding of the ITAT, Delhi Bench "C", because the Bombay Bench had considered additional evidence produced by the assessee, which showed that the partners were actively involved in the business and had made withdrawals from the firm. The Court also noted that the Bombay Bench had taken into account the criteria propounded by the High Court in its earlier order dated August 24, 1965.
Final Decision: The Court answered the question referred to it in the affirmative, in favor of the assessee and against the Revenue.
M.C. Jain, J.-On a direction by this Court on November 15, 1968, in D.B. Income-tax Cases Nos. 7, 8 and 9 of 1968, the Income-tax Appellate Tribunal, Jaipur Bench, has referred the following question of law for the opinion of this Court: “Whether, in the circumstances of the case, the Income-tax Appellate Tribunal, Bombay Bench ‘B’, Bombay, was justified in law in departing from the previous finding of the Income-tax Appellate Tribunal, Delhi Bench ‘C’, New Delhi, dated October 14, 1963, that the firm of M/s. Manaklal Porwal of Udaipur was not a genuine firm and as such was not entitled to registration under the Indian Income-tax Act, 1922?
2. We may state a few relevant facts. Manaklal was an “A” class contractor and was carrying on the business of construction engineer for a number of years up to March 31, 1955. With effect from April 1, 1955, he entered into a partnership agreement with Shri Kalulal, Shri Amritlal and one Smt. Jatan Bai, each of them having 1/4th share in the profits and losses of the said firm. In respect of the assessment year 1956-57, an application was moved by the assessee-firm for registration on the basis of the partnership deed and for the assessment year 1957-58, an application for renewal of registration was also moved. Along with the application, the assessee-firm filed an application dated March 6, 1956, for registration of the firm to the Registrar of Firms, certificate of registration was obtained from the Registrar of Firms and an application was made to M/s. Apaj Navinchand & Co., Udaipur, for opening a credit account for supply of petrol. The Income-tax Officer examined Shri Kalulal, Shri Amritlal and Smt. Jatan Bai with a view to find out whether they were genuine partners of the firm. Shri Manaklal was not examined. The Income-tax Officer found that there is no specific proof that the proprietary business is converted into a partnership business. The orders of the Income-tax Officer were challenged in appeal before the Appellate Assistant Commissioner and before the Appellate Assistant Commissioner some more material was presented which was taken into consideration by the Appellate Assistant Commissioner. The assessee’s claim for registration and for renewal of registration was, however, rejected. The assessee further appealed to the Income-tax Appellate Tribunal against the orders of the Appellate Assistant Commissioner. Before the Income-tax Appellate Tribunal, the assessee-firm
produced further evidence in respect of its claim regarding the genuineness of the firm. Affidavits of five persons were produced and four certificates of engineers were produced. It may be mentioned that before the Appellate Assistant Commissioner, it was pointed out that the firm was dissolved on March 31, 1962, and a deed of dissolution was produced. The Tribunal, after considering the evidence on record including the additional evidence, held that the position has nowhere improved and that the assessee-firm failed to establish its claim for registration of the firm. An application was moved by the assessee under Section 66(1) of the Indian Income-tax Act, 1922, but it was rejected by the Tribunal. Thereupon the assessee-firm approached this Court under Section 66(2). The assessee’s application was rejected by this Court on August 24, 1965.
3. When the assessment for the assessment years 1958-59, 1959-60 and 1960-61 came up before the Income-tax Officer, the assessee produced the following additional evidence:
1. Letter dated September 5, 1957, addressed by Manaklal, as partner, to the Executive Engineer, Udaipur.
2. Letter dated September 17, 1962, from the Executive Engineer, Udaipur, forwarding true copies of certain documents filed in his office.
3. Application dated December 2, 1957, made to the State Bank of India, Dohad, for opening a current account in the name of the firm.
4. Letter dated September 8, 1961, separately addressed to the Executive Engineer, Udaipur, by Amritlal “for Associated
