1973 Supreme(P&H) 46

PUNJAB & HARYANA HIGH COURT
P.C.Pandit and Bhopinder Singh Dhillon JJ.
Jagan Nath Pyare Lal
Versus
Commissioner Of Income-tax
Income tax Reference No. 7 of 1972,
Decided On : FEBRUARY 22, 1973

Under the provisions of the Income-tax Act there can be a partnership which may be in existence in accordance with the instrument of partnership with some of the partners having assented to the partnership but not having signed the said partnership deed itself.

Headnote:

INCOME TAX - Registration of firm - Refusal - Partnership deed not signed by all partners - Application for registration not signed by all partners - Whether registration rightly refused.

Fact of the Case:

The assessee-firm, Messrs. Jagan Nath Pyare Lal of Ludhiana, had ten partners who were members of two families and came into existence under the instrument of partnership executed on March 27, 1952. Padam Kumar was a minor in the said partnership. When he attained majority on October 1, 1956, he opted to continue as a full-fledged partner and a fresh instrument of partnership, copy of which is annexure "A" with the statement of the case, was executed, on Octobers, 1956, by 11 partners including Shri Rabinder Kumar, having Re. 1/2 share. On April 1, 1959, the partners decided to effect a change in the profits and losses-sharing ratio. A fresh deed, copy of which is annexure "B" with the statement of the case, was executed to that effect on April 1, 1959, and, consequently, an application dated September 2, 1959, for registration of the said firm under Section 26A of the Indian Income-tax Act, 1922, was filed on September 30, 1959, before the Income-tax Officer, A-Ward, Ludhiana, copy of which is annexure "C" with the statement of the case. Shri Rabinder Kumar, a partner of the firm, had left India for the United States of America for prosecuting his studies on January 29, 1958. The Income-tax Officer entertained doubts as to whether Shri Rabinder Kumar has signed the deed personally in the presence of the witnesses as mentioned in the concluding paragraph of the said deed. Similarly, the Income-tax Officer also doubted the signature of Shri Rabinder Kumar on the application for registration under Section 26A of the Act. The Income-tax Officer held an elaborate enquiry into this aspect of the matter as, according to the assessee, the partnership deed as well as the registration form were signed by Shri Rabinder Kumar personally. The Income-tax Officer after having held an elaborate enquiry into the matter, concluded that the deed of partnership was not genuine as Shri Rabinder Kumar had not personally put his signature on the said deed and also on the registration application as required under Rule 2 of the Income-tax Rules, 1922. On these two grounds; the Income-tax Officer declined to grant the registration to the assessee for the assessment year 1960-61.

Finding of the Court:

The Tribunal came to the conclusion that, if the signature of one of the partners is forged, there can be no question of the document being regarded as an instrument and the document is void and no genuine partnership can come into existence under any such document.

Issues: Whether, on the facts and in the circumstances of the case, the registration of the firm has rightly been refused ?

Ratio Decidendi: The enquiry to be made by the Income-tax Officer is to satisfy himself regarding all these three ingredients. The finding that the signatures of Shri Rabinder Kumar on the partnership deed were forged and that he did not sign the partnership deed himself, would not make the partnership deed itself illegal and consequently resulting in a finding that there was no genuine firm. At the most, it can be taken that this partnership deed is not signed by Shri Rabinder Kumar. In that situation, the enquiry to be directed by the income-tax authorities was to find out whether there was a genuine firm in existence as constituted in the partnership deed in which the shares of all the 11 partners are mentioned and the name of Rabinder Kumar as a partner also exists even though it be taken that he did not sign the partnership deed, but it is clear that this matter was not gone into by the income-tax authorities in this context. The whole enquiry was directed to find out whether the signatures on the instrument of partnership alleged to have been made by Rabinder Kumar were his signatures or not and the question, whether a genuine firm did exist as depicted in the instrument of partnership, was not in fact gone into from that view-point at all.

Final Decision: The question referred to this court for opinion is answered in the negative, in favour of the assessee and against the revenue, with costs.