TMI Blog1967 (3) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... Dalip Singh left the partnership, as he had gone to Bombay to join service, with the result that a new partnership deed was drawn up by the remaining partners on 23rd of July, 1958. Registration of this changed firm also was claimed for the assessment year 1959-60 for which an application was filed on September 22, 1958. By means of two separate orders dated Novemher 14, 1959, the Income-tax Officer refused to register these firms. He was of the view that the division of the capital and the commencement of the partnership concern was all a made-up affair and it had been done to get the benefit of registration. In case Sarwan Singh had made up his mind to distribute the capital amongst himself and his sons, he should have done so by executing a regular deed and the signatures of some witnesses should have been obtained thereon and not merely by a writing on one of the pages of the bahi which belonged to him. According to the Income-tax Officer, the sons of Sarwan Singh were joint with him and no actual division of the assets had taken place. When the matter came before the Appellate Assistant Commissioner, he, by means of a consolidated order dated July 26, 1960, allowed the appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellate Tribunal came to the conclusion that the partnership was not genuine and, therefore, the registration was rightly disallowed by the Income-tax Officer. Learned counsel for the revenue contended that the finding whether a particular firm is genuine or not is a finding of fact and, in a reference under section 66 of the Income-tax Act, this court could not interfere with a finding of fact arrived at by the Tribunal, unless it came to the conclusion that there was no material or evidence which would justify that finding. In the instant case, according to the learned counsel, there was evidence in support of this finding and, consequently, this court was debarred from interfering with the same. In the present case, the assessee had led evidence to show that up to the assessment year 1957-58, Sarwan Singh was the sole owner of the business and his status was that of an individual. On 4th of April, 1957, he divided his entire capital amongst himself and his three sons and the relevant entries to that effect were made in the books of accounts. A regular partnership deed was also executed on 8th of April, 1957, and with effect from 5th of April, 1957, the business became a partn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rightly disallowed by him and the Appellate Assistant Commissioner went wrong in accepting the assessee's case." Thus, it would be seen, and this was also the position of the learned counsel for the revenue, that the finding of the Tribunal to the effect that the firm was not genuine was based on the following three considerations : (1) The promissory notes which were sought to be placed before the Tribunal for the first time betrayed the assessee's case; (2) The books of accounts showed that Sarwan Singh obtained the money which was due to his son, Dalip Singh, and utilised it in the repair and reconstruction of his own house, that is to say, the money due to one partner was taken by another, which showed that the profits had not been enjoyed by the alleged partners; and (3) A perusal of the account books by the Tribunal proved that the Income-tax Officer had rightly doubted the genuineness of the firm. So far as the first consideration is concerned, it would be seen that the Tribunal had not said anywhere that the promissory notes were faked. All that is said is that they betrayed the assessee's case. It is not made clear in what manner they did so. It is not easily u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share of his profits is not relevant to determine the validity or the genuineness of the partnership. It was held by the Supreme Court in Commissioner of Income-tax v. Sivakasi Match Exporting Co. that a partner of a firm could secure his capital from any source or surrender his profits to his sub-partner or any other person. These facts, according to the Supreme Court, could not conceivably convert a valid partnership into a bogus one. It was also observed in that very authority that the manner in which a partner dealt with the share of his profits was not of any relevance to the question of the validity of the partnership. From what has been said above, it would be apparent that one of the considerations, namely, the second one, was absolutely irrelevant for determining the genuineness of the firm. As regards the remaining two, as already mentioned above, in the first place, the precise findings of the Tribunal are not clear, and, secondly, no reasons had been given for arriving at those conclusions, and, consequently, such conclusions had no validity in law. It appears that the Tribunal was influenced by the fact that the partners of this firm were no other than the father and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed because of the use of inadmissible material. This decision was, later on, referred to with approval in Omar Salay Mohamed Sait's case mentioned above. Learned cousel for the revenue, on the other band, referred to three decisions (Homi Jehangir Gheesta v. Commissioner of Income-tax, Bhaichand Amoluk Co. v. Commissioner of Income-tax and National Syndicate v. Commissioner of Income-tax), the first two by the Supreme Court and the third by a Bench of the Bombay High Court and submitted that if a finding of fact of the Tribunal was based on three pieces of evidence and only two out of them were held to be irrelevant, still that finding could not be interfered with, since it was based on some legal evidence, namely, the third piece of evidence. I have gone through these three authorities, but, in my opinion, they do not, strictly, support the proposition of law urged by the learned counsel. The two Supreme Court decisions have nowhere disagreed with the law laid down in Dhirajlal Girdharilal's case, which was subsequently approved in Omar Salay Mohamed Sait's case. As a matter of fact in Homi Jehangir Gheesta's case, it had been specifically mentioned thus : " Having examined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in India Cements Ltd. v. Commissioner of Income-tax, where it was observed : "...in a reference the High Court must accept the findings of fact made by the Appellate Tribunal, and it is for the person who has applied for a reference to challenge these findings first by an application under section 66(1). If he has failed to file an application under section 66(1) expressly raising the question about the validity of the findings of fact, he is not entitled to urge before the High Court that the findings are vitiated for one reason or the other. " There is no merit in this contention. At the mandamus stage, the petitioners wanted the following three questions of law which, according to them, arose out of the Tribunal's order dated January 9, 1962, to be referred to this court : " (1) Whether there was any material before the Tribunal for the finding that the profits of the previous year had not been enjoyed by the alleged partners of the firm ? (2) Whether there was evidence to hold that the partnership constituted by the deed dated April 8, 1957 (July 23, 1958, in the connected case) was not genuine ? (3) Whether, on the facts and in the circumstances of the case, the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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