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2017 (2) TMI 543 - AT - Income TaxDisallowance on claim made under Section 40(b) - whether the partnership was one formed between the HUF and two trustees or between three individuals? - Whether a valid partnership could be formed between three persons in representative capacity? - Held that:- It is not in dispute that the assessees were granted the status of registered firm by virtue of provisions of Section 185(1) of the Act since assessment year 1991- 92. The position continued for a period of twenty years and it was after such twenty years, the Assessing Officer attempted to disturb this. When a set of facts which permeates from earlier years, is consistently the same, it would not be appropriate to disturb the conclusions reached based on such facts. No doubt, rule of res judicata may not be applicable to the income-tax proceedings, but the rule of consistency demands that a position consistently taken shall not be disturbed unless there were significant change in facts. Insofar as reliance placed on Section 40(b) of the Act by the A.O. is concerned, there is nothing in that section to conclude that a partnership could not be formed by a karta of an HUF in his individual capacity with other persons. The same, in our opinion, would also apply where an individual who joins partnership in a representative capacity. It can always be considered that he was doing so in his individual capacity. This position has been reiterated by Hon'ble Apex Court in the case of Bagyalakshmi & Co. (1964 (11) TMI 11 - SUPREME Court ), which has also been relied on by the Ld. CIT(Appeals). Considering the facts of the case, we are inclined to uphold the orders of the CIT(Appeals). - Decided against revenue
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