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TMI Blog1960 (11) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... eading up to the appeal may be stated shortly. One Bhaichand Amolukh Vora, father of Chhotalal Bhaichand, started a firm in 1910, to work as principal agents for a number of insurance companies. In that firm, in addition to Bhaichand Vora and Chhotalal Bhaichand, one Nathubhai Patel was also a partner. Bhaichand Vora died in 1948, and the two surviving partners continued as the firm. Nathubhai Patel died in 1949, and it is stated that the firm thereafter consisted of Chhotalal Bhaichand and his wife, Bai Lalitaben. In the years that followed, the business of the firm was treated as the sole business of Chhotalal Bhaichand to which no objection was taken, because, as is now explained, the income of the wife would, in any event, have been inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the extent of 1 1/2 annas in the rupee, each. The balance of 2 annas in the rupee was earmarked to build up a reserve fund of Rs. 10,000. For the assessment year 1954-55, corresponding to the year of account, calendar year 1953, an application for the registration of this new firm was made under section 26A of the Indian Income-tax Act. The Income-tax Officer by his order dated September 30, 1954, declined registration, holding that the firm belonged solely to Chhotalal Bhaichand, and that there was only a pretence of a firm. He gave five reasons for coming to this conclusion. They were that Chhotalal Bhaichand had not made any formal transfer of the business to the new partners, that the deed stated that neither Khambatta nor Premchand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efer later. The firm then applied to the High Court under section 66(2), and set out the 18 questions which it alternatively summarised into two, as follows : " 1. Whether the finding of the Tribunal that the partnership but is in reality a partnership between Chhotalal, is not genuine Premchand and Khambatta is supported by any material on record and/or is based wholly or partly on conjectures, suspicions, surmises, incorrect assumptions or irrelevant materials, and/or amounts to an error or misdirection in law ? 2. If the above question is answered against the applicant, then, in view of the Tribunal's finding that there was a partnership between Chhotalal, Premchand and Khambatta whether the Tribunal ought to have directed an asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness, which was carried on as before by the new partnership, that an employee and an agent of the firm were taken as partners but had no right to the goodwill of the business, which was stated in the deed to belong solely to the assessee's old mother, that the monthly drawings of Premchand and Khambatta were limited to Rs. 300 which was almost equal to their remuneration or commission in the past, that the old business had three bank accounts which continued as before, one of them being operated by Chhotalal himself and the other two, by the new partners under a power-of-attorney which was not withdrawn, that no new letter of appointment was issued by the three insurance companies for whom the old firm was acting as principal agents, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the material time was the approximate remuneration earned by them in a preceding year. It is in reality a partnership between the assessee, Premchand and Khambatta. Manibai and the two minor sons are bogus parties...." The High Court, therefore, raised the question whether the order of the Income-tax Officer could be restored in toto in view of this finding, because the Income-tax Officer had taken the whole of the income of the firm into Chhotalal's individual assessment. In this appeal, it is contended that the High Court was in error in not calling for a reference, because (a) there were no materials on which the finding that the firm seeking registration was a pretence, could be rested, and (b) in any event, the Tribunal having act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch asked for registration was not a real firm, cannot be said to be founded on no material. In so far as the addition of certain other reasons, which are characterised as surmises, conjectures and suspicions, is concerned, this court has observed in Gheesta's case as follows : " We must read the order of the Tribunal as a whole to determine whether every material fact, for and against the assessee has been considered fairly and with due care ; whether the evidence pro and con has been considered in reaching the final conclusion ; and whether the conclusion reached by the Tribunal has been coloured by irrelevant considerations or matters of prejudice. Learned counsel for the appellant has taken us through the entire order of the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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