TMI Blog1959 (5) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax confirming an order declining to register the appellant firm under section 26A of the Indian Income-tax Act, hereinafter referred to as the Act. The order of the High Court was passed rejecting summarily an application by the appellant firm under section 66(2) of the Act. The present judgment shall dispose of both the appeals. The facts of the case are as follows: One Bhuban Mohan Shaw, who died in 1908, had three sons, Uma Charan Shaw, Aboy Charan Shaw and Panchukali Shaw. On his death, these three sons were alive, and there was also his widow, Mst. Surabala Dassi. Bhuban Mohan Shaw held an excise licence in his name for the retail sale of foreign liquor at a shop situated at No. 1, Dharamtala Street in Calcutta. After his death, the brothers formed a Hindu joint family of which Uma Charan was the karta. They were governed by the Dayabhaga law. The family continued the said business of sale of foreign liquor and the excise licences were taken in the names of Uma Charan and Panchukali. During the years that followed the business of the family was extended and other shops were opened. In addition to the retail shop of foreign liquor at Dharamtala Street, the family ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Shaw, was taken in as a partner, representing the branch of the deceased brother. The share of the branch was the same as that of Aboy Charan. In January, 1946, another limited liability company called the Shaw Brothers Stores, Ltd. consisting of Uma Charan, Panchukali and Shashadhar took over the business of Shaw Brothers at No. 12/13. Bertram Street, Calcutta. The income of that business was, thence, assessed in the hands of the said company. Uma Charan died on January 25, 1947, and his son Radha Raman Shaw was taken into the partnership with a share equal to that of his father. On April 10, 1947, a fresh deed of partnership was entered into by Panchukali, Shashadhar and Radha Raman in respect of the remaining shops, namely, (i) Messrs. Uma Charan Shaw, No. 40, Moti Sil Street, Calcutta, (ii) Messrs. Panchukali Shaw and Radha Raman Shaw, No. 1, Dharamtala Street, Calcutta, and (iii) Messrs. S. B. Dassi and A. C. Shaw at No. 201/202, Chandney Chawk Street, Calcutta. The said deed of partnership relating to these three shops was the basis of a fresh application under section 25A of the Act, out of which these two appeals have ultimately arisen. At first, a retur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y from the ken of employees was not considered as sound. The Tribunal summarised all these reasons and added others. They may be quoted in its own words: " It was admitted on behalf of the assessee that the existence of the partnership is not communicated to any outside authority including the bank in which the assessee has an account. It was represented that even when the partners constituted a Hindu undivided family, they had a bank account in the name of one of the partners and the same is continued even after the partnership was constituted. It was also admitted that the outside world is not aware of the fact that the excise business is being carried on in partnership. A partnership is an artificial legal entity. If the partnership among the three partners is one which could not be disclosed to the very authorities under whom licences are obtained for the excise shops and the fact that the partnership having come into existence is not made known to others, it will not be open to the assessee to claim registration under section 26A. All this establishes that no genuine partnership had come into existence. On the materials placed before us, we do not find any cogent reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t/accounts with different bank/banks or close down the same as and when necessary. Such bank account/accounts shall unless otherwise agreed upon be operated jointly and/or severally by the partners." It is contended that these provisions were designed to create a veneer of partnership for income-tax purposes, while the joint family continued as before. By keeping the accounts as hitherto by the partners, the outside world was not informed that the Hindu undivided family had disrupted. The decisions rendered in the case are said to involve a finding of fact, and it is contended for the Department that there was material on which the finding could be rested. Though the Tribunal stated that it had not proceeded on the ground that the partnership was illegal being against the Bengal Excise Act, 1911, the argument was referred to as supporting the conclusion that the firm was not genuine. Section 42(1)(a) of the Bengal Excise Act reads: " 42.(1) Subject to such restrictions as the State Government may prescribe the authority who granted any licence, permit or pass under this Act may cancel or suspend it .... (a) if it is transferred or sub-let by the holder thereof without the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could not be said to be too extensive as others had withdrawn large sums also in their turn. Taking into consideration the entire circumstances of the case, we are satisfied that there was no material on which the Income-tax Officer could come to the conclusion that the firm was not genuine. There are many surmises and conjectures, and the conclusion is the result of suspicion which cannot take the place of proof in these matters. It was contended that there were three orders, viz., the order of assessment, the order under section 25A and the one under section 26A, and merely reversing the order under section 26A cannot be of any consequence particularly as the order under section 25A stands. We are not concerned in these appeals in deciding what advantage will accrue to the appellant firm. That is its look-out, and we do not, therefore, accept the argument. The result is that the order of the Appellate Tribunal is reversed. The firm shall be registered under section 26A of the Act for the assessment year 1948-49. The appeal against the order of the High Court need not be considered, since it is not necessary to pass any orders thereon. There will be no order in that appe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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