TMI Blog1988 (7) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... e major on 5th Aug., 1973 and elected to continue a partner in the firm. Similarly Shri Ishwardas Purohit became major on 21st April, 1976 and he too elected to continue a partner in the firm. Thus upto the year 1977-78 there had been two changes in the constitution of the firm due to the minor partners becoming major and electing to continue partners in the firm. 4. Asst. yr. 1971-72 was the first year of the business of the assessee firm. For this year on its application in Form 11 of the IT Act, 1961 (the Act), dt. 27th March, 1971 the assessee firm was granted registration under s. 185 of the Act vide the order of the ITO dt. 10th Oct., 1973. Since there was no change in the constitution of the firm for asst. yrs. 1972-73 and 1973-74 the registration granted under s. 185 on 10th Oct., 1973 was allowed to have effect for the above two years under the provisions of s. 184(7) of the Act. With Shri Rajendrakumar Purohit becoming major and electing to continue partner in the firm a fresh partnership deed dt. 5th Sept., 1973 was brought into existence and for the asst. yr. 1974-75 the change in the constitution of the firm was recognised under s. 187 of the Act and the registratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and Shri Shewcharan Purohit on the other. He was further of the opinion that Smt. Radhabai Kothari had not become partner on her own free will but had joined the firm as a partner at the instance of her late husband. In his opinion both the two points affected the very character of the assessee firm as a genuine partnership firm and therefore registration granted to it for all the seven years under consideration was required to be cancelled. He therefore, by his letter dt. 3rd March, 1980 required the assessee firm to show cause as to why registration granted to it for asst. yrs. 1971-72 to 1976-77 be not cancelled. Though by its letter dt. 14th March, 1980 and 19th March, 1980 the assessee firm not only fully explained its constitution and the infirmity in the statement of Smt. Radhabai Kothari as had been pointed out by the ITO but also requested the ITO to allow it an opportunity to cross examine Smt. Radhabai Kothari upon whose evidence the ITO intended to rely to the disadvantage of the assessee firm yet the ITO did neither accept the explanation offered by the assessee firm nor did he accede to its prayer to allow cross examination on Smt. Radhabai Kothari by it. He therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in view of such statement of that lady partner the ITO could have inferred that there was absence of relationship of agency between Smt. Radhabai Kothari and Shri Shewcharan Purohit. Mr. Bhatt thus submitted that the learned AAC should not have upset the order of the ITO and requested us to restore the order of cancellation of registration. Contrary to it Mr. K.C. Patel the learned counsel for the assessee firm not only took us through the order of the AAC but also through several letters written by the assessee firm to the ITO and vehemently submitted that it should not be lost sight of that the assessee firm had been granted registration after necessary query in the asst. yr. 1971-72. Mr. Patel further submitted that thereafter there had been changes in the constitution of the assessee firm for two times i.e. in 1973 and 1976 but at none of the occasions the Department had doubted the genuineness of the assessee firm as partnership business. Mr. Patel further submitted that the distribution of shares of profit and losses amongst its various partners was never doubted by the Department even at the time of granting renewal of registration. The learned counsel stressed that by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT (1966) 59 ITR 424 (MP) of Madras High Court in the case of S.S.A. Ganga Mirthamal Co. vs. CIT, Madras (1969) 74 ITR 473 (Mad) and of Allahabad High Court in the case of Chitra Cinema vs. CIT (1972) 86 ITR 203 (All). 9. We have given our due consideration to the rival submission made on behalf of the parties before us and have gone through the record as placed before us. We have particularly and closely studied the statement of Smt. Radhabai Kothari dt. 2nd March, 1979. After having studied the point involved in these appeals quite patiently we have been clearly of the opinion that there was absolutely no justification on the part of the ITO to have invoked his jurisdiction under s. 186(1) of the Act in the present cases. We find all the appeals totally devoid of any force and would like to dismiss them outright. 10. Sec. 186(1) of the Act undoubtedly confers a discretionary jurisdiction upon an ITO to cancel the registration of a firm for an assessment year if he is of the opinion that there was, during the previous year, no genuine firm in existence as registered. But the discretionary jurisdiction vested in the ITO is to be exercised judicially and judiciously and not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cancel the registration on the grounds mentioned by him in his letter dt. 30th Jan., 1979. It was after the lapse of about a year or so that he thought it proper to summon Smt. Radhabai Kothari and to examine her on the point. Curiously enough the ITO did not consider to summon the male partner of the firm for the purpose. Again he did not consider it proper to summon another female partner of the firm who was Smt. Chitradevi Kothari. As is gathered from the statement of Smt. Radhabai Kothari she was put as many as 22 questions and we agree with the observations of the learned AAC that in answer to most of the questions Smt. Radhabai Kothari had stood the test of cross examination. It is no doubt true that in answer to question No. 10 she had stated that Shri Shewcharan Purohit was not a partner in the assessee firm. It was this answer of the lady that led the ITO to conclude that the assessee firm was not a genuine partnership firm and therefore registration granted to it under s. 185 on 10th Oct., 1973 or allowed to have effect under s. 184(7) in subsequent years be cancelled. We disapprove the approach adopted by the ITO in reading the statement of Smt. Radhabai Kothari. Thus a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion arrived at by the learned AAC in this behalf. We may further point out that not only the partnership deed mentions the fact that Shri Shewcharan was a partner in the firm but that fact has also clearly been stated by Shri Shewcharan Purohit himself in his statement dt. 16th Sept., 1978 recorded under s. 131 by ADI and by Smt. Chitradevi Kothari in her statement dt. 6th March, 1979. The ITO very conveniently ignored the document of partnership as also the statement of two other partners on the point. He also ignored that it was after enquiry into the genuineness of the firm that registration to it had been granted in the year 1973 and such registration had been allowed to have the effect under s. 184(7) for subsequent years. He had further ignored the fact that as and when there was a change in the constitution of the firm the document of partnership was signed by all partners including Shri Shewcharan and Smt. Radhabai Kothari. In our opinion the ITO should have kept it in mind that the illiterate or semi-illiterate ladies coming from orthodox and conservative families do not generally actively participate in the conduct of a family or partnership business. They might be partne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee but also to allow him an opportunity to produce evidence in rebuttal to it or to cross examine the witness, if such evidence consisted of the oral testimony of a person. If the assessee has been unjustly denied an opportunity to cross examine a witness on whose testimony the ITO intended to rely against the assessee, such an evidence cannot be read against the assessee. 14. To sum-up we are clearly of the opinion that the ITO was not at all justified in cancelling the registration to the assessee firm for any of the year under consideration and the learned AAC had very rightly corrected the mistake committed by the ITO in cancelling such registration to the assessee firm in several years. We must state that our conclusions find good support from the cases relied upon by Mr. Patel which we do not intend to deal with for the obvious reason that the facts involved in the present cases are quite clear and need no help from the principles enunciated in the cited cases for their approval by us. At the most we can, with the help of the authorities relied upon, observe that in the present cases it was highly uncharitable on the part of the ITO to characterise the assessee firm as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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