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TMI Blog1994 (10) TMI 83X X X X Extracts X X X X X X X X Extracts X X X X ..... Form No. 12 was filed for continuation of registration and there was no change in the constitution. The assessment was made in the status of URF. The Assessing Officer passed a separate order declining registration for this year. 3. The assessee had appealed from that order to the Commissioner of Income-tax (Appeals). There was also a quantum appeal filed by the assessee. Both the appeals were conjoined and a single order was passed by the Commissioner (Appeals) whereby the action of the Assessing Officer was upheld in regard to status. The Instant appeal is one directed against the order of the Commissioner (Appeals) affirming the status of URF. 4. The order of the primary authority purports to be one passed under section 185(1)(b). Section 185 applies to a case where registration has to be granted at the inception. Here, the assessee was a firm constituted way back in 1971, and being continued from year to year. There was no change in the constitution during the year of account. This was a case of continuation of registration and, therefore, Form No. 12 was filed by the assessee. Though the order of the Assessing Officer says that it was passed under section 185(1)(b), the dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is " liquor ", according to the definition in section 2(18) of the Karnataka Excise Act, 1965. It is, therefore, an intoxicant under section 2(16) of the said Act. No person can tap toddy from a tree, or bottle it for sale, except on the authority of a licence granted by the authority designated under the Karnataka Excise Act. Section 13(2) reads : "A licence granted under this section shall extend to and include servants and other persons employed by the licensee and acting on his behalf " The State Government has power to impose restrictions while granting licence or permit under the Karnataka Excise Act. The Government can cancel the licence or permit in the event of breach of any duty or obligation imposed upon the licensee ; vide section 29. For transporting or manufacturing, collecting or possessing any intoxicant, contrary to the provisions of the Karnataka Excise Act, even prosecution can be launched. Under the Karnataka Excise (Lease of the Right of Retail Vend of Liquors) Rules, 1969, lease of a right of retail vending of liquor cannot be transferred by the lessee except with the permission of the State Government, vide Rule 16A. 10. The case law relied upon by the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order passed by the Assessing Officer shows that the chartered accountant appearing for the assessee had been heard. That aspect of section 186(1), in our view, has been complied with. 15. To return to the subject,this is a case which is to be examined from the point of section 186(1). All that the Assessing Officer required to do is to see whether there was, during the previous year, no " genuine " firm in existence. There is no finding by the Assessing Officer in this year that the firm was not genuine. The objection of Shri Prasad is correct. Even the Commissioner (Appeals) does not find anywhere that the firm (assessee) was not genuine. All that the authorities below say is that the firm was illegal and, therefore, not entitled to registration for this year. 16. There is a subtle distinction between the words " genuine " and " invalid " and this has been shown by the Karnataka High Court in the case of CIT v. Kirana Traders [1986] 161 ITR 726. In this case, the firm had been constituted in March 1978 and registration had been granted for assessment year 1978-79. But later it was sought to be cancelled. The authority of the Income-tax Officer was examined in the context of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly intend to constitute a firm but a firm is apparently brought into existence by going through certain formalities, a real firm is not established, but a sham or bogus one. That is a case of a firm being not genuine. While legality of the firm is one of law, genuineness has nexus to realm of facts. It is in this context we have to insist upon a finding of the primary authority in regard to existence or otherwise of a genuine firm. As already stated there is no finding by the Assessing Officer that there existed no genuine firm. The finding of the Assessing Officer that the partnership was illegal does not satisfy the condition of section 186(1). 18. Puttaraju in whose favour the licence had been granted was working with the assessee on salary. He was a servant though his exact designation is not apparent from the record. Puttaraju had executed a power of attorney in favour of one Prabhakar who was the manager of the firm (assessee). It is on this authority the firm had tapped toddy and sold in retail. According to section 13(2), Karnataka Excise Act, a licence granted under this section to a person to tap toddy or bottle toddy for sale would extend to and include " servants and o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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