TMI Blog1986 (9) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... dt. 14th Aug., 1975 proper records and accounts of the partnership were agreed to be maintained but such term of the deed of partnership was violated and the accounts were not maintained. It appears that in his opinion the firm failed to comply with the terms of the deed of partnership and, therefore, it was not entitled to registration. The AAC referred to judgment of the Hon'ble Supreme Court in the case of Mandyala Govindu and Co. vs. CIT 1976 CTR (SC) 20 : (1976) 102 ITR 1 (SC) and relied upon the observations, "it is not, and it cannot be, disputed that the ITO before allowed the application of registration must be in a position to ascertain the shares of the partners in the losses.........." According to him, maintenance of accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtnership. It is nowhere mentioned that for constitution of valid partnership it is necessary to maintain accounts. Learned AAC has misapplied the ratio of the judgment of the Hon'ble Supreme Court in the case of Mandyala Govindu and Co. vs. CIT. There cannot be any valid partnership without an agreement to share the definite ratio of profits and losses of a business and the observations of the Hon'ble Supreme Court referred to above should be understood in that light. It is incorrect to assume that shares of the partners in the profits and losses cannot be ascertained without maintenance of account books. Distinction between maintenance of account books-regular or otherwise on one hand and accounting for the purpose of ascertaining the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directed that the ITO shall grant registration to the assessee-firm for all the four years. 7. The next ground of objection limited to the asst. yrs. 1977-78, 1978-79 and 1979-80 is in respect of estimate of profits. According to the assessee the profit for the asst. yr. 1977-78 was computed on the basis of total receipts from the business of sub-contractor as under: . Rs. Receipt for the asst. yr. 1976-77 1,20,400 Receipt for the asst. yr. 1977-78 3,29,600 . 4,50,000 Net profit @ 7.5% 33,750 Less: Already returned and assessed in the asst. yr. 1976-77 on Rs. 1,20,400 @ 5% 6,020 Balance net profit for the asst. yr. 1977-78 27,730 Con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er cent. We, therefore, find no merit on this point in the asst. yr. 1978-79. 11. In the asst. yr. 1979-80 the assessee showed receipt of Rs. 4,99,150 on which the ITO estimated net profit of 10 per cent. It failed in appeal before the AAC that the said profit should be estimated at 7.5 per cent. According to the AAC the ITO was justified in estimating the profit at 10 per cent as against 7.5 per cent in the earlier years since the assessee was in the habit of not maintaining books of account. Contention of ld. counsel for the assessee is that non-maintenance of books of account should not be taken as sufficient ground to enhance the rate of net profit from that taken in the earlier years. Further, according to him, the ITO in the asst. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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