BILLIMORA ENGINEERING MART Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) AT the instance of the assessee, the following two questions have been referred to us for our opinion :

(2.) A few relevant facts need be noticed in order to appreciate, the rival contentions urged in support and opposition of this reference. The assessment year is 1970 71 and the relevant year has ended on 31st March, 1970. It should be noted that the assessee firm commenced its partnership business on 1st Sept., 1969. The partners of the assessee firm filed an application for registration in Form No. 11 as required under r. 22 of the IT Rules, 1962, on 3rd Nov., 1969. It should be also recalled that it is common case that the deed of partnership was executed on 8th Jan., 1970. In other words, the application for registration was not accompanied by the original or certified copy of the deed of partnership. It has been found that the assessee firm had filed the original partnership deed along with the copy thereof after 8th Jan., 1970, and before August, 1972, though its exact date was not known as there was no receipt stamp on the said document. The partnership deed is found to have been drafted on two stamp papers of Rs. 50 each; one of which was purchased on 1st Sept., 1969, and another was purchased on 24th Dec., 1969. As stated above, the partnership deed was executed on 8th Jan., 1970, i.e., after the application for registration was filed on 3rd Nov., 1969.

(3.) IN reply to the aforesaid show cause notice, the assessee submitted that the evidence in the nature of instrument of partnership need not be contemporaneous and could be executed at any time up to the end of the accounting year provided there was an oral agreement in that behalf. In support of this submission, the assessee relied on the decision of the Supreme Court in Mitter & Sons vs. CIT (1959) 36 ITR 194 (SC) : TC33R.915. The assessee also pointed out that under s. 185(2), the ITO ought to have given an opportunity to the assessee to put its application in order within the prescribed statutory period. However, as the assessment was not completed by the time it submitted its reply to the show cause notice, a fresh application in Form No. 11 enclosing the instrument of partnership was sought to be submitted along with the said reply. It should be noted that inadvertently the assessee did not enclose the fresh application as stated in the said letter, and the fresh application along with the necessary enclosures was actually filed somewhere on 21st March, 1973, under cover of a letter of even date. Meanwhile, the ITO by his letter of 12th March, 1973, in reply to the explanatory letter aforesaid of the assessee dt. 22nd Nov., 1972, pointed out that the assessee was under an obligation to comply with the mandatory requirement prescribed under r. 22 of the IT Rules, 1962, inasmuch as the instrument of partnership was not annexed with the original application for registration filed on 3rd Nov., 1969, and, therefore, it was liable to be rejected. It is in further reply to this letter of the ITO that the assessee pointed out in his aforesaid letter of 21st March, 1973, that the necessary requirements of r. 22 have been carried out inasmuch as the application for registration was filed on 3rd Nov., 1969, and the partnership deed was brought into existence on 8th Jan., 1970, that is, before the close of the accounting year. It is by way of enclosure to this letter that it filed a fresh application which it has inadvertently failed to enclose with its previous letter of 22nd Nov., 1972. The ITO was not satisfied with the explanation of the assessee as he was of the opinion that there was no valid application moved before him for registration as the failure on the part of the assessee to annex the instrument of partnership constituted a basic defect which rendered the assessee's claim for registration unsustainable. The ITO emphasised that on the day on which the application was made, that is, 3rd Nov., 1969, the deed of partnership was not in existence and, therefore, it could not have annexed any instrument to evidence the partnership at the date of the application as required under the rules. He, therefore, rejected the application for registration.