COMMISSIONER OF INCOME-TAX Vs. NITYANAND DEOKINANDAN

JUDGEMENT

(1.) At the instance of the Commissioner of Income-tax, the Income-tax Appellate Tribunal, Allahabad, has in the case of the assessee, Nityanand Deokinandan, Kanpur, for the assessment years 1972-73 and 1973-74, stated the case and referred the following questions for the opinion of this court:

(2.) The statement of the case submitted by the Tribunal reveals that the assessee-firm was allowed registration under Section 185 of the I.T. Act for the assessment year 1967-68, and that thereafter it continued to be treated as a registered firm right up to the assessment year 1973-74. On perusal of assessment records the Commissioner found that when on November 3, 1966, the assessee submitted its application for registration for the year 1967-68, in Form No. 11 A, there was a discrepancy regarding the shares of different partners as mentioned in the partnership deed and the shares of partners as shown in the application for registration made in Form No. 11 A. In each of the years relevant to the assessment years 1967-68 to 1973-74, the account books of the assessee showed that the profits in the firm had not been distributed amongst its partners in accordance with the shares as mentioned in Form No. 11A. Being of the view that various orders passed by the ITO registering the firm for the assessment year 1967-68, and treating the registration as continuing for the subsequent years, were erroneous and prejudicial to the interests of the revenue, the Commissioner required the assessee to show cause why the registration granted to it under Section 184(7) of the I.T. Act for the assessment years 1972-73 and 1973-74 be not cancelled. No action was taken by the Commissioner in respect of the years prior to 1972-73, as the action taken by the ITO in respect of those years fell beyond the period of two years, period of limitation for the purpose, laid down in Section 263(2) of the I.T. Act (hereinafter referred to as "the Act").

(3.) The assessee appeared before the Commissioner and showed cause. It maintained that throughout the profits had been divided amongst the partners in accordance with the shares as shown in the partnership deed on the basis of which the firm had been registered by the ITO for the year 1967-68 (original partnership deed not being available, a copy of the same was obtained by the assessee from the bank and was produced for the perusal of the Commissioner). It contended that there was a mistake in Form No. 11A filed by the assessee at the time of making the prayer for registration of the firm for the year 1967-68. The Commissioner was not satisfied that the copy obtained from the bank and produced by the assessee before him was a copy of the document on the basis of which the firm had been registered for the year 1967-68, and concluded that its registration for the year 1967-68, as also the renewals in subsequent years, were granted on wrong assumptions and that treating the firm as continuing to be registered was prejudicial to the interests of the revenue. The Commissioner accordingly exercised his powers under Section 263 of the Act and cancelled the renewal of registration granted to the assessee-firm for the assessment years 1972-73 and 1973-74 and directed the ITO to reframe the assessments for each of the two years in accordance with law.