COMMISSIONER OF INCOME-TAX Vs. BAJAJ AND CO

JUDGEMENT

(1.) The assesses, a partnership firm, was granted registration and benefit of continuance of registration up to the assessment year 1969-70. Its partners were Sri Vinod Kumar and Sri Rajan Bajaj; four minors, Rajiv, Sanjiv, Geeta and Meena, were admitted to the benefits of the partnership. For the assessment year 1970-71 also, of which the previous year ended on July 15, 1969, the firm was granted the benefit of continuance of registration. Subsequently, the ITO found that a change had taken place in the constitution of the firm inasmuch as Kumari . Geeta became major on January 7, 1969. He was, therefore, of the opinion that continuance of registration, which had been allowed to the firm, was erroneous. He issued a notice under Section 186(1) of the I.T. Act and, after hearing the assessee and obtaining the previous approval of the IAC, cancelled the registration. The assessee appealed to the AAC, who, relying on the decision of this court in Ram Narain Laxman Prasad v. ITO [1972] 84 ITR 233 (All), upheld the order of the ITO. On appeal by the assessee, the Appellate Tribunal took the view that the only ground on which a certificate of registration of firm once granted can be cancelled is that the certificate has been obtained without there being a genuine firm in existence. The mere fact that the instrument of partnership may not have existed during the accounting period relevant to the assessment year for which registration is granted, is not a ground for holding that no genuine firm was in existence. This view was based on the decision of this court in Sheonath Prasad Motilal v. ITO [1963] 47 ITR 493. The Tribunal accordingly set aside the order of the ITO cancel. ling the registration of the firm. At the instance of the Revenue the following question has been referred for the opinion of the court:

(2.) The stand taken by the Department was that since one of the partners became a major during the relevant previous year, a change had taken place in the constitution of the firm and a fresh deed of partnership should have been drawn up for registration. Since that was not done, continuance of registration of the firm was erroneous. There being no genuine firm in existence, an action under Section 186(1) was competent. We find no merit in the contention. The assertion that on a minor attaining majority a change takes place in the constitution of the firm and the firm must apply for fresh registration under Section 184(8) of the Act, is based on the view taken in Ganesh Lal Laxmi Narain v. CIT [1968] 68 ITR 696 (All) and Ram Narain Laxman Prasad's case [1972] 84 ITR 233 (All). These decisions have been overruled by a Full Bench of this court in Badri Narain Kashi Prasad v. Addl. C1T [1978] 115 ITR 858, It would, therefore, not be correct to say that as a consequence of a minor attaining majority a change in the constitution of the firm takes place and the firm must apply for fresh registration.

(3.) As found by the Tribunal the genuineness of the firm was not disputed at any stage. The question is whether recourse could be had to Section 186(1) of the Act for cancellation of the continuance of the registration granted to the firm. This question came up for consideration before this court in Sheonath Prasad Motilal v. ITO [1963] 47 ITR 493. In that case Rule 6B of the Indian I.T. Rules, 1922, which was to the following effect, came up for consideration :