SHUBHAM FABRICS Vs. INSPECTING ASSISTANT COMMISSIONER

JUDGEMENT

(1.) THE petitioner in this writ petition prays for quashing the notice dated February 16, 1988, issued under section 148 of the Income-tax Act, 1961 (briefly "the Act, 1961"), the notice dated February 8. 1988, issued under section 186 of the Act and directions issued by the Inspecting Assistant Commissioner, "C" Range, Kanpur, under section 144A of the Act, which are annexures "2", "1" and "6", respectively, to the writ petition.

(2.) THE brief facts are that the firm, Shubham Fabrics, Swarup Nagar, Kanpur, engaged in the business of manufacturing, processing, dyeing, bleaching, printing ready-made or semi ready-made garments and having allied business, came into existence in the assessment year 1985-86 and the same obtained registration. As there was a change in the constitution of the said firm in the assessment year 1986-87, which is relevant to the instant writ petition, inasmuch as four partners, two of them representing their Hindu undivided families and the remaining two representing their trusts having minor beneficiaries were introduced, the petitioner (hereinafter referred to as "the firm" applied for registration in Form No. 11A under section 187 of the Act and filed its return of income in the status of a registered firm for the assessment year 1986-87. THEreupon, respondent No. 2 issued notice to the firm under section 186 (annexure "1" to the writ petition), calling upon the firm to explain why the registration should not be cancelled. In the notice issued under section 148 (annexure "2" to the writ petition), the Income-tax Officer stated that during the course of the assessment proceedings, it had been noticed that a genuine firm was not in existence. He had this doubt, because the minors were the beneficiaries in the two trusts which were represented by the trustees in the firm. That was why the firm was called upon to file the return in the status of an association of persons. THEreafter, the firm made a reference to the Inspecting Assistant Commissioner under section 144A(1) seeking his directions for the guidance of the Income-tax Officer on the questions :

(3.) A counter-affidavit has been filed on behalf of respondent No. 2 stating in paragraph 11 that, ultimately, the minors shall be saddled with the losses, which shall be in contravention of the Indian Partnership Act and the Contract Act, because in the partnership deed nothing has been mentioned for the share of the two partners representing the trusts in the firm.