JEWAT LADHUBHAI SHAH Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) BY this reference, at the instance of the assessee, the following two questions of law have been referred to us, under S. 256(1) of the IT Act, 1961, for our opinion :

(2.) THE material facts relevant for determination of the controversy in this case are as follows :

(3.) THE assessee appealed to the AAC who rejected the appeals and affirmed the orders of the ITO. While doing so, he held the partnership deed to be illegal and invalid. He also held that a firm based on a partnership deed which is tainted by illegality cannot be considered a genuine firm and, therefore, the ITO was justified in cancelling the registration already granted under S. 186(1) for the asst. year 1973 74. In the appeals for asst. yrs. 1974 75 and 1975 76 also, it was held that there was no valid partnership in existence during the previous years relevant to the above assessment years. The assessee went in further appeal to the Tribunal. The Tribunal also rejected the appeals of assessee for all the three assessment years and affirmed the order of the ITO and the AAC. While doing so, the Tribunal held that during the previous year corresponding to the asst. yr. 1973 74, there was no genuine firm in existence as registered. The Tribunal also held that the deed of partnership dt. 9th Nov., 1971, on the strength of which registration was sought for by the assessee and granted by the ITO for the asst. year 1973 74, being an invalid deed of partnership and the registration granted for that year having been cancelled on the basis of subsequent information, the assessee was not entitled to the benefit of continuation of registration for the two subsequent assessment years. Hence this reference at the instance of the assessee.