SAFARI WINES Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) TWO questions are referred for the opinion of this court under section 256(1) of the Income-tax Act. The questions are :

(2.) The assessment year concerned herein is 1975-76. A partnership deed was executed on 29/07/1974, with effect from 1/05/1974, according to which there were three major partners, viz., R. Gopal, V. Chandrasen Rao and R. Eswaraiah. Two minors, viz., Baby Anita and Master Pawan Kumar, were admitted to the benefits of the partnership. On 10/01/1975, the firm was reconstituted with effect from 1/01/1975. Besides the three major partners aforesaid, one more major partner, viz., Vijayakumar Mehta, was taken in. The two minors earlier admitted continued as such besides them, three more minors, viz., Baby Avani Mehta, Master Apoorva Mehta and Master Sandeep Mehta, were admitted to the benefits of the partnership. The Income-tax Officer, after noticing that the applications filed in Form Nos. 11 and 11A were defective inasmuch as the guardians of the minors admitted to the benefits of the partnership had not given their consent to the partnership deed, called upon the assessee to file the codicil. The assessee, however, contended that the minors were admitted with the knowledge of their guardians and it was not necessary to produce the codicil. But in respect of the two minors, Baby Anita and Master Pawan Kumar, letters of their guardians confirming their consent to their admissions were filed. The income-tax Officer, however, did not consider this letter as adequate and held that in spite of giving an opportunity, the assessee has not filed the codicil and declined to grant registration on the ground that it was not genuine. On appeal, the Appellate Assistant Commissioner was of the opinion that though the Income-tax Officer was not justified in not accepting the letter of the guardian of Baby Anita and master Pawan Kumar, he was of the opinion that not filing the letter of the guardian of the three other minors was sufficient to justify refusal of registration for the period 1/01/1975, onwards. For the same reasons, he was of the opinion that refusal of registration to the previous firm which was in existence before 1/01/1975, was not proper. The assessee as well as the Department both filed appeals against the orders of the Appellate Assistant commissioner before the Income-tax Appellate Tribunal.

(3.) The contention put forward by the Department was that there was only a change in the constitution under the deed dated 10/01/1975, that it was only a case where a single firm was in existence for the entire period and that, therefore, registration could not have been granted even for the first period, i.e., up to 31/12/1974. The assessees contention, however, was that if there was any defect in the partnership deed, the Income-tax Officer should have intimated the same to the assessee within one month of the filing of the application for registration and that, in any event, since there were differences between partners, it has not been possible to produce the consent letter of the guardian. The Appellate Tribunal, however, held, following the decision of the Allahabad High Court in Addl. CIT v. Uttam Kumar Pramod Kumar [1978] 115 ITR 796 [FB], that inasmuch as the guardians of the minors have not signed the partnership deed not have they signed the application for registration, registration could not have been granted to the firm. The Tribunal also accepted the contention of the Department that the granting of registration for the period up to 31/12/1974, was equally bad. Accordingly, it dismissed the appeal filed by the assessee and allowed the appeal filed by the Department. Thereupon the assessee applied for and obtained this reference.