MAHAVIR INDUSTRIAL WORKS Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal, Indore, at the instance of the assessee, has made this reference under Section 256(1) of the I.T. Act, 1961, to answer the following question :

(2.) THE facts giving rise to this reference as per the statement furnished by the Tribunal may be stated in brief thus : On the strength of a partnership deed executed on October 20, 1971 (annexure-E), between Smt. Darshandevi, w/o Shri Kailashchandra Agrawal, and Shri Rajendrakumar and Shri Ashok Kumar, sons of Shri Kailashchandra Agrawal, the assessee-firm, M/s. Mahavir Industrial Works, Indore, claimed registration of the firm under Section 185 of the I.T. Act, 1961, for the accounting years 1973-74 to 1976-77. THE ITO examined the claim and found that Shri Kailashchandra, husband of Shrimati Darshandevi and father of the other two partners, who was given the general power of attorney dated October 25, 1971 (annexure-F), was the de facto proprietor of the assessee-firm and the assessee-firm was only a benami concern of Shri Kailashchandra. THE ITO, therefore, held that the said firm was not genuine and was not entitled to the grant of registration for the accounting year 1973-74. THE ITO, however, granted registration on a protective basis on the ground that Kailashchandra was not a partner in the firm. This order of the ITO was, however, cancelled by the Commissioner under Section 263 of the I.T. Act and he directed the ITO to pass a fresh order.

(3.) AGGRIEVED by the order of the AAC, the Department filed an appeal before the Tribunal which after considering the contentions of the parties came to the conclusion that no genuine firm came into existence and the entire business was being run by Kailashchandra Agrawal as the sole proprietor of the firm. It is in these circumstances that this reference has been made to this court at the instance of the assessee.