MUKHI MULCHAND SITALDAS Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is an application under S. 66(2) of the Indian IT Act, 1922, by the assessee, for requiring the Tribunal, Nagpur Bench, Nagpur, to refer a certain question of law said to arise out of its order in Income -tax Appeal No. 16572 of 1966 -67, dated May 30, 1970, to the High Court for its opinion, viz. :

(2.) HERE , by this application under S. 66(2) of the Act, the assessee had tried to introduce various other questions ; but it is not necessary for us to deal with such additional questions.

(3.) WHEN a document purporting to be an instrument of partnership is tendered on behalf of a firm and an application is made for registration of the firm as evidenced by such instrument, the ITO is entitled to inquire whether the instrument is intended by the parties to have real effect as governing their rights and liabilities inter se in relation to the business or whether it has been executed by was of pretence in order to escape liability for tax and without intention that its provisions should in truth have effect as defining the rights of the parties as between themselves : Kanga and Palkhivala's Income Tax, seventh edition, volume I, page 1016. Here, on the facts found by the Tribunal, it is amply clear that when the partners of the firm applied for registration for the asst. year 1959 -60, vide their application dated January 30, 1958, which was received in the office of the ITO, Bilaspur, on February 6, 1958, the ITO required the firm to produce all its partners, but it was stated before the ITO that the present whereabouts of all the partners were not known. The ITO sent a registered letter by post to Chijumal, a partner of the firm, but the same was not served. Another partner, Dhalchand, was also not produced before the ITO, though required. During the course of the assessment proceedings, the aforesaid Chijumal appeared before the ITO on October 17, 1964, in his capacity as a complainant, and stated that the firm was engaged in suppression of sales and evasion of income -tax and sales tax.