SARAF BROTHERS Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is an application under S. 256(2) of the INCOME TAX ACT, 1961 (hereinafter referred to as " the Act"), praying that the Tribunal, Jaipur Bench, Jaipur, may be directed to state the case and refer the following four questions arising out of the order of the Tribunal dated December 20, 1973, to this Court for decision :

(2.) ON November 27, 1964, a deed of partnership was executed by four persons, namely, Sitaram, Smt. Shanti Devi, w/o Prahlad Rai, Smt. Parmeshwari Devi, w/o Sukhdev, and Smt. Sohini Devi, w/o Mohanlal, with the stipulation that they shall share the profits and losses of the partnership business in the name of Saraf Bros., in equal share. It may be mentioned here that the last three persons are wives of the brothers of Sitaram and that all the four brothers were partners in the firm Gauri Dutt jai Narain. The firm was registered with the Sub Registrar of Firms at Ramgarh on December 31, 1964. Then, an application for registration of the firm under S. 184 of the Act was submitted before the ITO, Sikar. The matter was transferred to the ITO, Special Ward I, Jaipur, and by an order dated November 19, 1970, the ITO concerned refused to register the firm, Saraf Bros., on the ground that there was no genuine partnership. The ITO, therefore, clubbed the income of Saraf Bros. with the income of Gauri Dutt jai Narain on the basis that the business of Saraf Bros. was essentially a part of the business of Gauri Dutt jai Narain. However, as a precautionary measure, he also made an assessment order in respect of Saraf Bros., as an unregistered firm relating to the asst. year 1966 -67. Saraf Bros. filed an appeal against the order passed by the ITO under S. 185(1) of the Act before the AAC'C' Range, Jaipur, who, by his order dated April 12, 1972, allowed the appeal holding that there was no material on record to establish that a genuine firm had not come into existence as a result of the partnership deed dated November 27, 1964, and he came to the conclusion that Saraf Bros. was entitled to registration under S. 185(1) of the Act.

(3.) THEREUPON , the assessee, Saraf Bros., filed two reference applications before the Tribunal, Jaipur Bench, Jaipur, arising out of the consolidated order of the Tribunal, relating to the assessment year 1966 -67. By reference Application No. 135 of 1973 -74, the following four questions were desired by the assessee to be referred to this Court :