MUNILAL SHIVNARAIN KOTHARI Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE learned Income-tax Appellate Tribunal, Jaipur, Bench, Jaipur, has referred the following question of law to this court, on an application of the assessee :

(2.) THE facts giving rise to this reference briefly stated are that for the assessment year 1968-69, the assessee, M/s. Munilal Shivnarain (hereinafter called "the assessee"), filed a voluntary return declaring income of Rs. 19,867. THE assessee also filed an application in Form No. 11, along with the original partnership deed dated July 17, 1969. On a scrutiny, the ITO found that the assessee was not a genuine partnership firm. THE grounds on which this finding was arrived at by the ITO are not relevant for our present purpose. THE ITO, therefore, refused to register the firm under Section 185 of the I.T. Act. He thereupon proceeded to assess the assessee in its status as an association of persons and finalised the assessment. THE assessee filed two appeals before the AAC, one against the order refusing to register the firm and the other against the assessment itself. THE AAC accepted the appeal against the assessment order holding that if the ITO was of the opinion that the assessee could not be granted registration, he should have taken its status as an unregistered firm and not as an association of persons without issuing fresh notice in the status of an association of persons and giving adequate opportunity of hearing to the assessee. He was further of the view that in assessing the assessee as an association of persons, the ITO exceeded his jurisdiction. He, therefore, set aside that order. As a consequence, in the appeal against the order refusing to register the firm, the learned Appellate Assistant Commissioner held that the order under Section 185 of the Act was also void.

(3.) IT may at once be stated that since the question whether the firm was genuine or not, has been left open to be decided by the learned AAC, we are not required to go into it and the only question which requires to be considered is whether, in the circumstances of the case, assuming that the assessee is not a genuine firm as held by the ITO, the assessment of the assessee could have been made taking its status as an association of persons. We shall now proceed to consider this question.