Commissioner of Income Tax vs Kanhaya Lal Ram Chand (No. 1)

Gokal Chand Mital, J.—Kanhaya Lal Ram Chand was granted registration for the assessment year 1970-71. The Revenue challenged the registration on the basis that the so-called sub-partnership was not genuine. Ultimately, the matter came to this court in Income Tax Reference No. 45 of 1975 and it was held that the sub-partnership between Kanhya Lal and Ram Chand was not genuine and thus was not entitled to registration. This case is reported as Commissioner of Income Tax Vs. Kanhayalal Ram Chand, .

Since initial registration was granted for the assessment year 1970-71, the firm applied for continuation of registration for the assessment year 1971-72 and continuation of registration was granted. This matter, at the instance of the Revenue, went up to the Income Tax Appellate Tribunal, Chandigarh, and since by that time the decision of this court for the assessment year 1970-71 had not been rendered, the Tribunal also decided in favour of the assessee. The Tribunal declined the reference and on a petition filed by the Revenue u/s 256(2) of the Income Tax Act, 1961 (for short "the Act"), this court in Income Tax Case No. 22 of 1977, by order dated February 27, 1984 ( Commissioner of Income Tax Vs. Kanhaya Lal Ram Chand (No. 2), ), directed the Tribunal to refer the following question :

"Whether, on the facts and in the circumstances of the case and in view of the opinion of the High Court in its judgment dated December 10, 1976, in Income Tax Reference No. 45 of 1975 Commissioner of Income Tax Vs. Kanhayalal Ram Chand, , the Appellate Tribunal is right in law in holding that the assessee-firm is entitled to a finding in its favour u/s 184(7) of the Income Tax Act, 1961, in respect of the assessment year 1971-72 ?"

By the time the aforesaid order was passed, this court had found the sub-partnership to be not genuine and, therefore, not entitled to registration for the assessment year 1970-71.

In view of the decision of this court for the assessment year 1970-71, it has to be taken that there was no registered partnership and, therefore, continuation of registration for the assessment year 1971-72 does not arise. Accordingly, the referred question is answered in favour of the Revenue, that is, in the negative.

Since the assessee had applied for continuation of registration in view of the fact that for the earlier assessment year registration had been granted at that time, in view of the changed circumstances it will be open to the assessee to apply to the Income Tax Officer for fresh registration for the assessment year 1971-72 and seek condonation of delay, but this would be subject to all objections which the Revenue may like to raise to oppose the registration.

With the aforesaid observations, the reference stands disposed of with no order as to costs.