1. This reference is at the instance of the assessee in which the following three questions have been referred :
'(1) Whether, on the facts and in the circumstances of the case, notice under section 148 of the Income-tax Act, 1961, is bad in law and without jurisdiction ?
(2) Whether, on the facts and the the circumstances of the case, and considering the agreement of partial partition and other material on record it can be said that an association of persons was formed ?
(3) Whether, on the facts and in the circumstances of the case and having regard to the partial partition, it can be said that the share income from M/s. Sonasao Rukhabsao & Co. was diverted by overriding title ?'
2. Question No. 1 is not pressed, and hence only question Nos. 2 and 3 survive for consideration. The relevant facts giving rise to this reference are as under : There was a HUF of Shantikumar Maganlal Jain consisting of himself, his wife, Vijaybai, and minor sons Uday, Alok and Rajnish. Shantikumar was a partner in the firm of M/s. Sonasao Rukhabsao and Company. There was a partial partition of the HUF of Shantikumar Jain, which was reduced to writing on October 22, 1968. It was agreed between the major members of the HUF that the interest of the HUF in the firm of M/s. Sonasao Rukhabsao and Company should be partitioned and each of the members of the family would get one-fifth share and Shantikumar would continue to be in the firm as partner and profit and loss of every year would be apportioned amongst the members of the family equally in the books of the HUF.
3. By an order under s. 171(3) of the I.T. Act, 1961, dated March 17, 1973, the partial partition was accepted.
4. It appears that during this year no intimation was given to the firm of M/s. Sonasao Rukhabsao and Company about the partial partition, though in the HUF account the partition was recorded. Principally, on the basis of the last clause of the agreement relating to continuation of Shantikumar as partner and the conduct of not giving intimation to the firm about the partial partition, the Tribunal came to the conclusion that the members of the erstwhile HUF of Shantikumar constituted an association of persons.
5. Now, it cannot be disputed that by mere partition and division of share but in the absence of unity of purpose for a common venture, there cannot be an association of persons. The recital in the agreement that Shantikumar shall continue to be a partner in the said firm and profit and loss of every year shall be apportioned amongst the members of the family equally in the books of the HUF, in the context of the whole agreement, cannot even remotely suggest the intention to have a unity of purpose. Similarly, it is difficult to see how non-intimation to the partnership is a circumstance against the assessee, especially when in the books of the HUF relevant entries are made. We have already decided this point in almost similar circumstances in the following cases :
(1) CIT v. Indramohan Sharma (No. 1) : 138ITR696(Bom) ,
(2) CIT v. Indramohan Sharma (No. 2) : 138ITR699(Bom) and
(3) CIT v. M. D. Kanoria : 137ITR137(Bom) .
6. Under the circumstances, question No. 2 is answered in the negative and in favour of the assessee, and question No. 3 is answered in the affirmative and in favour of the assessee. The Department to pay the costs of the assessee.