1. In compliance with the direction of this court under Section 66(2) of the Income-tax Act, 1922 (hereinafter called ' the Act'), the Income-tax Appellate Tribunal, Hyderabad Bench, has stated a case for our opinion on the following question of law:
' Whether, on the facts and in the circumstances of the case, there is any material for the Tribunal to come to the conclusion that the partnership consisted of only one person, namely, Yadam Chennaiah, and is the firm entitled to registration under Section 26A of the Indian Income-taxAct?'
2. For a proper appreciation of the scope of the reference, it is necessary to refer to the material facts that gave rise to the question : One Yadam Chennaiah, an agriculturist of Karumuru village in Repalle Taluk, Guntur District, joined in 1950, as a partner in a firm styled M. Bullaiah and Maddula Venkatramaiah executing road contracts. In the year 1952, he came to Chirala where his father-in-law was residing and obtained contracts from the Indian Leaf Tobacco Development Company Ltd. (hereinafter referred to as ' I.L.T.D. Co. Ltd.') for transportation of its goods. It was claimed by him that his business was actually carried on by him in partnership with three others, namely, Rosaiah, Kotaiah and Koteswara Rao, in accordance with, in the first instance, an oral agreement, later embodied in an instrument of partnership dated December 15, 1952. The firm constituted under the aforsaid instrument of partnership consisting of four partners with their profit-sharing ratios of 6 annas, 4 annas, 4 annas and 2 annas in a rupee was styled as Messrs. Madhusudana & Co. For the assessment year 1953-54 corresponding to the relevant accounting year coding with March 31, 1953, the registration of the firm under Section 26A of the Act was refused by the Income-tax Officer holding that the business was the sole concern of Sri Y. Chennaiah and the other three alleged partners were only dummies. For the assessment years 1954-55, 1955-56 and 1956-57, the assessee repeated his claim for registration but without success. The further contention of the assessee that the firm was registered with the Registrar of Firms on October 12, 1953, and the contract with the I.L.T.D. Co. Ltd., unlike in the prior year, was entered into by the firm as such in the subsequent three years, did not find favour with the Income-tax Officer who was of the view that those additional factors did not alter the real position of the assessee for the reasons stated in his order. The assessee preferred appeals to the Appellate Assistant Commissioner who rejected the appeal in so far as the assessment year 1953-54 was concerned. But, however, the appeals for the remaining three assessment years have beenallowed holding that there was a valid and genuine partnership under the Registration and Partnership Acts from the very commencement of the relevant accounting years and the contracts with the I.L.T.D. Co. Ltd. were entered into by the firm and the profits had been credited to the partners in the respective profit-sharing ratios. Aggrieved by the order of the Appellate Assistant Commissioner, the Income-tax Officer preferred appeals to the Income-tax Appellate Tribunal for the assessment years 1954-55, 1955-56 and 1956-57 whereas the assessee filed an appeal in respect of the assessment year 1953-54. The Tribunal, on a consideration of the entire material on record, agreeing with the Income-tax Officer, was of the view that there was no genuine firm in existence and the entire business belonged to Y. Chennaiah alone, for the reasons stated in its order common to all the years and refused registration for all the years in question. The reference applications under Section 66(1) by the assessee have been rejected by the Tribunal on the ground that no question of law did arise out of its order. Hence this reference at the instance of the assessee in so far as the assessment years 1954-55, 1955-56 and 1956-57 are concerned.
3. The contention of Sri T. Venkatappa, learned counsel for the assessee, is three-fold:--(1) that there is no material for the Tribunal to come to the conclusion that the partnership consisted only of one partner, viz., Yadam Chennaiah and the other partners are only dummies; (2) that the finding of the Tribunal that there was no genuine partnership in existence in the three years in question is perverse, illegal and in any event, vitiated by irrelevant and extraneous considerations and surmises; and (3) that there is ample material to sustain the finding of the Appellate Assistant Commissioner that there was in existence a genuine partnership during the relevant years of account consisting of four partners entitled for registration under Section 26A of the Act. He cited a number of authorities to which we shall refer at appropriate places.
4. Mr. K. Srinivasa Murthy, learned counsel appearing for the revenue, resisted the claim of the assessee contending, inter alia, that the finding of the Tribunal that there was no genuine partnership in existence and it is the sole business concern of Y. Chennaiah is one of fact supported by ample material and it is not open for this court to interfere with such a finding in exercise of its advisory jurisdiction under Section 66 of the Act, It was replied by the assessee's counsel that this court has jurisdiction to interfere with a finding of fact in cases where there was no evidence or it is vitiated by irrelevant and illegal considerations.
5. Before we proceed to consider the question referred for our opinion, we feel it convenient and profitable to advert to the provisions of the Act and rules relating to the grant of registration under the Act and the scope of the jurisdiction of this court under Section 66. Section 26A and Rules 2to 6B of the rules deal with registration of firms. The registration of a firm under the Act is not a common law right nor is it a matter of course. It is a privilege conferred on the assessee-firms to be granted if the statutory requisite conditions prescribed under Section 26A and Rules 2 to 6B have been satisfied by the firms which were legally and genuinely in existence in the relevant years of account. The benefit of lower rates of tax is conferred on registered firms. A registered firm prior to the amendment of Sub-section (5) of Section 23 by the Finance Act, 1956, was not liable to tax as a unit. The share income of the firm after ascertainment has to be apportioned to the respective partners in whose hands the share income was liable to be taxed. Subsequent to the amendment of 1956, the registered firm as such is also liable to tax at a lower rate. In the case of unregistered firms, the assessment will be made on the firm as an entity. Hence, the assessee-firms seek for registration in order to obtain benefits conferred on such firms. A combined reading of Section 26A and Rules 2 to 6B manifests that if the application for registration made by a firm gives the requisite particulars prescribed by the rules, the Income-tax Officer has a statutory duty and obligation to register such a firm if it is in existence as evidenced by the instrument of partnership. In order that the firm may be entitled to registration, the following essential conditions must be fulfilled :--(1) that the firm should be constituted under an instrument of partnership specifying the individual shares of the partners ; (2) that an application on behalf of and signed by all the partners furnishing the requisite particulars as per Rules 2 to 6B has to be filed before the assessment of the income under Section 23 of the Act for the relevant year; (3) that the profits or losses, if any, should have been divided or credited in accordance with the terms of the instrument of partnership ; and (4) that a genuine partnership must have been in existence as evidenced by the deed in the relevant accounting year : Vide R. C. Mitter & Sons v. Commissioner of Income-tax,  36 I.T.R. 194 ;  Supp. 2 S.C.R. 641 (S.C.). The discretion vested in the Income-tax Officer is of judicial character and he is not entitled to reject the application on suspicion or surmises. The firm as evidenced by the deed of partnership specifying the shares of the partners must be in existence during the year of account in respect of which registration is sought for and the instrument of partnership must have been executed before the close of the relevant accounting year. The profits of the firm must be ascertained amongst the partners and distributed or credited to their accounts in the books of account maintained by the firm. The firm must be a valid one. It must be said to be not in existence if it is a bogus or not a genuine one. The income-tax authorities have, therefore, to ascertain, firstly, whether the application is in the prescribed form, furnished the requisite information and material as required by the rules,and, secondly, whether a genuine and valid firm is in existence in the relevant accounting year. Where an application for registration under Section 26A is in conformity with the Rules, the jurisdiction of the Income-tax Officer is limited to ascertaining the fact whether the firm as evidenced by an instrument of partnership sought to be registered is a bogus one or void in law : vide Commissioner of Income-tax y. Sivakasi Match Exporting Co., : 53ITR204(SC)
6. It is now well settled that the jurisdiction of this court in dealing with income-tax reference is only advisory in nature but not an appellate or revisional jurisdiction. It is a special jurisdiction conferred under the Act and forms no part of the High Court's original or appellate jurisdiction. The powers to be exercised and the procedure to be followed by this court are circumscribed and regulated by Section 66 and it cannot traverse beyond the limits specified therein. The reference can be made either at the instance of the assessee or the Commissioner whoever be the aggrieved party to the decision of the Tribunal. It must be confined to only questions of law that arise out of the order of the Tribunal. Whether a question is one of law or whether a question of law does arise or not, depends upon the facts and circumstances found or admitted, of each case. The principles applicable to find out whether a question is one of'fact or law have now been well settled by the Supreme Court in Sree Meenaksni Mills v. Commissioner of Income-tax,  31 I.T.R. 28 ;  S.C.R. 691(S.C.) which are reiterated by all the subsequent decisions. The findings of fact arrived at by the Tribunal are final and binding on this court while dealing with the income-tax references. This court is not competent to answer the questions of law- that did not arise out of the order of the Tribunal. However, this court may refuse to answer any question at the time of the hearing of 'the reference if, in its opinion, it is unnecessary or academic or if there is no valid subsisting dispute relating to the payment of fax for the assessment year in question between the assessee and the income-tax department. See Commissioner of Income-tax v. Smt. Anusuya Devi, : 68ITR750(SC) . Hence no questions which are academic or unnecessary or which did not arise out of the order of the Tribunal could be agitated in and answered by this court in exercise of its advisory jurisdiction under Section 66. If the question is comprehensive, the parties would be entitled to urge all the aspects that have a bearing on the answer to the question, although those aspects have not been specifically argued before the Tribunal. This court has to look to the statement of facts for expressing its opinion on the question of questions of law referred to it by the Tribunal. This court can, no doubt, reframe the questions that really arise out of the order of the Tribunal in appropriate cases and answer them, but cannot frame questions which are not referred to it.
7. The Tribunal, being the final fact-finding authority, must arrive at its own conclusions of fact after due and proper consideration of the entire material, oral and documentary, be it for or against the assessee. The orders of the Tribunal must be speaking orders indicating the questions that arose for determination and the evidence pro and contra relating to each one of them and the findings arrived at on the evidence on record before it. The findings of fact can be reviewed by this court when they are based on no material or they are perverse and so unreasonable that no reasonable prudent person would arrive at : See Sree Meenakshi Mitts Ltd. v. Commissioner of Income-lax. The material must be valid and germane and relevant, but not irrelevant, extraneous and inadmissible in evidence. In order to find out whether there is material in support of a finding of fact arrived at by the Tribunal on a consideration of the material on record, the court must read the order of the Tribunal as a whole to determine whether every material fact for and against the assessee has been considered fairly and with due care and whether the conclusion arrived at is coloured by extraneous and irrelevant considerations or matters of prejudice. However, the Tribunal's order need not be examined sentence by sentence minutely and in detail so as to discover a minor lapse or omission, in order to find a question of law. It is the totality of the material and evidence on record but not each factor separately that should be taken into consideration to examine whether there is or is not any material in support of a finding of fact arrived at by the Tribunal, the fact-finding authority. In other words, it is the cumulative effect of all the factors relevant, germane and material for the issue that really forms the basis for the finding of fact but not each factor taken independently de hors the other material facts : See Homi Jehangir Gheesta v. Commissioner of Income-tax, : 41ITR135(SC) . Where the findings of fact reached by the Tribunal are based on suspicions, conjectures, partly legal evidence and partly surmises coloured by any irrelevant considerations or matters of prejudice, they are liable to be set aside by this court in exercise of its advisory jurisdiction : vide Dhirajlal Girdharilal v. Commissioner of Income-tax, : 26ITR736(SC) and Sree Meenakshi Mitts Ltd. v. Commissioner of Income-tax The income-tax authorities including the Tribunal are quasi-judicial authorities empowered to deal with the matters relating to income-tax assessments under the Act, but they are not courts to which the provisions of the Evidence Act are applicable. Though they are empowered to gather any evidence or material behind the back of the assessee, however, they cannot make use of the same without disclosing it to the assessee and affording a reasonable opportunity to him to explainand rebut the same, in support of conclusions arrived at by them. Where the income-tax authorities have reached the conclusions though of fact basing either wholly or partly on such material without affording reasonable opportunity, 'such findings can be interfered with by the High Court: See Dhakeshwari Cotton Mills Ltd. v. Commissioner of Income-tax, [19541 26 I.T.R. 775 ;  1 S.C.R. 947 (S.C.), Omar Salay Mohamed Sait v. Commissioner of Income-tax, : 37ITR151(SC) and Bai Velbai v. Commissioner of Income-tax,  49 I.T.R. (S.C.). 130.
8. In the light of the aforesaid discussion, we shall proceed to examine whether the question referred to us is one of law and answer the same if we find that it is one of law.
9. The finding arrived at by the Tribunal in the instant case is that in none of the three years in question, there was a genuine firm constituted under the instrument of partnership with four partners as alleged by the assessee and it was Y. Chennaiah alone who was carrying on business. As held by the Supreme Court in Krishna Flour Mills v. Commissioner of Income-tax, : 44ITR501(SC) whether a firm is genuine or not is normally a question of fact, but, however, whether there was any material for the Tribunal to hold that the partnership firm constituted under a deed of partnership was or was not genuine, is a question of law. As pointed out earlier, this court can interfere with a finding of fact if there is no material in support of it, or it is perverse, or so unreasonable that no reasonable prudent person can arrive at or if it is based on irrelevant and extraneous considerations.
10. We shall now turn to the contention of Sri Venkatappa that the other three partners are genuine partners and the finding of the Tribunal that the firm is not genuine is perverse and, in any event, based on irrelevant and inadmissible material or surmises or conjectures and is, therefore, / liable to be interfered with by this court. In order to find whether there is any material for the Tribunal to hold that the alleged three partners are only dummies, it is necessary in this context to recapitulate the facts and circumstances found by the Tribunal. The contract business was originally started by Sri Y. Chennaiah alone who obtained the contract from the I. L. T. D. Co. Ltd., for the accounting year relevant to the assessment year 1953-54 in respect of which the registration was refused and no reference application made. Even in the corresponding accounting years now in question under this reference, it was Sri Y. Chennaiah that approached the officers of the L L. T. D. Co. Ltd. and secured the contract although it was in the name of the assessee-firm. The business was admittedly started on May 1, 1952, and by the time the instrument of partnership was executed on December 15, 1952, most of the profits for the yearending with March, 1953, were earned by the assessee. As pointed out by the Income-tax Officer, from a perusal of the accounts and records, the firm did in fact practically no business after December, 1952, till the close of that accounting year. The reasons purported to have* necessitated Y. Chennaiah to take the other three partners were not found to be true by the Income-tax Officer and the Tribunal. It is stated by Sri Y. Chennaiah that he admitted the other three partners as he required finance for the business and he would not trust the clerks. The business is to transport tobacco of the I. L. T. D. Co. from Chirala to Bangalore on lorries on payment of Rs. 660 per lorry. However, Sri Y. Chennaiah was admittedly paying Rs. 570 per lorry engaged by him to transport the tobacco. The contract business to transport the tobacco of the company was found by the Tribunal to be such that no capital was required That apart, the capital purported to have been subscribed by the three alleged partners amounts to only Rs. 3,000 which is not sufficient to finance even one lorry load of tobacco. The second reason that he cannot trust the clerks was also found to be untrue as, in fact, he had employed lour clerks who were looking after the business and accompanying the lorries to Bangalore. Hence, both the reasons stated to have formed the basis for inducing Chennaiah to take the other three partners are found to be untrue and untenable by the Income-tax Officer and the Tribunal who also found that Kotaiab, an ordinary cooly in the tobacco company and Koteswara Rao who was working as a cleaner of a lorry belonging to another person, were not having the capacity even to finance the amounts alleged to have been advanced by them. The part played by the alleged partners was not believed by the Income-tax Officer and the Tribunal for the reasons stated in their orders. On examining the statements of the partners recorded by the Income-tax Officer which disclose certain material contradictions relating to the part played by them in respect of the partnership business, the Tribunal was of opinion that:
' Surely all these persons would not have been telling the truth and reading through the evidence as a whole, we are of the opinion that their general statement that it was Y. Chennaiah alone who was managing the business is true and none of them ever took any part in the business of the firm.'
11. None of the partners other than Chennaiah is found to know anything about the conduct of the business. Chennaiah was solvent enough to finance his business. The profit earned by him in the business was considerably large. The Tribunal did not believe the plea of the assessee that there was an actual division of profits among the alleged partners.
12. On a consideration of the aforesaid facts and circumstances found by the Tribunal, we have no hesitation to hold that there was sufficient materialfor the Tribunal to hold that the alleged three partners of the firm sought for registration are not genuine but bogus and the entire business is the sole proprietary concern of Y. Chennaiah. Nor are we prepared to agree with Mr. Venkatappa that the aforesaid finding of fact is perverse or based on irrelevant and extraneous considerations alone, liable to be reviewed by this court in exercise of its advisory jurisdiction. The basic facts referred to above are really relevant and germane for the decision of the point at issue before the Tribunal. Nor the facts found are inadmissible in evidence. Each fact by itself may not provide the basis for finding that the firm is not genuine ; however, if the totality of the facts and circumstances or, in other words, the cumulative effect of all the factors relevant and admissible, is taken into consideration, we must hold that the finding of the Tribunal is perfectly valid and justified. In any event, we are clear in our mind that this is not a case where it can be stated that the finding is not supported by any material, nor it is perverse or unreasonable.
13. We shall now turn to the decisions cited by Mr. Venkatappa, The decisions of the Supreme Court in Commissioner of Income-tax v. Sivakasi Match Exporting Co. and Commissioner of Income-tax v. A. Abdul Rahim & Company, : 55ITR651(SC) do not advance the case of the assessee herein as, admittedly, there was a genuine firm in existence in those cases as pointed out by the Supreme Court. The Sivakasi Match Exporting Co.'s case is an authority for the proposition that there was no prohibition under the Partnership Act. against a partner or partnerships of different firms joining together to enter into a separate partnership to carry on a different business, that a partner of a firm can enter into a sub-partnership with others in respect of his share and it will not in any way affect the validity of the partnership nor the manner in which such partner dealt with his share of the profits after allocation is relevant to the question of the validity of the partnership; and that a partner can acquire his capital from any source. The sub-sequent utility of the share income of a partner after its division is not germane or material for the purpose of the decision under Section 26A. However, the income-tax authorities are empowered to consider the fact whether there was any division or allocation of profits to arrive at such a finding. The utility of the profits in certain cases by the alleged partners would certainly be a relevant and germane factor to find out whether such a partner is genuine or bogus. In the case that came up before the Supreme Court, there was no doubt about the genuineness of the partnership. The validity of a partnership constituted by two firms was in question. But, in the instant case, the genuineness of the firm and whetherthree of the alleged partners are bogus, fell for consideration. The promissory notes produced by the alleged partners to establish their claim that the profits of the firm were in fact allocated to them, were found to be new and not genuine. The Tribunal held that they have been got up by the alleged partners in order to show that they were real partners. Though there is no specific finding by the Tribunal that the entries in the account books showing the crediting of division of profits are false, it can be inferred from a reading of the order. The Tribunal was of the view that there was no division of profits among the partners which was a material requisite condition for the grant of registration under Section 26A.
14. The case of A. Abdul Rahim & Co. is an authority for the proposition that the firm, if it was genuine and in existence as evidenced by the instrument of partnership, is entitled for registration notwithstanding the fact that one of the partners was found to be a benamidar for another. In such case, the real beneficiary of the share income received from the firm would be made liable to pay the income-tax in respect of such share income when taken along with his other income. Where two or more of the remaining partners are found to be benami, such firm is still entitled for registration. However, where the entire partnership business is found to be the proprietary concern of one individual, it can, under no circumstances, be held that a genuine firm is in existence entitled for registration under the Act. It is pertinent to notice that the decision of this court in Hiranand Ramsukh v. Commissioner of Income-tax,  47 I.T.R. 568 (A.P.) wherein it was held that the partnership was not entitled for registration as two of the partners constituting the alleged firm were not genuine but were mere dummies shown as partners with a view to reduce the incidence of tax, was approved by the Supreme Court. However, it may be noticed that the Supreme Court did not approve some observations of this court not relevant for the issue now before us.
15. The decision of the Mysore High Court in City Tobacco Mart v. Commissioner of Income-tax,  64 I.T.R. 478 (Mys.) is a case where registration was granted to a firm constituted by Mohamed Khan, his wife, his son and his two employees. In that case, three of the partners were working partners and one of the partners (second partner) was found to be a benamidar of the first partner. The non-contribution of any capital by a partner is certainly not a valid ground to refuse registration. Partners may be taken as working partners without even any investment of capital. There may be sleeping partners who did not take part in the conduct of the business. Still nonetheless the firm will be entitled to registration if there are more than two genuine partners even though one or other is found to be benamidar. Hence, that case also does not render any assistance to the plea of the assessee herein.
16. In United Paid Construction Co. v. Commissioner of Income-tax,  59 I.T.R. 424 (M.P.) it was held that the presence of a sleeping partner who did not know the details of the partnership business nor withdraw the profits credited to his share, will not disentitle the partnership from getting registration under Section 26A. That case is, therefore, not applicable to the present case.
17. The next case we may refer to is that of the Madras High Court in P.A.C. Ratnaswamy Nadar & Sons v. Commissioner of Income-tax,  46 I.T.R. 1148 (Mad.) Therein registration was granted to a firm constituted by a father and his sons holding that mere relationship of the partners inter se is not a ground to refuse registration if there was a valid genuine firm in existence as evidenced by the instrument of partnership.
18. In S.S.A. Gangamirthammai & Co. v. Commissioner of Income-tax, : 74ITR473(Mad) a partnership firm constituted by four ladies who had appointed two others to maintain the business was held to be entitled for registration under the Act.
19. It may be pointed out that none of the cases cited by Mr. Venkatappa are on all fours with the facts of the present case and they are distinguishable on facts. They are justified on the facts of those cases.
20. For all these reasons stated, we therefore answer thai there is material for the Tribunal to hold that the partnership consisted of only one person, i.e., Y. Chennaiah, and the firm is not entitled for registration under Section 26A of the Act. The assessee shall pay the costs of this reference to the Commissioner of Income-tax, Advocate's fee is fixed at Rs. 300.