1. JUDGMENT : R. R. Rastogi, J. - The IT Appellate Tribunal, Delhi Bench B, New Delhi has referred the following questions for the opinion of this Court :
"1. Whether on the facts and in the circumstances of the case, were the AAC and the IT Appellate Tribunal legally correct in admitting the amendment deed dt. 19-8-1969 ?
2. Whether on the facts and in the circumstances of the case, the provisions of rr. 22(2), 22(3) and 24 of the IT Rules, 1962 were not complied with by the assessee and was the assessee entitled to the benefit of registration u/s 185 of the IT Act, 1961 ?
3. Whether on the facts and in the circumstances of the case, the assessees failure to divide the profits in the profit sharing ratio specified in the partnership deed dt. 19-8-1969 is fatal to the assessees claim of benefit of registration as per its application in Form 11-A filed on 30-3-1970 ?"
The facts briefly stated are that the respondent M/s. Lalta Pd. Bishambhar Saran, Kashipur, a partnership firm was originally constituted under a deed of partnership dt. 1-4-1959. It comprised of four partners, viz., Bishambhar Saran, Ved Prakash, Dharam Prakash and Om Prakash. This firm was granted registration and the benefit of continuance of registration till the asst. yr. 1969-70. On 18-7-1969 Bishambhar Saran died and S/s Om Prakash and Dharam Prakash left the firm. The firm was then reconstituted and a deed of partnership was executed on 19-8-1969. It comprised of the surviving partner, Ved Prakash and Smt. Chameli Devi, widow of Bishambhar Saran, Vishu Prakash, was admitted to the benefits of the partnership. The shares of the partners in the profit and loss were as under :
Name of the partner
1. Ved Prakash
2. Smt. Chameli Devi
3. Vishnu Prakash
2. For the assessment year 1970-71 with which we are concerned in this reference application for registration in Form No. 11 duly signed by Ved Prakash and Smt. Chameli Devi was given on 31-3-1970. The original partnership deed was attached with the application. The ITO on a scrutiny of the accounts found that the profits had been divided for the period from 18-7-1969 to 31-3-1970 in the ratio of 33 1/3% each which was not in accordance with the shares specified in the partnership deed. He also found that for the first period i.e. 1-4-1969 to 18-7-1969 no declaration in From No. 12 had been given. Accordingly, he refused to grant registration to the assessee firm for this assessment year.
3. Aggrieved the assessee filed an appeal before the AAC and produced before him an amended deed of partnership which had been executed on 19-8-1969. According to this deed the shares of the two partners and the minor in the profits were 33 1/3% each and in the losses the shares of the two adult partners were 50% each and that of the minor nil. The AAC admitted that document and held that the profits had been divided quite correctly in accordance with the shares specified in the amended deed and the assessee was entitled to registration. He also found that the ITO had not doubted the genuineness of the firm. The assessment had also not been made u/s 144 of the Act and if at all, there was only an irregularity in the matter of filing of the application for registration and for that reason registration could not be refused.
4. The revenue took up the matter in appeal before the Tribunal. The Tribunal agreeing with the AAC, held that it was merely due to a mistake that the assessee could not file a copy of the aforesaid deed before the ITO. The genuineness of the firm had not been doubted. It was evidenced by an instrument of partnership and the profits had been divided in accordance with the shares specified in the deed as amended subsequently and the assessee was, thus, clearly entitled to registration. It the result, the appeal was dismissed.
5. Now at the instance of the revenue the questions indicated above have been referred to this Court.
We may take up questions 1 and 3 together. As noted above, it has been found by the Appellate Tribunal that it was a mere inadvertent omission on the part of the assessee that it could not file the amended partnership deed dt. 19-8-1969 before the ITO. This was a pure finding of fact which is binding on us. It cannot be said, therefore, that the AAC erred in admitting that the discretion exercised by the appellate authority in admitting this document was not justified. In view of this amended deed, there was no error in the division of profits.
6. As regards question No. 2 sub-r. (1) of r. 22 requires that an application for registration of a firm for the purpose of the Act shall be made in accordance with the provisions of sub-rr. (2) to (5). Sub-r. (2) requires that where the application is made before the end of the relevant previous year and in case no change had taken place in the constitution of the firm, the application shall be made in From 11 and shall be accompanied by the original instrument evidencing the partnership together with a copy thereof. In case any change or change in the constitution of the firm or shares of these partners have taken place the application shall be made in From 11 A and shall be accompanied by the original instrument along with the certified copy thereof, if for some reason the original cannot be produced. Sub-r. (3) says that where after the date of making an application u/sub-r. (2) any change or changes in the constitution of the firm or the shares of the partners have taken place during the previous year a fresh application shall be made after each such change takes place. Coming to r. 24, it requires that the declaration to be furnished u/sub-s. (7) of s. 184 shall be in From No. 12 and shall be verified in the manner indicated therein and shall be signed by the persons concerned in accordance with sub-r. (5) of r. 22.
7. From the order of the Appellate Tribunal it does not appear that these aspects were specifically urged before it. It has not dealt with the same. All that was urged was that r. 22(3) and r. 24 had not been complied with. The Appellate Tribunal has not given any finding on these contentions specifically. It cannot be said, therefore, that this question arises out of the order of Tribunal. Theremedy of the revenue was to file an application for rectification before the Tribunal itself. However, in view of the finding given by the Tribunal that the omission to produce the amended deed was due to an inadvertent mistake, it cannot be said that there was any non-compliance of sub-rr. (2) and (3) of r. 22.
8. Accordingly, we answer questions 1 and 3 in the affirmative, we in favour of the assessee and against the revenue. Question No. 2 does not arise out of the Tribunals order and hence it is returned unanswered. The assessee is entitled to costs which we assess at Rs. 250.