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Saraf Brothers Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtRajasthan High Court
Decided On
Case NumberD.B. Civil Misc. Income-tax Petition No. 188 of 1975
Judge
Reported in[1987]166ITR414(Raj)
ActsIncome Tax Act, 1961 - Sections 256(2)
AppellantSaraf Brothers
RespondentCommissioner of Income-tax
Appellant Advocate N.D. Mantri, Adv.
Respondent Advocate S.M. Mehta, Adv.
Excerpt:
- - these were precisely the questions in respect of which the assessee sought to obtain a reference to this court by means of his reference application no. section 185(1) of the act provides that on receipt of an application for the registration of a firm under section 184, the income-tax officer shall inquire into the genuineness of the firm and its constitution as specified in the instrument of partnership and shall grant registration if he is satisfied that there was during the previous year in existence a genuine firm with the constitution so specified......facts and in the circumstances of the case, the tribunal was right in holding that the business of saraf brothers belonged to m/s gauri dutt jai narain ? 2. whether there was proper evidence and material upon which it was open to the tribunal to come to the decision that the business of saraf brothers was benami of gauri dutt jai narain ? 3. whether, on the facts and in the circumstances of the case, the tribunal was right in upholding the addition of rs. 5,000, the deposit of nathu ram mangalchand-ka ? 4. whether the burden of proving the deposit of rs. 5,000 was properly discharged by producing the confirmation letter from stranger creditor of shri nathu ram mangalchand-ka for his deposit of rs. 5,000 with the assessee ?' 2. the facts which have given rise to the filing of the present.....
Judgment:

Dwarka Prasad, J.

1. This is an application under Section 256(2) of the Income-tax Act, 1961 (hereinafter referred In as 'the Act'), praying that the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, may be directed to state the case and refer the following four questions arising out of the order of the Tribunal dated December 20, 1973, to this court for decision:

'1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the business of Saraf Brothers belonged to M/s Gauri Dutt Jai Narain ?

2. Whether there was proper evidence and material upon which it was open to the Tribunal to come to the decision that the business of Saraf Brothers was benami of Gauri Dutt Jai Narain ?

3. Whether, on the facts and in the circumstances of the case, the Tribunal was right in upholding the addition of Rs. 5,000, the deposit of Nathu Ram Mangalchand-ka ?

4. Whether the burden of proving the deposit of Rs. 5,000 was properly discharged by producing the confirmation letter from stranger creditor of Shri Nathu Ram Mangalchand-ka for his deposit of Rs. 5,000 with the assessee ?'

2. The facts which have given rise to the filing of the present reference application, may be briefly stated.

3. On November 27, 1964, a deed of partnership was executed by four persons, namely, Sitaram, Smt. Shanti Devi, w/o Prahlad Rai, Smt. Parmeshwari Devi, w/o Sukhdev, and Smt. Sohini Devi, w/o Mohanlal, with the stipulation that they shall share the profits and losses of the partnership business in the name of M/s. Saraf Brothers, in equal share. It may be mentioned here that the last three persons are wives of the brothers of Sitaram and that all the four brothers were partners in the firm M/s. Gauri Dutt Jai Narain. The firm was registered with the Sub-Registrar of Firms at Ramgarh on December 31, 1964. Then, an application for registration of the firm under Section 184 of the Act was submitted before the Income-tax Officer, Sikar. The matter was transferred to the Income-tax Officer, Special Ward I, Jaipur, and by an order dated November 19, 1970, the Income-tax Officer concerned refused to register the firm, M/s. Saraf Brothers, on the ground that there was no genuine partnership. The Income-tax Officer, therefore, clubbed the income of M/s. Saraf Brothers with the income of M/s. Gauri Dutt Jai Narain on the basis that the business of M/s. Saraf Brothers was essentially a part of the business of M/s. Gauri Dutt Jai Narain. However, as a precautionary measure, he also made an assessment order in respect of M/s. Saraf Brothers, as an unregistered firm relating to the assessment year 1966-67. M/s. Saraf Brothers filed an appeal against the order passed by the Income-tax Officer under Section 185(1) of the Act before the Appellate Assistant Commissioner of Income-tax, 'C' Range, Jaipur, who, by his order dated April 12, 1972, allowed the appeal holding that there was no material on record to establish that a genuine firm had not come into existence as a result of the partnership deed dated November 27, 1964, and he came to the conclusion that M/s. Saraf Brothers was entitled to registration under Section 185(1) of the Act.

4. The Income-tax Officer, thereafter, filed two appeals before the Income-tax Appellate Tribunal, Jaipur Bench, apparently, one against the order of the Appellate Assistant Commissioner directing the registration of the firm, M/s. Saraf Brothers, and the other relating to the assessment of the aforesaid firm in respect of the assessment year 1966-67. The Appellate Tribunal heard these appeals along with other appeals preferred by the assessing authority in respect of the firm, M/s. Gauri Dutt Jai Narain, and by an order dated December 20, 1973, allowed both the aforesaid appeals, so far as M/s. Saraf Brothers was concerned. In the matter relating to registration of the firm, the Appellate Tribunal came to the conclusion that no genuine partnership came into existence by the name of M/s. Saraf Brothers, out of the partnership deed dated November 27, 1964. The Tribunal also held that the business of M/s. Saraf Brothers was part of the business of M/s. Gauri Dutt Jai Narain and that the Income-tax Officer was right in clubbing the income of M/s. Saraf Brothers with that of M/s. Gauri Dutt Jai Narain. Some other objection relating to the alleged deposit of Rs. 5,000 standing in the name of Nathu Ram Mangalchand-ka was also decided against the assessee.

5. Thereupon, the assessee, M/s. Saraf Brothers, filed two reference applications before the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, arising out of the consolidated order of the Tribunal, relating to the assessment year 1966-67. By reference Application No. 135 of 1973-74, the following four questions were desired by the assessee to be referred to this court:

'1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the business of Saraf Brothers belonged to M/s. Gauri Dutt Jai Narain ?

2. Whether there was proper evidence and material upon which it was open to the Tribunal to come to the decision that the business of Saraf Brothers was benami of Gauri Dutt Jai Narain ?

3. Whether, on the facts and in the circumstances of the case, the Tribunal was right in upholding the addition of Rs. 5,000, the deposit of Nathu Ram Mangalchand-ka ?

4. Whether the burden of proving the deposit of Rs. 5,000 was properly discharged by producing the confirmation letter from the stranger creditor of Shri Nathu Ram Mangalchand-ka for his deposit of Rs. 5,000 with the assessee ?'

6. By another reference Application No. 134 of 1973-74, the assessee desired the Tribunal to refer the following two questions to this court for its opinion:

'1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in refusing registration of the firm ?

2. Whether, on the facts and circumstances, there was material to come to the conclusion that the firm is not genuine ?'

7. Both these reference applications were heard together by the Tribunal and were rejected by a common order dated November 30, 1974. The assessee has now filed this application under Section 256(2) of the Act in this court desiring that the Income-tax Appellate Tribunal be directed to refer the four questions mentioned in Application No. 135 filed before the Tribunal, along with a statement of the case. It appears that no application under Section 256(2) of the Act has been filed in this court by the assessee after the rejection of the reference applicationNo. 134 by the Tribunal.

8. The main question which arises out of that part of the order of the Tribunal relating to its refusal to register the firm, M/s. Saraf Brothers, is as to whether the Tribunal was right in refusing to grant registration to the firm and as to whether the finding of the Tribunal that the firm, M/s. Saraf Brothers, was not a genuine partnership was based on proper evidence. These were precisely the questions in respect of which the assessee sought to obtain a reference to this court by means of his reference Application No. 134. But after the rejection of that application by the Tribunal, it appears that the assessee has not pursued the matter further and the order of the Appellate Tribunal in this respect has become final and conclusive. As such, we are unable to call for any reference on any question relating to the refusal of registration of the firm, M/s. Saraf Brothers.

9. So far as questions Nos. 1 and 2 now sought to be referred, as to whether the business of M/s. Saraf Brothers belonged to M/s. Gauri Dutt Jai Narain or was 'benami' of M/s. Gauri Dutt Jai Narain are not related to the questions arising out of the refusal to register the firm M/s. Saraf Brothers. Section 185(1) of the Act provides that on receipt of an application for the registration of a firm under Section 184, the Income-tax Officer shall inquire into the genuineness of the firm and its constitution as specified in the instrument of partnership and shall grant registration if he is satisfied that there was during the previous year in existence a genuine firm with the constitution so specified. Thus, when an application for the registration of a firm is presented before the Income-tax Officer under Section 184 of the Act, the main question which he is called upon to determine or inquire into is the one relating to genuineness of the firm and its constitution. In the present case, the Income-tax Appellate Tribunal, after an elaborate consideration of the materials on record, came to the conclusion that the firm, M/s. Saraf Brothers, was not a genuine firm. The Tribunal also held that the three ladies, namely, Smt. Shanti Devi, Smt. Parmeshwari Deviand Smt. Sohini Devi, were not genuine partners of the firm, M/s. Saraf Brothers. The questions as to whether the aforesaid ladies were genuine partners of the firm and whether the firm, M/s. Saraf Brothers, is a genuine partnership firm or not are essentially questions of fact and the Tribunal was right in refusing to make a reference in respect of those questions. Moreover, the question as to whether the business of M/s. Saraf Brothers belonged to M/s. Gauri Dutt Jai Narain or was ' benami' of M/s. Gauri Dutt Jai Narain are again questions of fact. The inferencesdrawn by the Appellate Tribunal in order to arrive at the aforesaid conclusion are inferences of fact drawn from other facts and as such no question of law is involved in these matters. Questions Nos. 3 and 4, which are sought to be referred are dependent upon the firm, M/s. Saraf Brothers, being a genuine firm and relate to the assessment of the said firm, pertaining to the assessment year 1966-67. As the Appellate Tribunal has held that the firm, M/s. Saraf Brothers, was not a genuine firm and was not entitled to registration under Section 185 of the Act, questions Nos. 3 and 4 do not arise at all.

10. In the aforesaid circumstances, we are in agreement with the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, and hold that none of the questions which are sought to be referred are questions of law arising out of the order of the Tribunal and, therefore, no reference can be called for in this matter. This application for calling a reference is, consequently, dismissed. The parties are left to bear their own costs.


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