Patna High Court
Samiur Rahman And Brothers vs Commissioner Of Income-Tax, Bihar And ... on 26 March, 1966
Equivalent citations: [1968]67ITR386(PATNA)
JUDGMENT
These three references are in relation to the income-tax assessment years 1956-57, 1957-58 and 1958-59. Statement of case was called for from the Income-tax Appellate Tribunal under section 66 (2) by this court at the instance of the assessee in regard to each of those three years.
The point for consideration is common to all the three references and, therefore, will be dealt with together.
The assessee was being assessed as a registered firm, since the year 1953, carrying on business in goat skin. The registration of the firm had been allowed by the Income-tax Officer under section 26A of the Indian Income-tax Act. But while dealing with dealing with the assessment for the assessment year 1956-57, and the two following years, the Income-tax Officer discovered certain discrepancies in the description of partners as given in the partnership deed dated April 1, 1953, and in the business activities of the firm, particularly, in regard to its overdraft account with the Central Bank of India Limited at Samastipur. He also had an information that in connection with the assessment of the business of the assessee under the Sales Tax Act, Khaliur Rahman, father of the four partners of the firm, had claimed himself as the proprietor of the business, and the sales tax assessment was made on that basis. On these two grounds, the Income-tax Officer refused registration of the assessee-firm under section 26A of the Act. The assessee went in appeal against the order of refusal to renew the registration of the firm before the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal, one after the other, but without success. The firm asked for a reference under section 66 (1) of the Act but that was not conceded. Ultimately, it came to this court and obtained a rule calling upon the Appellate Tribunal to state the case. The question framed for consideration is :
"Whether, on the facts and in the circumstances of this case, the income-tax authorities were justified in law in refusing to register the assessee-firm for the assessment year in question under the provisions of section 26A of the Income-tax Act ?"
The deed of partnership that was executed on the 1st April, 1953, showed the names of four persons who happened to be the four brothers being sons of Khaliur Rahman. In the past, prior to 1948, he (Khaliur Rahman) was carrying on the business in goat skin and was assessed to income-tax till 1948. But since Samiur Rahman and Safiur Rahman formed a partnership and carried on the same business, they were assessed to income-tax on that basis. In April 1953, by the deed of partnership the two younger brothers were also taken as partners and the partnership firm was constituted with the four brothers. In December, 1953, an application was made to the Central Bank of India Limited at Samastipur of behalf of this firm for the advance by way of cash credit. That application has been printed in the paper-book at page 9 as annexure "D". In that application the name of the borrower was shown as "M. Samiur Rahman and Bros." (that was the name of the firm). But the names of the four partners shown in that application were M. Samiur Rahman and Bros." (that was the name of the firm). But the names of the four partners shown in that application were M. Samiur Rahman, Safiur Rahman, Ataur Rahman and M. Khaliur Rahman. The last one is the name of the father. The name of the forth brother, Ziaur Rahman, appears to have been dropped out from the application made to the bank. At the time when the Income-tax Officer took up the question of renewal of the registration of the firm, he called upon the assessee to explain this discrepancy, and it was stated before him that the name of the father was shown as a partner in the application for advance from the Central Bank of India by way of cash credit, because immovable properties that were sought to be offered as security for the loan asked for, stood in the name of the father. No reason appears to have been given for omitting the name of the fourth brother as a partner in the application. None of the orders passed by the Income-tax Officer, the Appellate Assistant Commissioner or the Appellate Tribunal, which are annexures to the statement of case, shows any explanation to have been given in that respect by the assessee before any of those three authorities. The explanation in regard to the inclusion of the fathers name was not satisfactory to the Income-tax Officer, and he described that to be frivolous. The Appellate Tribunal also was not satisfied with that explanation. The position thus comes to this. There was some discrepancy as to who were the partners in the business activity of the firm and in the deed of partnership. This was undoubtedly a material, on which the income-tax authorities were competent to come to their own conclusions in regard to the genuineness of the partnership as disclosed in the partnership document. Assuming that a different conclusion could be arrived at, accepting the explanation as offered by the assessee in regard to the inclusion of the name of the partners father in the application made to the Central Bank of India, that would not be a proper justification for holding that the refusal to renew the registration was illegal. If there would have been no materials in support of the action taken, the position would have been different, or if there were other relevant materials and they were not considered by the Income-tax Officer or the other authorities including the Appellate Tribunal, the impugned action could have been challenged successfully. Learned counsel drew our attention to some statements in the petition by the assessee under section 66 (1) before the Income-tax Appellate Tribunal, in which reference was made to some other material as, such as certified copy of application before the Registrar of Firms, registration certificate under the Indian Partnership Act, subsequent certificates from the Central Bank, certificate from the State Bank, certificates from Lloyds Bank and some other customers, etc. But there is nothing to show that these materials were placed before the Income-tax Officer or before the Appellate Tribunal at the time when the question of renewal of registration was under consideration. Therefore, learned counsel cannot make out a point that relevant materials placed before the income-tax authorities were not taken into consideration at all while refusing the renewal of registration.
One contention raised on behalf of the assessee was that, according to the findings of the Appellate Tribunal, the assessee was a firm consisting of the four sons, the youngest one being a benamidar of the father, and in that view the renewal of the registration under section 26A are distinctly given in the Act itself; for example, there must be an application signed by all the partners. The present application for renewal had been signed by the four brothers as partners of the firm in accordance with the deed of partnership. If the Appellate Tribunal came to the conclusion that the father was another partner of this firm then the application, which had been made for the renewal of registration, having not been signed by him, could not have elicited registration of the firm including the father as a partner thereof. Similar would be the position with the alternative finding of the Tribunal that the fourth brother was a benamidar of the father and was, in that capacity, a partner. The partnership deed will be completely at variance with this position. Therefore, the document, which was necessary to be filed for purposes of renewal of registration, was different from the constitution of the firm, as held by the Tribunal. In either view of the matter, renewal of registration could not be claimed by the assessee.
Learned counsel further contended that the application made to the Central Bank of India Ltd. was clearly a misrepresentation made by the firm for the purpose of having financial credit and a wrong statement, therefore, was made that the father was also a partner of the firm. Since the number of partners in the partnership deed was four, the name of one of the brothers had to be dropped in order to keep the number of partners disclosed in the application to the bank at four, so that the bank will not be able to discover any apparent discrepancy between the deed of partnership and the application. Whatever purpose may have been behind that application, there cannot be doubt that was an activity of the firm connected with its business. The applicant was the firm itself. If the business activities do not correspond with the stipulations made in the deed of partnership, which is the basis of registration under the Indian Income-tax Act for the purpose of assessment, the genuineness of the claim of the firm as a partnership firm in accordance with the deed of partnership will necessarily be open to challenge. Some discrepancy, if of a trivial nature, may be ignored. But that will be a matter for the income-tax authorities to decide. In a reference under section 66, it will not be open to us to replace our views on facts for the views taken by the authorities concerned, if such views are supportable by some evidence on record.
For the reasons given above, we answer the question in the affirmative and against the assessee and dispose of the three references accordingly. The assessee will pay a consolidated sum of Rs. 100 as costs of all these three references to the department.