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Issues involved: Application u/s 5 of the Limitation Act, reference application u/s 256(2) of the Income-tax Act, 1961 regarding the grant of registration to an assessee-firm.
Summary: The High Court of Rajasthan heard arguments on the delay in filing the reference application u/s 256(2) of the Income-tax Act and decided to condone the delay. The case revolved around the question of whether the Income-tax Appellate Tribunal was justified in granting registration under section 185 to the assessee-firm. The firm claimed to have six partners and applied for registration for the assessment year 1988-89. The Assessing Officer initially refused registration, suspecting the firm's genuineness due to certain partners not being produced and the bank account being in one partner's name. However, the Income-tax Appellate Tribunal later ruled in favor of the firm's existence and granted registration. The Commissioner of Income-tax, Jodhpur, argued that income-tax authorities could refuse registration if the partnership was not genuine. Citing previous cases, it was emphasized that the partnership deed must establish a genuine partnership, and the Income-tax Officer has the authority to verify the authenticity of the partnership. The Tribunal's decision in this case was deemed correct by the Bombay High Court and the Calcutta High Court reiterated the importance of genuine partnership evidence for registration. The Rajasthan High Court highlighted that individual circumstances should not automatically invalidate a partnership, and the cumulative circumstances should be considered. In this specific case, the Tribunal's decision to grant registration was upheld as justified. The Supreme Court's ruling emphasized that the existence of a firm is a factual matter, and the decision of the Tribunal is final in such cases. Similarly, a Rajasthan High Court case reiterated that partnership genuineness is a question of fact to be determined based on evidence. Ultimately, the High Court concluded that the Tribunal's findings on the partnership's genuineness did not warrant a reference under section 256(2) of the Income-tax Act, and no complex legal issues arose. The application for reference was rejected, with no costs imposed.
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