1996 (1) TMI 99 - HC - Income Tax

Summary

Issues:
1. Registration of a firm under section 185 of the Income-tax Act, 1961.
2. Refusal of registration based on genuineness of the firm.
3. Requirement of passing an order under section 185 for each assessment year.

Detailed Analysis:
The judgment by the High Court of MADHYA PRADESH dealt with the registration of a firm under section 185 of the Income-tax Act, 1961. The Tribunal had refused registration of the firm based on the genuineness of the firm. The Income-tax Officer had initially refused registration on nine grounds, leading to a series of appeals and applications filed by the assessee. The Tribunal, after considering all aspects, concluded that a genuine partnership did not come into existence based on the evidence presented. The court cited previous decisions to emphasize that the genuineness of a firm is a question of fact and cannot be revisited in a reference. The court upheld the Tribunal's decision, stating that as no genuine firm had come into existence, registration was not justified, ruling in favor of the Revenue and against the assessee on this issue.

Regarding the requirement of passing an order under section 185 for each assessment year, the court confirmed that every assessment year is considered separate, and an order under section 185 is necessary for each assessment year. Section 185(1)(a) and (b) of the Income-tax Act, 1961, specify the procedure for registration of a firm, emphasizing the need for the Assessing Officer to inquire into the genuineness of the firm and pass an order accordingly. The court answered this question in favor of the assessee and against the Revenue, highlighting the legal obligation to pass an order under section 185 for each assessment year.

In conclusion, the court answered all three questions in the affirmative. The answers to questions 1 and 2 favored the Revenue and went against the assessee, while the response to question 3 supported the assessee and opposed the Revenue. The reference application was disposed of accordingly, with no order as to costs, and a fixed counsel fee for each side was specified. The court directed the transmission of the order to the Tribunal, concluding the judgment on the registration and assessment requirements under the Income-tax Act, 1961.