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2013 (4) TMI 226 - HC - Income TaxAssessment of status - Whether the Tribunal was right in sustaining the order of the AAC directing the assessing officer to assess the status of Registered Firm against A.O.P.? - Held that - In the present case, it is clear that the Tribunal, after rectifying its mistake and taking into consideration the material on record, which it had failed to consider earlier has come to a conclusion that the assessee-firm was a genuine firm. This is purely a finding of fact and in such a situation, no question of law as such arises and, in this connection, reference may be made to the decisions in CIT vs. M. P. Bidi Leaves & Company (1981 (11) TMI 9 - MADHYA PRADESH HIGH COURT); India Cements Ltd. vs. CIT (1965 (12) TMI 22 - SUPREME COURT); ClT vs. Chander Bhan Harbhajan Lai (1966 (1) TMI 20 - SUPREME COURT); Sir Shadilal Sugar & General Mills Ltd. vs. CIT (1982 (4) TMI 43 - ALLAHABAD HIGH COURT); Chimanlal Umaji vs. CIT (1978 (10) TMI 16 - MADHYA PRADESH HIGH COURT) and Shri Paramanand Bhai Patel and Smt. Jyotsna Devi Patel vs. CIT (1984 (1) TMI 40 - MADHYA PRADESH HIGH COURT). Also to consider the comments of the learned author in his book Law of Income Tax by Kanga & Palkhivala (7th edn.) vol. I, at page 1159. Thus, the Tribunal having taken all the facts and circumstances into consideration while deciding the appeal on merits, the question proposed by the Revenue being not a question of law as such does not call for a reference. The order passed by AAC affirmed by the Income Tax Appellate Tribunal, Indore Bench, Indore, appears to be correct and in accordance with law - the question referred to this Court deserves to be answered in negative, in view of the law laid down by the Division Bench in the matter of respondent reported as Mithalal Ashok Kumar (1984 (11) TMI 16 - MADHYA PRADESH HIGH COURT) relating to the same assessee for the assessment year 1978-79 had held that the assessee M/s Mithalal Ashokumar was a genuine firm and directed I.T.O., to grant registration to the assessee and also allowed the appeal on the question of quantum.
Issues involved:
1. Interpretation of the Income Tax Act, 1961 regarding the assessment status of a Registered Firm as an Association of Persons (A.O.P.). Detailed Analysis: The judgment concerns a reference under section 256 of the Income Tax Act, 1961 by the Income Tax Appellate Tribunal, Indore Bench, Indore. The primary issue revolves around the correctness of sustaining the order of the Additional Commissioner of Income Tax (AAC) directing the assessing officer to assess the status of a Registered Firm as an Association of Persons (A.O.P.). The case pertains to the assessment year 1982-83, where the Income Tax Officer disallowed the continuation of registration of the assessee and assessed them as an A.O.P. on a protective basis. This decision was based on the belief that the business of the assessee belonged to another firm. However, the AAC, following a previous order related to the same assessee for the assessment year 1978-79, held that the assessee firm was genuine and directed the assessing officer to grant registration. The Income Tax Appellate Tribunal dismissed the Department's appeal, citing previous decisions by the Tribunal and the High Court. The matter had previously been brought before the High Court in a related case involving the same assessee, where it was held that the firm in question was genuine and entitled to registration. The case involved detailed scrutiny of the constitution and operations of the firm in question, M/s Mithalal Ashok Kumar. The Income Tax Officer found commonalities between M/s Mithalal Ashok Kumar and another existing firm, M/s Abhayakumar Jaswant Kumar, including close family relations among partners, common capital sources, shared business activities, and common business premises. The Income Tax Officer concluded that M/s Mithalal Ashok Kumar was not a genuine firm but a branch business of M/s Abhayakumar Jaswant Kumar. Despite arguments by the assessee regarding the non-essentiality of active participation by all partners and the timing of assessments, the Tribunal upheld the Income Tax Officer's decision, considering the entire arrangement as sham. Following a rectification application by the assessee, the Tribunal set aside its previous order and reheard the appeal on merits, ultimately granting registration to M/s Mithalal Ashok Kumar as a genuine firm. The Revenue's subsequent application for reference to the High Court was rejected, as the Tribunal's decision was based on factual findings rather than a question of law. The High Court, in line with previous rulings, upheld the Tribunal's decision, emphasizing that the matter was factual and did not warrant a reference. In conclusion, the High Court dismissed the petition, affirming the Tribunal's decision to grant registration to M/s Mithalal Ashok Kumar as a genuine firm. The judgment underscores the importance of factual considerations in such cases and highlights the settled position regarding the assessment of firm status under the Income Tax Act, 1961.
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