9911796707
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Issues:
Assessment of firm in the status of a partnership firm, cancellation of registration, refusal of registration, genuineness of the firm, deviation in profit distribution, application for registration, assessment as an association of persons. Analysis: The judgment pertains to the assessment years 1962-63 and 1963-64 concerning a firm that underwent a partial partition leading to the formation of a new partnership. The Commissioner, upon review, set aside the assessment and canceled the firm's registration due to a discrepancy in profit distribution. The Commissioner found that the profit division did not align with the partnership deed, leading to doubts about the firm's genuineness. Consequently, the ITO canceled the firm's registration for both years and assessed it as an association of persons. The assessee appealed the decision, and the AAC upheld the cancellation of registration. However, the Tribunal later overturned the decision, deeming the firm genuine despite a minor deviation in profit distribution. The Tribunal noted that the discrepancy was likely an inadvertent error by the accountant, as the partners were family members. The Tribunal found the firm and its partners to be genuine, emphasizing that the application for registration was made correctly and within the stipulated time frame. The Tribunal's factual findings led to the conclusion that the firm's genuineness was not in question, despite the minor irregularity in profit distribution. The High Court concurred with the Tribunal's assessment, distinguishing the case from precedent where a significant portion of profits was undistributed at the time of registration application. The Court held that the minor deviation in this case did not warrant a refusal of registration, as the firm's genuineness remained intact. Ultimately, the High Court ruled in favor of the assessee, stating that the firm was entitled to registration under the Income Tax Act for the relevant assessment years. The Court's decision was based on the factual findings and the negligible nature of the deviation in profit distribution. The judgment highlighted the importance of considering the overall genuineness of the firm in such cases, especially when minor discrepancies arise.
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