1994 (9) TMI 111 - AT - Income Tax

Summary

Issues Involved:
1. Genuineness of the assessee-firm M/s Shri Gopal Mills.
2. Registration of the assessee-firm for the assessment year 1979-80.
3. Continuation of registration for the assessment years 1980-81 and 1981-82.
4. Allegation of benami transactions involving Smt. Jankiben and Shri Gopaldas.
5. Age of Shri Gopaldas at the time of joining the firm.

Issue-wise Detailed Analysis:

1. Genuineness of the assessee-firm M/s Shri Gopal Mills:
The Assessing Officer (AO) questioned the genuineness of the firm on several grounds. Firstly, it was alleged that Smt. Jankiben was a benamidar of her husband, Shri Tharumal. The AO noted that Smt. Jankiben brought in capital from M/s Bansilal & Co., where she was previously a partner, and her husband provided factory premises to the firm at a nominal rent, suggesting a benami relationship. Additionally, the AO found that Shri Gopaldas, who shared profits and losses, was a minor at the time of joining the firm and thus could not be a full-fledged partner. The AO also alleged that Shri Gopaldas was a benamidar of his father, Shri Bansilal, as his capital contributions and property ownership were linked to his father.

2. Registration of the assessee-firm for the assessment year 1979-80:
The AO refused registration under Section 185(1)(b) for the assessment year 1979-80, citing the non-genuineness of the firm due to the benami transactions and the minor status of Shri Gopaldas. The first appellate authority, however, found that the Department had not discharged the burden of proving that Smt. Jankiben was a benamidar of her husband. The appellate authority also accepted the evidence provided by the assessee that Shri Gopaldas was not a minor at the time of joining the firm, relying on affidavits and other documentation.

3. Continuation of registration for the assessment years 1980-81 and 1981-82:
The AO's refusal to continue registration for the subsequent years was based on the same grounds as for the initial registration. The first appellate authority allowed the continuation of registration, relying on its findings for the assessment year 1979-80.

4. Allegation of benami transactions involving Smt. Jankiben and Shri Gopaldas:
The AO alleged that Smt. Jankiben was a benamidar of her husband, citing her capital contributions and the nominal rent of the factory premises. The first appellate authority, however, found no evidence that the profits earned by Smt. Jankiben were enjoyed by her husband. Similarly, the AO's claim that Shri Gopaldas was a benamidar of his father was refuted by the appellate authority, which found that the capital contributions and property ownership were genuine and not indicative of a benami relationship.

5. Age of Shri Gopaldas at the time of joining the firm:
The AO argued that Shri Gopaldas was a minor based on his school certificate, which showed his date of birth as 1st January 1962. The assessee, however, provided evidence including affidavits, a family horoscope, and a driving license to claim that his actual date of birth was 12th January 1959. The first appellate authority accepted this evidence, noting that the Supreme Court had held that school certificates are not conclusive proof of age. However, the Tribunal found that the assessee failed to explain why a false date of birth was given in the school records and relied on the sale deed from 1968, which corroborated the school record date. The Tribunal concluded that the correct date of birth was 1st January 1962, making Shri Gopaldas a minor at the time of joining the firm and thus invalidating the firm's constitution.

Conclusion:
The Tribunal found that the assessee-firm was not genuine and validly constituted due to the minor status of Shri Gopaldas and the benami allegations. Consequently, the appeals of the Revenue were allowed, and the AO's order to refuse registration and continuation of registration was confirmed.