1985 (2) TMI 82 - AT - Income Tax

Summary

Issues:
Claim of registration for the assessment year 1980-81; Validity of partnership deed; Minor's involvement in the partnership; Cancellation of registration by Commissioner under section 263 of the Income-tax Act, 1961; Interpretation of partnership laws.

Analysis:
The appeal before the Appellate Tribunal ITAT Chandigarh involved the assessee's claim of registration for the assessment year 1980-81. The dispute arose when the Commissioner, under section 263 of the Income-tax Act, 1961, ordered the cancellation of registration initially granted by the ITO. The main issue revolved around the validity of the partnership deed due to discrepancies related to the date of execution and the involvement of a minor partner.

The firm in question started in November 1978, with the relevant accounting year ending on 31-12-1979. The partnership deed, initially mentioning 10 partners including a minor, was executed on stamp paper purchased on 7-3-1979, with the date of execution falsely indicated as 1-11-1978. The Commissioner (Appeals) based the cancellation of registration on the invalidity of the deed due to the minor's involvement and the incorrect date of execution.

The assessee argued that the minor partner's inclusion was inadvertent and presented evidence to support the claim that the minor was never a partner. However, the departmental representative supported the cancellation, citing a Kerala High Court decision in a similar case. The Tribunal found that the partnership deed did not align with the orally constituted partnership from 1-11-1978, as the deed was executed later and on different terms.

Referring to the principles set by the Punjab High Court, the Tribunal emphasized the requirement for the factual existence of the partnership throughout the accounting year and a written instrument specifying individual shares. The Tribunal concluded that the deed's discrepancies and the minor partner's involvement invalidated the registration claim, rejecting the assessee's appeal. The reliance on previous cases like Bombay Ajmeer Stores and Jagan Nath Pyare Lal was deemed misplaced, as the core issue was the mismatch between the oral partnership and the executed deed.

In light of the contradictory evidence and the failure to meet partnership law requirements, the Tribunal upheld the cancellation of registration, confirming the Commissioner's decision. The judgment highlighted the importance of adherence to partnership laws and the factual consistency between oral agreements and written instruments for registration purposes.