1984 (7) TMI 148 - AT - Income Tax

Issues Involved:
1. Validity of the registration of the partnership firm for the assessment year 1981-82.
2. Whether the firm dissolved on the death of a partner or continued with a change in constitution.
3. The genuineness of the signatures and allegations of undue influence.

Detailed Analysis:

1. Validity of the Registration of the Partnership Firm for the Assessment Year 1981-82:
The primary issue was whether the firm should be granted registration for the assessment year 1981-82. The Income Tax Officer (ITO) refused registration under section 185(1)(b) of the Income-tax Act, 1961, citing a letter from Khairunnisa Begum alleging undue influence in signing the documents. The Appellate Assistant Commissioner (AAC) acknowledged the existence of a declaration in Form No. 12 and directed verification of the claims of undue influence. The Tribunal directed the ITO to provide an opportunity to rectify any defects under section 185(2) and to examine the validity of signatures before granting registration.

2. Whether the Firm Dissolved on the Death of a Partner or Continued with a Change in Constitution:
The Tribunal examined clause 11 of the partnership deed dated 5-4-1972, which stated that the firm would not dissolve upon the death of a partner. However, the Tribunal also considered the subsequent partnership deed dated 10-1-1981, which stated that the firm was dissolved by mutual agreement on 26-12-1980. The Tribunal concluded that even though the firm did not dissolve under section 42 of the Indian Partnership Act, 1932, it did dissolve under section 40 by mutual consent. Therefore, there were two distinct firms for the periods 1-4-1980 to 25-12-1980 and 26-12-1980 to 31-3-1981, necessitating separate assessments and registration processes.

3. The Genuineness of the Signatures and Allegations of Undue Influence:
Khairunnisa Begum's letter dated 20-9-1982 claimed that her signatures on the documents were obtained under undue influence. The Tribunal noted the importance of verifying these claims. The ITO was directed to specifically inform Khairunnisa Begum about the requirement to rectify any defects in the declaration. The Tribunal emphasized that the ITO must examine all relevant parties to ascertain the validity of the signatures and the circumstances under which the documents were signed.

Conclusion:
The Tribunal set aside the orders of the authorities below and directed the ITO to pass fresh orders after conducting necessary verifications. The ITO was instructed to:
1. Intimate the defect in the declaration in Form No. 12 to the firm and allow rectification.
2. Examine the validity of signatures and allegations of undue influence.
3. Process the application in Form No. 11 for the subsequent period and grant registration if the requirements are met.

The Tribunal upheld the AAC's direction for separate assessments for the two periods, confirming that there were two distinct firms. The appeal of the assessee was treated as dismissed for statistical purposes, and the appeal of the revenue was allowed in part.

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