1978 (7) TMI 146 - AT - Income Tax

Issues Involved:
1. Delay in filing Form No. 11 for partnership registration.
2. Genuine nature of the partnership firm M/s. Mahavir Drillers.
3. Income estimation of M/s. Mahavir Drillers.
4. Income estimation of Shri Chain Sukh Ajmera from legal profession.

Detailed Analysis:

1. Delay in Filing Form No. 11 for Partnership Registration:
The assessee, M/s. Mahavir Drillers, filed a partnership deed along with Form No. 11 on 25th Sept., 1974, for the assessment year 1974-75. The learned ITO noted a delay in filing Form No. 11 and found the reasons provided by the assessee insufficient for condoning the delay. The assessee argued that the delay was due to Shri Naresh Kumar's business engagements at various locations in India, which prevented timely filing. The Tribunal found the explanation plausible and noted that the ITO's decision to discuss the matter on merit implied an implicit condonation of the delay. Thus, the Tribunal concluded that there were sufficient causes for the delay.

2. Genuine Nature of the Partnership Firm M/s. Mahavir Drillers:
The ITO questioned the genuineness of the firm, suggesting that the business was actually carried out by Shri Chain Sukh Ajmera. The Tribunal examined the partnership deed executed on 1st April, 1973, and found it valid and properly executed. The agreement between Shri Chain Sukh Ajmera and the partners, Naresh Kumar and Suresh Kumar, was also reviewed and deemed valid, despite not being registered. The Tribunal considered the statements of the partners and found consistent evidence that the business was conducted by the partners as per the partnership deed. The Tribunal emphasized that the profits were divided and enjoyed by the partners, with no evidence suggesting that Shri Chain Sukh Ajmera enjoyed the profits. Consequently, the Tribunal concluded that the firm M/s. Mahavir Drillers was genuine.

3. Income Estimation of M/s. Mahavir Drillers:
The ITO estimated the firm's receipts at Rs. 70,000 and applied a net profit rate of 40% subject to depreciation and interest. The AAC reduced this to a net profit rate of 37.5%. The Tribunal, after considering the evidence and the firm's disclosed profit rate of 33%, determined that a net profit rate of 35% subject to depreciation and interest was reasonable. The Tribunal provided relief accordingly.

4. Income Estimation of Shri Chain Sukh Ajmera from Legal Profession:
The ITO estimated Shri Chain Sukh Ajmera's income from his legal profession at Rs. 7,000, which the AAC reduced to Rs. 3,500. The Tribunal found no convincing evidence from the assessee to suggest that the income was less than Rs. 3,500. Given the absence of account books and considering the evidence, the Tribunal upheld the AAC's estimation of Rs. 3,500 as reasonable.

Conclusion:
- Appeal No. 335: Allowed.
- Appeal No. 304: Partly allowed.
- Appeal No. 312: Partly allowed.

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