1981 (4) TMI 141 - AT - Income Tax

Summary

Issues:
1. Cancellation of registration under section 186 for the assessment years 1973-74 and 1974-75.
2. Admissibility of new evidence in the form of an affidavit during appeal proceedings.
3. Granting continuation of registration based on Form No. 12 and partnership deeds for the assessment years 1975-76 to 1977-78.

Analysis:

1. Cancellation of Registration (1973-74 and 1974-75):
- The Revenue appealed against the cancellation of registration for the firm due to a change in the constitution when a minor partner became a major partner. The Income Tax Officer (ITO) canceled the registration based on the view that the firm was no longer genuine under section 186 of the IT Act, 1961.
- The Appellate Authority Commissioner (AAC) accepted the assessee's contention that the firm remained genuine as the major partner continued with the same share ratio and did not agree to share losses. The AAC directed the ITO to grant continuation of registration for the relevant years.
- The Tribunal upheld the AAC's decision, stating that the firm did not become ingenuine when the minor partner became a major partner, as the share ratio remained unchanged and losses were not to be shared by the major partner.

2. Admissibility of New Evidence:
- The Revenue argued that the AAC improperly admitted new evidence in the form of an affidavit during appeal proceedings. However, the Tribunal found that the affidavit was presented in compliance with the IT Rules, and there was no specific ground of appeal against its admission.
- The Tribunal also noted that the Central Board of Direct Taxes issued instructions supporting the continuation of registration in similar cases where a minor partner became a major partner without agreeing to share losses. The Tribunal held that there was no change in the constitution requiring a fresh partnership deed, as the major partner maintained the same share ratio.

3. Granting Continuation of Registration (1975-76 to 1977-78):
- The assessee sought continuation of registration based on Form No. 12 and the original partnership deed for the assessment year 1975-76. The ITO refused registration, citing a new partnership deed filed by the assessee.
- The AAC upheld the refusal, stating that the new deed superseded the old one. The Tribunal disagreed, emphasizing that the primary contention of the assessee for continuation of registration should have been given more weight.
- The Tribunal directed the AAC to reconsider the case, focusing on the primary contention and providing a clear finding on why continuation of registration could not be granted based on Form No. 12. The Tribunal allowed the appeals for statistical purposes, setting aside the AAC's decision.

In conclusion, the Tribunal upheld the continuation of registration for the relevant years, emphasizing the importance of maintaining the original share ratio and partnership terms when a minor partner becomes a major partner. The Tribunal also stressed the need for primary contentions to be thoroughly considered before alternative arguments are addressed in appeal proceedings.