1977 (11) TMI 86 - AT - Income Tax

Issues Involved:

1. Genuineness of the partnership firm.
2. Validity of the signatures on the partnership deed and registration applications.
3. Justification of the Income Tax Officer (ITO) in canceling the registration and refusing continuation of registration.
4. Admissibility and interpretation of the lady partner's statement regarding her ability to sign.

Detailed Analysis:

1. Genuineness of the Partnership Firm:

The Income Tax Officer (ITO) questioned the existence of a genuine partnership firm based on the suspicion that the signatures of one of the partners, Smt. M. Sarda, on the partnership deed and registration applications were not authentic. The ITO based this suspicion on a statement made by Smt. M. Sarda on January 16, 1975, in which she allegedly denied her ability to sign in the manner the signatures appeared on the documents.

Upon appeal, the Appellate Assistant Commissioner (AAC) found that the ITO had not conducted a thorough investigation to disprove the existence of a genuine firm. The AAC noted that the ITO neither examined the partners nor gathered any other evidence to support the claim that the firm was not genuine. The AAC concluded that the ITO was not justified in canceling the registration granted for the initial years and refusing to continue registration for the subsequent years.

2. Validity of the Signatures on the Partnership Deed and Registration Applications:

The ITO argued that the signatures on the partnership deed and registration applications were not those of Smt. M. Sarda, rendering the partnership contract incomplete and the applications defective. The ITO emphasized that a partnership must be supported by an instrument of partnership signed by all partners to be entitled to registration.

In response, the counsel for the assessee argued that the partnership deed was a continuation of an earlier oral agreement and that the conduct of the business established the existence of a partnership. They contended that any mark intended to convey authentication constitutes a signature, and the law does not require all partners to sign the instrument evidencing the partnership.

The Tribunal found that the ITO's conclusion was based on suspicion rather than expert evidence. The ITO did not conduct an expert comparison of the handwriting, and the Tribunal noted that signatures can change over time due to various factors. The Tribunal concluded that the ITO's suspicion alone was insufficient to invalidate the signatures.

3. Justification of the ITO in Canceling the Registration and Refusing Continuation of Registration:

The ITO canceled the registration for the assessment years 1969-70, 1970-71, and 1971-72, and refused to continue registration for the assessment years 1972-73 and 1973-74, based on the suspicion that the signatures were forged.

The Tribunal found that the ITO's decision was not supported by tangible evidence or expert opinion. The Tribunal emphasized that the ITO's suspicion alone could not justify the cancellation of registration. The Tribunal also noted that the ITO had accepted the partnership and the individual returns filed by Smt. M. Sarda in previous years, indicating the existence of a genuine partnership.

4. Admissibility and Interpretation of the Lady Partner's Statement Regarding Her Ability to Sign:

The ITO relied on a statement made by Smt. M. Sarda on January 16, 1975, in which she allegedly denied her ability to sign in the manner the signatures appeared on the documents. The ITO concluded that the lady could not write or sign based on this statement.

The Tribunal found that the ITO's interpretation of the statement was erroneous. The Tribunal noted that Smt. M. Sarda had written her name and affixed her thumb impression during the statement, indicating her ability to sign. The Tribunal also pointed out that the lady had accepted her signatures on the documents in question.

The Tribunal referred to legal definitions and judicial decisions regarding the concept of a signature, concluding that any mark intended to convey authentication constitutes a signature. The Tribunal found no legal basis to invalidate the signatures and upheld the AAC's order.

Conclusion:

The Tribunal dismissed the departmental appeals, upholding the AAC's order. The Tribunal concluded that the ITO's suspicion regarding the genuineness of the partnership and the validity of the signatures was not supported by tangible evidence or expert opinion. The Tribunal emphasized that the ITO's decision to cancel the registration and refuse continuation of registration was unjustified. The Tribunal found that the partnership deed and registration applications were valid, and the partnership was genuine.

← Previous Next →