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TMI Blog1984 (7) TMI 148X X X X Extracts X X X X X X X X Extracts X X X X ..... irm with legal heirs if they desired." Subsequently, C. Ahmed Hussian passed away on 25-12-1980. Another instrument of partnership was executed on 10-1-1981. This partnership was between Sakeena Bee, wife of late C. Ahmed Hussain and Khairunnisa Begum, wife of S.A. Hameed. The partnership deed, amongst other clauses, contained the following narration : " And whereas the parties hereto have by mutual agreement dissolved the said partnership firm on 26th day of December, 1980. And are carrying on business under a new partnership as from 27th day of December, 1980." 4. For the assessment year 1981-82, now under consideration, two returns of income were filed on 5-7-1982. One return was for the period 1-4-1980 to 25-12-1980 on a total income of Rs. 62,800. The return bore the signatures of both Sakeena Bee and Khairunnisa Begum. Accompanying the return were statements containing the trading account for the period 1-4-1980 to 25-12-1980, profit and loss account for that period and the balance sheet as on 25-12-1980. The profit for the aforesaid period was apportioned between who, according to the assessee, were the partners in the period, viz., Ahmed Hussain, Sakeena Bee and Kha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e already pointed out that there is a Form No. 12 on record.) He finally refused registration stating as under : " It is not the contention of the partner Smt. Khairunnisa Begum that signature in the papers and forms for the assessment year 1981-82 was not hers. Her contention is that they were obtained by undue influence. Therefore, the question of summoning the partner for ascertaining the bona fides of her signature does not arise. The burden of proving whether there was undue influence and misrepresentation of facts lies on the partners of the firm and not on the department. The very fact that the partner Smt. Khairunnisa Begum has signed the papers and forms under undue influence and misrepresentation of facts clearly shows that there was no genuine firm in existence during the year under consideration. Therefore, I refuse to register the firm and treat the firm as an unregistered firm." 9. There was an appeal to the AAC wherein refusal of registration was challenged, The AAC set the record right by stating that there was a declaration in Form No. 12. He held that the genuineness of the firm for the period Ahmed Hussain was a partner could not be questioned, since it was h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eparate assessments should be made and two orders should be passed in the matter of registration. According to the revenue, there was only a change in constitution as envisaged under section 187 of the Act, and the AAC had failed to consider the effect of clause 11 of the partnership deed dated 5-4-1972. 13. The learned counsel for the assessee and the learned departmental representative adduced arguments in support of their respective stands at length. 14. We have set out the facts. The deed of 5-4-1972 contained a clause, i.e., clause 11, relating to what action is to be taken on the death of a partner. We have set out this clause in extenso earlier. The stand of the revenue was that because of the existence of this clause, the firm has not dissolved. Even accepting the contention of the revenue in this regard, we are still to examine whether there has been a dissolution of the firm or not by any other event. We have already set out the relevant clause in the deed executed on 10-1-1981. There it was mentioned that by mutual agreement the earlier firm was dissolved with effect from 26-12-1980. The argument of the learned departmental representative was that this subsequent dee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 110 ITR 468 (FB) applied only in a case where there was a dissolution consequent to the death of a partner. We are unable to agree to such a statement. The ratio of the judgment of the Full Bench of the Andhra Pradesh High Court in the case referred to applies in all cases where there is dissolution of a firm, i.e., one firm comes to an end and another firm comes into being. Section 42 is only one of the provisions under which a dissolution takes place. Therefore, the fact that dissolution was not effected under section 42 but under section 40, does not alter the principle which is laid down by the aforesaid Full Bench decision. The learned departmental representative submitted that in a case where accounts were closed and new accounts were opened, i.e., CIT v. T. Veeraraghavulu Chetty Sons Co. [1975] 100 ITR 723, the Andhra Pradesh High Court held that the provisions of section 187 alone were attracted. This decision has been referred to by their Lordships in the later Full Bench decision in the case of Vinayaka Cinema. The observations of their Lordships in this regard are as under : " In CIT v. T. Veeraraghavulu Chetty Sons Co. [1975] 100 ITR 723 (AP), a Division Bench of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ettiar Co. v. CIT [1964] 52 ITR 134 (Mad.) : ' We must also observe that the department is over-punctilious in considering applications for registration of firms and is not averse to refuse registration quite readily in a facile manner.' Section 185(2) and (3) of the Income-tax Act, 1961, is a welcome parliamentary reaction to judicial observations of this kind. At this time of the day, therefore, it would be too much to urge that the ITO is not under a duty bound to give a helping hand to assessees, who, even with expert professional advice, might falter here and there in filing the applications, which the ITO might not quite regard as being in order. In those cases, not only normal courtesy, but the dictates of the statutory requirements would make for a return of the (defective) applications with an express reference to the defects contained in the applications and an opportunity given to the assessee-firms to rectify the defects. Such a procedure had not been gone through in this case. As we observed, since the defect was a minimal one, the Tribunal was justified in reading the declaration as if it did not contain even that defect and in proceeding to grant continuance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istence, the request for continuation of registration and grant of registration of respective firms has to be processed separately. It would also follow as a consequence of any orders that may be passed that separate assessments will have to be made, and in the assessments so made, appropriate status would have to be taken for the respective firms. Therefore, there was no infirmity in the order of the AAC making it clear that two separate assessments would have to be made. That is only a natural consequence flowing out of his order on the points of registration. To this extent, there was no error in the order of the AAC and there is no merit in the appeal of the revenue on this point. 19. As far as the appeal of the assessee is concerned, we have given directions which are different from those given by the AAC, but which would nevertheless call for further enquiries to the extent stated. Therefore, it cannot be said that the AAC should have straightaway directed the grant of registration, and to this extent, therefore, he was not in error. 20. The result is, the orders of both the authorities below are set aside and fresh orders will be passed by the ITO in conformity with our ..... X X X X Extracts X X X X X X X X Extracts X X X X
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