9911796707
TMI Blog1996 (12) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... ithstanding that there is no evidence that the secret profits have been divided in accordance with the profit sharing ratios in the deed of partnership ? (2) Whether, on the facts and in the circumstances of the case, the decision of the Appellate Tribunal that the firm would be entitled to registration on the ground that the finding of the benami nature of Sri B. Narayana's partnership in the firm is based on surmises and doubts and not on facts, is based on facts and is rational, reasonable and free from perversity ? (3) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in holding that the assessee-firm is entitled to registration ? " In order to consider these questions it is necessary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he firm was not entitled to be registered. On a further appeal filed by the assessee before the Income-tax Appellate Tribunal, the Tribunal allowed the appeal and held that the firm was entitled to be registered. Before the Tribunal, the learned Departmental representative had confined his argument to the second and third objections only. With regard to non-sharing of secret profits, the Tribunal held that on discovery by the Department a revised return was filed by Sri Palavarapu Satyanarayana and as per the judgment of this court in Variety Hall and Ramakrishna Textiles v. CIT [1972] 84 ITR 202, the failure to disclose certain income and to divide the same amongst partners in accordance with the terms of the partnership deed does not by i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the account of Sri Bajjuri Narayana by getting it adjusted to the account of Sri Palavarapu Satyanarayana. The managing partner of the assessee-firm has stated before the authorities that that has been done with the tacit consent of Sri Palavarapu Satyanarayana. More over, Sri Bajjuri Narayana himself earlier claimed as an employee of the assessee-firm denying his interest in the firm and he even claimed gratuity as an employee. But, the fact also remains that the said claim for gratuity filed before the Labour Commissioner was subsequently withdrawn. His statement before the Income-tax Officer is that he was not a partner in the appellant firm and he did not contribute any capital though in his account, in the books of account of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment of the material on record, we are of the opinion that the findings arrived at by the Income-tax Officer and by the Appellate Assistant Commissioner that the partnership was not genuine appears to be proper and plausible. As per section 185 of the Act as it stood at the relevant year, the authorities could refuse the registration if during the previous year the firm was not a genuine firm. The Explanation to section 185 of the Act further clarifies that for the purposes of section 185 and section 186 "a firm shall not be regarded as a genuine firm if any partner of the firm was, in relation to the whole or any part of his share in the income or property of the firm, at any time during the previous year, a benamidar." Under Explana ..... X X X X Extracts X X X X X X X X Extracts X X X X
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