9911796707
TMI Blog1996 (6) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... materials in holding--- (i) ' Except for the fact that the partners participated in the bid on March 10, 1978, the business, in fact, was not commenced and the same was commenced only on April 1, 1978 ' ? (ii) ' Since no business has been done during the year in question there cannot be a firm in existence ' and are not the above findings incorrect, legally and factually? " The assessee is a firm in the name and style of Bhadra Enterprises. It came into existence on the strength of the partnership deed dated March 1, 1977. The assessment year in question is 1978-79. The partnership consisted of five partners and their shares specified in regard thereto. It appears that the Income-tax Officer refused registration and proceeded to asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the decision dated February 25, 1985, came to the conclusion that the appellant-firm is an entity in the hands of which the income can be legitimately assessed for the year under consideration. In the process of reasoning, the appellate authority considered the question of treating the firm as an unregistered association. The appellate authority in regard thereto held that there was a firm in existence, that it was a genuine and a legal firm and the income could be legitimately assessed in the hands of the firm. Accordingly, the authority directed the Income-tax Officer to accept the application for registration of the assessee-firm which has been properly and timely filed, and legally capable of the grant of registration for the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bid on March 10, 1978, the commencement of the business at least can be traced to that date and in regard thereto it cannot be contended that there was no business at all during the assessment year in question. The Tribunal has considered the position in the following manner : " The only point for consideration in this appeal is whether in the absence of the assessee having done any business, during the accounting period relevant to the assessment year, the cash credit appearing in the accounts of the assessee could be added as its income from undisclosed sources. At this stage, it is very relevant to make a mention of a few material facts of this case. In this case, a partnership firm came to be formed by a deed of partnership dated M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the partners could be understood. It is plain and crystal clear that the agreement was entered into on March 1, 1977. From the circumstances appearing on the face of the record that thereafter on March 10, 1978, the first step in regard to the activity is found to have been taken by participation in the bid. The other circumstances of finding cash credit entries to the tune of Rs. 1,90,000 attributable to two persons named P. P. Raju and P. K. Viswanathan, both being dated March 31, 1978 is also an indication of the activity in regard thereto. Therefore, the reasoning that in the absence of a business activity, partnership would have to be termed as legally erroneous (sic). As far back as in 1954 this basic situation is traceable to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y directed the process of registration. The position of law is also crystal clear that the firm comes into legal existence in pursuance of the agreement and it cannot be said to be in existence in the absence of any business activity, because the business activity is to commence in pursuance of the agreement and, therefore, the agreement would be first in point of time. For the above reasons the questions referred are answered in the following manner---question No. 1 is answered in the negative, in favour of the Revenue and against the assessee. Question No. 2 is also answered in the negative, in favour of the Revenue and against the assessee. A copy of this judgment under the seal of this court and the signature of the Registrar shall ..... X X X X Extracts X X X X X X X X Extracts X X X X
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