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TMI Blog1998 (8) TMI 112X X X X Extracts X X X X X X X X Extracts X X X X ..... u Puri were having 1/3rd share each. Smt. Punam Puri was having 25% share and Shri Sanjay Puri was having 8-1 /3%. For the year under consideration the assessee came with the new partnership deed executed on 2-7-1986 in which shares of the original partners Shri K. K. Puri, Smt. Indu Puri, Smt. Punam Puri and Shri Sanjay Puri were changed as two more partners viz. Shri A. K Puri and Shri Vivek Puri were also inducted with 2% and 3.3% shares respectively. The Assessing Officer noted that these two persons have been admitted to the partnership simply to give the benefit to these two persons out of the partnership concern. The Assessing Officer further probed the matter and asked the partners to produce Shri A. K. Puri and Shri Vivek Puri. It appears that affidavits of Shri A. K. Puri and Shri Vivek Puri were filed and it was requested that both of them may be exempted from personal appearance. The Assessing Officer noted further that Shri Vivek Puri was resident student of Bachelor of Engineering at Chandigarh during the relevant period when he was inducted as partner. He completed his course in 1988 session. He has also not contributed any capital nor he has rendered any service in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und that firm was not genuine can be rejected. On the basis of the ratio of these case laws, the Assessing Officer considered that it was a case of mutual understanding amongst the existing partners to adjust their shares and for that purpose they brought two new members and that fact made the existence of firm as non-genuine. The application for registration was accordingly rejected. 3. The assessee came in appeal and taken up different pleas before the CIT(A). The plea was that the Assessing Officer was not justified in denying the claim of registration of assessee-firm. The first legal plea taken by the assessee was that the Assessing Officer was legally bound to allow registration to the assessee-firm as individual assessment of the partners had already been completed, assessing the share of profit from the firm as profit of the registered firm. The assessments of Smt. Indu Puri, Shri Sanjay Puri, Shri K. K. Puri were completed by respective Assessing Officers on 21-2-1989 and that of Shri A. K. Puri on 12-9-1989 and Shri Vivek Puri on 31-7-1989 and thus the assessing Officer has to allow the claim of the assessee-firm for registration. Reliance was placed on the decision of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een completed and thus there should have not been any obstacle in the way of the Assessing Officer to grant registration to the assessee-firm. Accordingly the Assessing Officer was directed to allow the claim of the assessee for registration. This appeal is directed against this order of the CIT(A). 5. The learned D.R. placed reliance on the order of the Assessing Officer and contended that it was a case where registration was rightly refused. During the course of hearing the Bench asked the learned D.R. to point out the case laws in which the view of the Hon'ble Gujarat High Court in the case of Laxmichand Hirjibhai (supra) based on the decision of the Hon'ble Supreme Court in the case of Raza Buland Sugar Co. Ltd. (supra) and that of Murlidhar Jhawar & Purna Ginning & Pressing Factory (supra) were distinguished by their Lordships but inspite of the hints given by the Bench, the learned D. R. has not made any effort to lay his hands on the case and to help the Bench. As against it, the learned counsel for the assessee had placed heavy reliance on the order of the CIT(A). He has contended that order of the CIT(A) is well reasoned and based on the decision of the Hon'ble Supreme Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the appeal of the revenue against the decision of the Hon'ble Andhra Pradesh High Court in the case of Ch. Atchaiah (supra). The Hon'ble Supreme Court in the case of ITO v. Ch. Atchaiah [1996] 218 ITR 239 / 84 Taxman 630 has reversed the decision of the Andhra Pradesh High Court which was based on the decision of the Supreme Court in the case of Murlidhar Jhawar & Purna Ginning & Pressing Factory (supra). Their Lordships have distinguished the ratio of Kanpur Coal Syndicate (supra) and that of Murlidhar Jhawar & Purna Ginning & Pressing Factory (supra). While doing so, their Lordships have observed as under : " A comparison of the provisions of the India Income-tax Act, 1922, and the Income-tax Act, 1961, immediately brings out the difference between them. Section 3 of the 1922 Act provided that in respect of the total income of a firm or an association of persons, the income-tax shall be charged either on the firm or the association of persons or on the partners of the firm or the members of the association of persons persons individually. It is evident that this option was to be exercised by the Income-tax Officer keeping in view the interests of the revenue. In such a situa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer and subsequent assessment of firm as unregistered firm then assessment of firm was valid. All the cases referred to above decided by the Hon'ble Supreme Court, as noted above, has reversed the decision of the Hon'ble Andhra Pradesh High Court in the case of Ch. Atchaiah (supra) and impliedly overruled the decision of the Hon'ble High Court in the case of Murlidhar Jhawar & Purna Ginning & Pressing Factory (supra) and that of the Gujarat High Court in the case of Laxmichand Hirjibhai (supra). The dictum of the Hon'ble Supreme Court is very much clear that the ITO has no option like the one he had under 1922 Act but he has to tax the right person and right person alone. By "right person" is meant a person who is liable to be taxed with respect to a particular income. If that ratio is applied to the present case then it could easily be inferred that it is immaterial that partners of any firm stood assessed prior to the completion of assessment of any firm with its status as registered or unregistered. The Assessing Officer has to assess the firm either as registered or unregistered and that will be the correct position of law and assessment in favour of any partner i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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