Bhagwan Cloth Stores vs Commissioner of Income Tax

C.P. Sen, J.—At the instance of the assessee, the following question of law has been referred to this court for its opinion by the Tribunal u/s 256(1) of the Income Tax Act, 1961, for the assessment year 1976-77:

" Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in upholding the orders of the authorities below refusing registration to the assessee-firm ? "

Originally, a business in cloth was done in the name and style of Bhagwan Cloth Stores, by the Hindu undivided family of which Girdharilal Bhagwandas was the karta. From November 14, 1974, Girdharilal took his son, Ashok Kumar, as a working partner and converted the business into a partnership, but no partition was effected in the family. The Income Tax Officer was of the opinion that the joint family business could not be converted into a partnership, unless there was a partition between the family members and that no genuine firm had come into existence. He, therefore, refused registration to the asses-see. On appeal, the Appellate Assistant Commissioner, relying on a decision of the Bombay High Court in Shah Prabhudas Gulabchand Vs. Commissioner of Income Tax, Bombay, , held that a coparcener could never become a partner in a business carried on by the karta of the Hindu undivided family, unless he had separated and was the owner of separate property. He also upheld the finding of the Income Tax Officer that no genuine firm had come into existence. On appeal, the Tribunal upheld the conclusion of the authorities below and rejected the appeal. Thereafter, the assessee filed an application for rectification on the ground that the view of the Bombay High Court has not been accepted by this court in Ramchand Nawalrai Vs. Commissioner of Income Tax, and, therefore, the assessee was entitled to registration. The Tribunal discussed both the decisions but preferred to follow the decision of the Bombay High Court. It appears that the decision of the authorities below that no genuine firm had come into existence was not challenged and, therefore, not considered by the Tribunal.

After having heard counsel for the Department, since the assessee remained unrepresented, we are of the opinion that the question has to be answered in the affirmative, in view of the recent decision of the Supreme Court in Ratanchand Darbarilal Vs. Commissioner of Income Tax, M.P., that the genuineness of a firm is a question of fact--Tribunal considering all aspects--High Court not justified in going into the facts. It may be mentioned here THAT this court had taken a contrary view in Commissioner of Income Tax Vs. Ratanchand Darbarilal, , which has been reversed by the Supreme Court in the aforesaid decision, that the High Court has jurisdiction to interfere with the findings of the Tribunal that a genuine firm had come into existence. In the present case, there is a concurrent finding by the authorities below that no genuine firm has come into existence. This finding was not challenged before the Tribunal and so it has not been required to be considered. The question whether the firm was genuine or not is a question of fact and cannot be agitated in this reference. In view of this position, it is not necessary for this court to consider the correctness of the decision of this court in Ramchand Nawalrai Vs. Commissioner of Income Tax, .

Therefore, the question is answered in the affirmative, in favour of the Revenue and against the assessee. There shall be no order as to costs, as the assessee has not come and supported the reference.