1986 (2) TMI 31 - HC - Income Tax

Court affirms Bombay Bench's decision, deems firm genuine with new evidence. Assessee prevails, parties bear own costs.

Commissioner Of Income-Tax Versus Manaklal Porwal

Commissioner Of Income-Tax Versus Manaklal Porwal - [1986] 160 ITR 243, 57 CTR 249, 26 TAXMANN 766 Issues Involved:1. Whether the Income-tax Appellate Tribunal, Bombay Bench 'B', was justified in law in departing from the previous finding of the Income-tax Appellate Tribunal, Delhi Bench 'C', regarding the genuineness and registration entitlement of the firm M/s. Manaklal Porwal.Detailed Analysis:Issue 1: Justification of Departure by the Bombay BenchThe primary question referred to the court was whether the Income-tax Appellate Tribunal, Bombay Bench 'B', was justified in law in departing from the previous finding of the Income-tax Appellate Tribunal, Delhi Bench 'C', which had determined that the firm M/s. Manaklal Porwal was not a genuine firm and thus not entitled to registration under the Indian Income-tax Act, 1922.Relevant Facts:- Manaklal, an 'A' class contractor, formed a partnership with Shri Kalulal, Shri Amritlal, and Smt. Jatan Bai, each holding a 1/4th share, effective from April 1, 1955.- The firm applied for registration for the assessment year 1956-57 and renewal for 1957-58.- The Income-tax Officer and the Appellate Assistant Commissioner rejected the firm's claim for registration and renewal.- The Income-tax Appellate Tribunal, Delhi Bench 'C', upheld these rejections, concluding that the firm was not genuine.- Despite additional evidence submitted during subsequent assessments for the years 1958-59, 1959-60, and 1960-61, the Income-tax Officer and the Appellate Assistant Commissioner again refused registration.- The Income-tax Appellate Tribunal, Bombay Bench 'B', however, found the firm to be genuine based on fresh evidence and criteria set by the High Court.Arguments from Revenue:- The Revenue argued that the Bombay Bench was not justified in departing from the Delhi Bench's earlier finding, as such a departure would create chaos and uncertainty.- It cited the principle that no Tribunal has the right to reach a conclusion entirely contrary to another Bench's decision on the same facts, as established in CIT v. L.G. Ramamurthi [1977] 110 ITR 453 (Madras High Court).- The Revenue also referenced CIT v. Durga Prasad Mysore [1971] 82 ITR 540 (Supreme Court) to support the argument that previous findings should be considered, especially when no fresh material is presented.Arguments from Assessee:- The Assessee contended that findings from previous years do not operate as res judicata or estoppel in subsequent years, as established in ITO v. Murlidhar Bhagwan Das [1964] 52 ITR 335 (SC) and M.M. Ipoh v. CIT [1968] 67 ITR 106 (SC).- The Assessee emphasized that additional evidence was presented for the subsequent years, which justified a different conclusion by the Bombay Bench.Court's Analysis:- The court acknowledged that the doctrine of res judicata does not apply to tax assessments for different years, and findings from one year are not binding in subsequent years.- The Bombay Bench's decision was based on additional evidence not considered by the Delhi Bench, including letters, applications, and correspondence that demonstrated the partners' active involvement in the firm.- The court noted that the Bombay Bench evaluated the fresh material and found substantial withdrawals by the partners, indicating they shared profits, thereby supporting the firm's genuineness.- The court concluded that the Bombay Bench was justified in its finding, as it was based on new evidence and was not perverse or based on irrelevant considerations.Conclusion:The court answered the question in the affirmative, supporting the Bombay Bench's decision. The finding that the firm was genuine was upheld, and the court ruled in favor of the assessee, stating that the Tribunal's decision was legally justified based on the additional evidence presented. The parties were ordered to bear their own costs of the reference.