Income tax registration of firms: authority may verify genuineness of the partnership before granting statutory benefit

The Income Tax Officer could enquire into the genuineness and bona fides of a claimed partnership before granting firm registration, because statutory registration depended on a real partnership constituted by an instrument specifying the partners' shares. The absence of an express investigative provision did not remove the officer's power to call for evidence where necessary to satisfy himself that the applicants were truly entitled to the statutory benefit. If the document produced did not reflect a genuine partnership, the officer was not bound to accept it at face value. The authority to verify authenticity before registration was therefore upheld.

---

---

Issues: Whether the Income Tax Officer had power, when an application for registration of a firm was made, to enquire into the reality and bona fides of the alleged partnership and to require evidence before granting registration.

Analysis: The reference turned on the scope of the officer's authority under the taxing scheme governing registration of firms. The reasoning accepted that the right to seek registration arose only where there was in fact a firm constituted under an instrument of partnership specifying the partners' individual shares. If the document produced was not a genuine instrument embodying a real partnership, the officer was not bound to accept it at face value. The absence of an express investigative provision did not exclude the power to make such enquiry, because the officer had to satisfy himself that the applicants were truly the persons entitled to the statutory benefit and could call for evidence necessary to determine whether the alleged partnership was real.

Conclusion: The Income Tax Officer had power to enquire into the genuineness of the partnership and to require evidence of its reality before registration.

Final Conclusion: The reference was answered in favour of the revenue position, and the officer's power to investigate the authenticity of the claimed partnership for registration was upheld.

Ratio Decidendi: Where statutory registration of a firm depends upon a real partnership constituted by an instrument specifying the partners' shares, the assessing authority may demand proof of genuineness and enquire into the reality of the transaction before proceeding with registration.

---