TaxTMI 
TaxTMI 
1978 (7) TMI 146
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..... In Bhilwara district it was used from June, 1973 to Dec., 1973. Thus it was submitted that on account of these activities Shri Naresh Kumar could not sign the application in Form No. 11 in time and as such there was delay in filing the application for registration. The learned ITO was of the opinion that the reasons were not sufficient for condoning the delay. After this finding the learned ITO also decided on merit that the firm was not genuine. In this opinion, the partners have not contributed any capital. According to him the agreement entered between the said partners and Shri Chain Sukh, father of the two partners was not registered. 3. The firm also filed return on 25th Sept., 1974 declaring an income of Rs. 3,654. According to the learned ITO the so called partners S/Shri Naresh Kumar and Suresh Kumar did not contribute any capital in the firm but they took tractor compressor in the firm on loan from their father Shri Chain Sukh Ajmera who is an Advocate. According to the learned ITO the said agreement was not registered and after appreciating the statement of the partners he came to the conclusion that the business in reality was carried on by Shri Chain Sukh Ajmera. ....
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....arned AAC also held that the firm was not genuine. In substance, the business belonged to Shri Chain Sukh Ajmera and the same was carried on by him. So according to the learned AAC the income from the business in question could only be assessed in the hands of Shri Chain Sukh Ajmera. According to the learned AAC the net profit rate of 40 per cent applied by the ITO is excessive. In his opinion the net profit rate of 37.5 per cent subject to depreciation and interest would be reasonable. The learned AAC also held that the income from profession of Shri Ajmera taken by the learned ITO was also excessive. In his opinion the income from profession should be taken at Rs. 3,500. 7. Being aggrieved with the order of the learned AAC the assessee is in appeal before the Tribunal. 8. The first point for determination in all the three appeals is whether the business M/s. Mahavir Drillers is real business of the firm M/s. Mahavir Drillers, Bhilwara or it belongs to Shri Chain Sukh Ajmera. The assessee M/s. Mahavir Drillers filed application for registration in Form No. 11 alongwith the partnership deed. The copy of the Partnership deed is on the paper book. The deed was executed on 1st A....
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....y. 3. The first party has agreed to make available to the 2nd party another compressor in place of the present one which the first party has an order with the manufacturers. The difference of price between the present compressor and the next coming one will be added to this loan amount. 4. The first party has taken loans from the Bank for purchase of these machineries & equipments and he has to pay interest over the same. The second party would reimburse him for such interest till the bank loan is paid off. 5. Besides interest the 2nd party shall repay the above loan of Rs. 55,000 plus the difference of the present future compressor as stated in cl. 3 above in 5 equal instalments. The loan amount shall not carry any interest. 6. In case of default in payment either of Bank interest or repayment of instalment the 1st party shall be free to exercise its charge on the above machineries & equipments in such manner as is reasonable for the purpose. 7. The first party will get the registration of the tractor transferred to the name of the 2nd party after complete repayment of loan is made. 8. During the period of loan the 2nd party will keep the machinery and equipments....
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....partner has been doing work according to the partnership. The partnership does not provide as to how both the partners shall do the business. So it is for the partners to do the business as they like. At least from the partnership deed it is not clear that Shri Suresh Kumar was required to work all the time in the business. Similarly, the statement of Shri Naresh Kumar clearly goes to show that he used to go at the sites and look after the work of drilling and digging of the wells. So in substance the statements of Shri Naresh Kumar and Suresh Kumar clearly go to proved that the business of drilling and digging of wells was carried on by them in accordance with the partnership deed dt. 1st April, 1973. The profits were divided according to the partnership deed and were also enjoyed by the partners themselves. At least there is no evidence on record from which it could be established that the profits of the said business were really enjoyed by Shri Chain Sukh Ajmera. 10. It is significant to note that the learned ITO made certain queries from Shri Chain Sukh Ajmera vide his letter dt. 25th Aug., 1976. Shri Ajmera replied in detail vide his letter dt. 30th Aug., 1976. In this lett....
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....n Form No. 11. The assessee gave detailed application stating that the business of drilling and digging of wells was carried on in different places, namely, Gujrat, Rajasthan and Madhya Pradesh and as such Shri Naresh Kumar who usually remains at site could not come within time so there was delay in filing the application. According to the learned ITO this explanation was not sufficient. In my opinion the finding of the learned ITO is not correct. The explanation given by the assessee was not found to be false. So the explanation given by the assessee was probable. At least it could not be said that the explanation given by the assessee was improbable or impossible. 13. There is another aspect of the matter. If the learned ITO was of the opinion that there were no sufficient reasons for not filing the application in time, he should have rejected the application out right. The learned ITO instead of doing so also discussed the matter on merit. It means that the learned ITO impliedly condoned the delay in filing an application in Form No. 11. Thus, in my opinion, there were sufficient causes which prevented the assessee from filing the application within time. 14. The other poi....