TaxTMI 
TaxTMI 
1996 (4) TMI 44
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....Bhandar, Darbhanga, was assessed as a firm consisting of two partners, namely, Hanuman Prasad Choudhary and Murlidhar Choudhary, up to the assessment year 1975-76. On June 30, 1975, Murlidhar Choudhary retired from the business leading to dissolution of the firm. A new partnership allegedly came into existence between Hanuman Prasad Choudhary and Smt. Indu Devi in the name and style of Choudhary Kirana Bhandar. The returns were filed in the name of the said firm for the assessment years in question along with application for registration of the firm. The Income-tax Officer found that Smt. Indu Devi had neither rendered any service to the partnership nor had contributed any capital ; the alleged capital of Rs. 1,001 shown in her account had ....
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....ence with a view to avoid proper taxation. Mr. Pawan Kumar, learned counsel for the assessee, has assailed the correctness of the findings of the Tribunal. According to him, contribution of capital money by every partner is not the requirement of law. It is enough if there is an agreement between two or more persons and the business is carried on by some on behalf of all and the profit is shared between them. According to counsel, once the agreement is produced before the Assessing Officer the onus shifts to the Department to prove that the partnership firm was not genuine. He has placed reliance on K. D. Kamath and Co. v. CIT [1971] 82 ITR 680 (SC) ; Himalaya Engineering Co. v. CIT [1965] 57 ITR 762 (Patna) ; Virendra Kumar Avinash Kumar ....
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....o partnership is genuine or not and the firm does in fact exist, primarily, is a question of fact. According to counsel for the assessee, however, where a finding of fact is recorded on a wrong interpretation of law it becomes a question of law within the scope of section 256 of the Income-tax Act. It is, thus, to be seen whether the finding of fact referred to above is based on an erroneous interpretation of any law. As noticed above, the Income-tax Officer had come to the conclusion that the money shown to have been contributed by Smt. Indu Devi, on admission, was found to be the money of the firm itself. Interest at the rate of nine per cent, which had allegedly been paid to Smt. Indu Devi on the so called contribution made by her was fo....