TaxTMI 
TaxTMI 
1978 (3) TMI 14
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....ad filed an application for registration under s. 26A of the Indian I.T. Act, 1922, on the 27th June, 1957. The assessee had also filed a return showing "nil" income for the assessment year 1958-59. During the course of assessment proceeding for that year, the authorised representative of the assessee filed a letter dated 7th September, 1962, in which it was stated that no business was done during the period from 1st January, 1957, to 25th July, 1957, and, therefore, a "nil" return of income was filed. It was further brought to the notice of the ITO that the business had actually commenced on the 26th July, 1957, and the books of accounts were closed for the first time on 30th June, 1958, which accounting year was relevant to the assessment year 1959-60, and for which a return of income was also made. The ITO on these facts found that the very first year of business of the assessee was for the assessment year 1959-60, and for that assessment year the assessee had filed an application for renewal of registration on 29th June, 1959. However, when pointed out by the ITO that for the assessment year 1959-60, an application for registration under s. 26A of the Indian I.T. Act, 1922, sh....
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....erred to M/s. K. L. Poddar & Sons, Pvt. Ltd. Therefore, according to the ITO, it was clear that the bank account was created only as an eyewash in order to create evidence that the partners were carrying on business. The ITO further held that the application was belated. The firm consisted of ladies and minors who lacked the requisite knowledge of carrying on an intricate and complicated manganese ore business which was mostly exported to foreign market with a little use in local steel industries. All the purchases and sales were actually conducted by M/s. K. L. Poddar & Sons Pvt. Ltd. in which the husbands or parents of the partners were vitally interested. The above bank account in the Bank of Mysore did not show any transaction being done in the course of the day to day business except one or two stray transactions relating to the business. In reply to the queries made by the ITO, the assessee stated that the partners consulted the guardians of the minor beneficiaries and agreed to carry on the business. The lady partners thus consulted their husbands and other relatives and decided to start the business. Further, the partners carried on the partnership business, according to th....
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.... Poddar, are shown to have contributed capital to the extent of Rs. 10,000 each. In the case of the three minors who are admitted to the business of the partnership each of them is stated to have contributed Rs. 5,000 as capital. It is found that the amount shown as contributed by the minors was withdrawn by 31st. December, 1957, during the very first year and in the case of the adult partners entire capital contributed excepting Rs. 5,000 in each of the cases of Smt. Indira Rani Poddar and Smt. Sarada Devi Poddar is shown as withdrawn during the very first year. Thus, the amount of Rs. 10,000 contributed by these two partners was hardly sufficient for carrying on the manganese business, the turnover in which was more than Rs. 3,00,000 in the very first year. It was also observed that the entire business was financed by M/s. K. L. Poddar & Sons Pvt. Ltd. and all the sale proceeds alleged to belong to this appellant-firm were credited in the account of M/s. K. L. Poddar & Sons Pvt Ltd. and the entire purchase price is also shown to have been paid by M/s. K. L. Poddar & Sons Pvt. Ltd. It was explained that this was done to use the overdraft facilities to which K. L. Poddar & Sons Pvt....
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....justified in not granting registration. Thereafter, the assessee went up in appeal before the Tribunal. Before the Tribunal, it was contended that the books of account were maintained by the assessee and were produced before the ITO and he had scrutinised some of the matters which, according to the assessee, were not germane to the matters in issue. It was further emphasised that in the assessment proceedings for this year, the accounts of the assessee-firm were not challenged in any way and the various objections raised merely went to cloud and confuse the issue. It was not disputed by the departmental authorities that all the formalities had been gone through and thus the assessee firm was only required to prove that there was such a firm in existence and, according to the assessee, the assessee-firm could not have furnished any better proof than the ITO's assessment order in the case of the firm as also of the partners. According to the assessee, the firm got its work done through a limited company and that company acted as its bankers and financiers and the question of benamidar in this case did not arise as the limited company acted as its broker. The Tribunal was of the vie....
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.... carried on, the manner of supply of capital of the business, the nature of business done and the method of doing such business. In that light the ITO as well as the AAC had evidence to hold that the firm was not genuine and factually did not exist. On behalf of the assessee, it was urged that the fact that the partners were ladies and minors who were inexperienced by themselves to carry on the business was irrelevant for determining the existence of the partnership. It was, secondly, urged that the fact that the assessee-firm carried on their business through M/s. K. L. Poddar & Sons Pvt. Ltd. was also irrelevant because, according to counsel for the assessee, the fact that someone carried on a business with the aid and assistance of someone else was not indicative of the fact that the firm ceased to carry on the business. It is true that the various factors mentioned by the ITO and also the AAC taken by themselves singly did not indicate that either no business was carried on by the firm or there was no firm in existence. But these factors were not irrelevant as such. Same facts neutral in themselves when taken in conjunction with one another may assume colour, to which due weig....
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....idar of M/s. K. L. Poddar & Sons Pvt. Ltd. The AAC and the ITO were considering the question of benami on the ground that there was in reality no firm at all. From this aspect of the matter, the ITO and the AAC had approached the question and had referred to the evidence and the factors mentioned in the order holding that the firm was really a dummy of the company and was not a firm itself. The Supreme Court in the case of Sree Meenakshi Mills Ltd. v. CIT [1957] 31 ITR 28 at page 52 had referred to the fact that the word " benami " is used to denote two different kinds of transactions. It is in the second sense mentioned in the Supreme Court judgment, that is to say, in the sense that the partnership was a fictitious arrangement and the document did not represent the reality that the ITO and the AAC had approached the matter. These two types of benami were also referred to by the Supreme Court in its judgment in the case of CIT v. A. Abdul Rahim and Co. [1965] 55 ITR 651 at 658. Therefore, in our opinion, though the Tribunal considered that there was no legal infirmity in granting the registration, it did not properly appreciate the evidence that had been mentioned by the ITO and ....