1979 (2) TMI 34

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....ip dated 6th April, 1960, the continuing partners are said to have admitted one Mrs. Chandrakaladevi Deviprasad, wife of Deviprasad Brijlal, in the partnership with effect from 1st November, 1959. An application for registration of the firm was made on 1st April, 1960, and a copy of the instrument of partnership was filed. With a view to verify the genuineness of the new firm, the ITO wanted to examine the new partner, Chandrakaladevi, and he, therefore, issued a summons under s. 131 of the I.T. Act, 1961. She did not appear before the ITO on 2nd March, 1966, on which day she was summoned to appear. A letter, however, came to be written by someone on her behalf that she had gone to her native place in Rajasthan. An intimation was, theref....

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....the firm had failed to prove the genuineness of the constitution of the partnership in spite of reasonable opportunity being given to it. He, therefore, confirmed the order of the ITO. The firm took the matter in appeal to the Tribunal. The Tribunal took the view that whether Chandrakaladevi was a partner or not could only be found by subjecting her to cross-examination and her refusal to appear before the I.T. authorities was sufficient to draw an adverse inference against the assessee in this respect. The Tribunal has observed in its order that the representative of the assessee was even unable to file a copy of the partnership deed before the Tribunal. Holding that the ITO sought to find out the truth about the partnership deed, but C....

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.... and must actually exist in terms specified in the instrument. When an application for registration of a firm is made to the ITO, it is open to the ITO to verify whether the partnership is really a genuine partnership or whether the partnership is a sham one. Merely because names of certain partners are specified in the deed of partnership and their shares are also specified, the partnership does not automatically become a genuine partnership and the ITO is entitled to examine whether each of the partners mentioned in the deed of partnership is a real partner and whether the shares specified are real and whether the profits which are to be distributed under the deed will truly be the profits of the individuals who have been shown as part....