Judgment:
V.K. Singhal, J.
1. The Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, has referred the following question of law arising out of its order dated November 24, 1980, under Section 256(1) of the Income-tax Act, 1961, in respect of the assessment year 1977-78 :
'Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in granting registration to the firm for the assessment year 1977-78 ?'
2. The brief facts of the case are that the assessee-firm consisted of four partners. One of the partners, Smt. Devi Bai, expired in July, 1975. In her place, her grandson, Shri Nirmal Kumar, was taken as a partner with effect from January 1, 1975 (sic). The assessee filed an application in Form No. 11A claiming registration to the firm. The Income-tax Officer observed that profits were divided between the old partners and no profit had been given to Shri Nirmal Kumar in accordance with the new partnership deed. He, therefore, held that no genuine firm existed and accordingly did not grant registration to the firm. An appeal was preferred and it was contended that the correct date of death of Smt. Devi Bai is June 26, 1975, and it was by mistake that the date was mentioned as July 1, 1975. The Appellate Assistant Commissioner observed that after the death of Smt. Devi Bai, her account was closed but it was continued in the account books of the firm and the profit was credited in her account as if she was a partner in the firm. The account of Shri Nirmal Kumar represented a loan to the firm and the profit was not credited to his account. In view of the above, the Appellate Assistant Commissioner held that Shri Nirmal Kumar was not a partner of the firm and the new partnership deed was not given effect to and accordingly the order of the Income-tax Officer was upheld.
3. The assessee preferred a second appeal before the Income-tax Appellate Tribunal and it was contended that, because of inadvertence, the profits were credited in the account of Smt. Devi Bai by the accountant. The credit made was equal to the share of Shri Nirmal Kumar and, for this inadvertent mistake of the accountant, the assessee should not be punished. It has also been contended that, for the assessment year 1978-79, the Income-tax Officer granted registration on the basis of the sale deed. The Income-tax Appellate Tribunal held that the authorities below were not justified in refusing registration to the firm. The Tribunal has further observed that the account of Smt. Devi Bai had already been transferred and merged with the account of Shri Nirmal Kumar and by this process the profits had ultimately been credited to the account of Shri Nirmal Kumar. Therefore, no defect remains even on this account. The firm was held entitled to registration for the assessment year 1977-78.
4. We have considered the matter. In the present case, the genuineness of the firm is not disputed and it is only on account of not giving the share of profit to Shri Nirmal Kumar in accordance with the new deed of partnership that the firm was held not to be a genuine firm. The registration for the assessment year 1978-79 had already been granted on the basis of the sale deed. The finding which has been recorded by the Income-tax Appellate Tribunal and not been challenged is that the profits of Shri Nirmal Kumar were inadvertently credited to the account of Smt. Devi Bai and this was an inadvertent technical mistake. A further finding has been given that the account of Smt. Devi Bai has already been transferred and merged with the account of Shri Nirmal Kumar and by this process the profits have ultimately been credited to the account of Shri Nirmal Kumar. Therefore, no defect remains even on this account.
5. The reasoning which has been given by the Income-tax Appellate Tribunal is in accordance with law and, therefore, it is held that the Income-tax Appellate Tribunal was right in granting registration for the assessment year 1977-78.