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Civil Reference Case No. 5 of 1956, decided on 2nd January 1957.
26‑A‑Firm‑Registra tion‑Instrument of partnership tampered with in material particulars after execution‑Refusal to register.
The Income‑tax Officer is justified in refining to register, under the Income‑tax Act, an instrument of partnership which is tampered with in material particulars after it has been executed.
By two separate applications made under section 66 (1) of the Income‑tax Act the assessee requires the Tribunal to refer certain alleged questions of law which are said to arise out of the Tribunal's order relating to the applicant's assessment for the charge year 1952‑53.
2. The application arising out of the assessment proper (R. A. No. 51 of 1955‑56) is admittedly time‑barred by 18 days. By a separate order made under section 66 (1) we have condoned the delay and admitted the application for reference.
3. The facts of the case are these : In connection with the assessment year 1952‑53, based on the "previous year" ending the 13th April 1951, the assessee made an application for registration under section 26‑A of the Act on the 29th November 1952: Registration was sought on the basis of the so‑called . instrument of partnership dated the 7th August 1952. The application for registration was accompanied by a copy of this instrument and the original instrument of partnership also appears to have been produced at some stage and subsequently it was . taken away. Clause 2 of this original instrument provided as follows
"That the partners shall be entitled to profits and liable to losses ascertained on adjustment of books in the manner following:
|
| Rs. | A. | P. |
| (i) Abdul Hamid | 0 | 8 | 0 |
| (ii)Muhammad Solaiman | 0 | 4 | 0 |
| (iii) Muhammad Anisuddin | 0 | 2 | 0 |
| (iv) Muhammad Islam | 0 | 2 | 0 |
That the working partners will receive the above share of profit in lieu of their salaries."
Abdul Hamid who had hitherto carried on the business in his individual capacity was supposed to be the capitalist partner whereas the other three were shown as working partners. The Income‑tax Officer suspected that the working partners were in fact employees of Abdul Hamid and that no contractual relation ship existed between Abdul Hamid on the one hand and these three on the other. The case was subsequently taken up on the 24th December 1952. On the date of hearing the assessee produced the same instrument of partnership which had been in the meantime tampered with. One of the old sheets, page 3, of the original instrument was replaced by another sheet of cartridge paper of a smaller size bearing the same page. This new sheet did not contain the following stipulation occurring in the original clause 2:
"That the working partners will receive the above share of profits in lieu of their salaries."
Then again, in the preamble "August" was erased and "September" typed in place thereof. The stamp paper for the partnership deed was purchased on the 6th September 1952, whereas the deed was shown to have been executed on the 7th August 1952. Realizing this mistake the assessee got over this difficulty by antedating this document after it had been executed. This altered document was presented to the Habib Bank and it bears the seal of the bank under date 22nd December 1952, that is to say, two days before the matter was finally taken up by the income‑tax Officer. The Income‑tax Officer refused registration holding that there was no genuine partnership. He also com mented on the interpolations subsequently made by the assessee in order to meet the objections which the Income‑tax Officer had given out at the beginning of the proceedings. In the opinion of the Income‑tax Officer, the business still continued to be the exclusive property of Abdul Hamid. In that view of the matter he also made the assessment in the status of an individual.
4. Against the orders of the Income‑tax Officer refusing registration under section 26‑A of the Act and assigning the status of individual for the purpose of assessment, the assessee preferred two appeals to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner set aside the Income‑tax Officer's order refusing registration and directed him to register the firm for the assessment year 1952‑53. In the appeal against the assessment proper the Appellate Assistant Commissioner refused to interfere with the quantum of assessment but at the same time directed the Income‑tax Officer to treat the assessee as a registered firm.
5. Against this order of the Appellate Assistant Commis sioner the Income‑tax Officer preferred two appeals to the Tribunal. In both these appeals the objection was precisely the same, namely, that the Appellate Assistant Commissioner was not justified in allowing registration and in directing the Income- tax Officer to treat the assessee as a registered firm for purposes of assessment for the charge year 1952‑53. The Tribunal allowed both the appeals, set aside the order of the Appellate Assistant Commissioner granting registration etc. and restored the orders made by the Income‑tax Officer. In disposing of the appeals the Tribunal made the following observation
"That the original instrument was tampered with in the manner explained above is admitted by the assessee, but it is alleged that there was in fact 'no tampering' but that the original deed was subsequently 'amended'. It is impossible to accept this position. There should have been a deed of rectification for which the assessee would have had to pay stampt duty, or there should have been a fresh instrument of partnership. Neither of these steps was, however, taken but certain interpolations were made at a later stage which it was not permissible to do. We are surprised that the Appellate Assistant Commissioner calls this invalid document as an 'amended' deed and on the basis of this erroneous assumption he has ordered the Income‑tax Officer to accord necessary registration. It is impossible for us to order registration on the basis of a document which is no more than a mere waste paper in the eye of law. Such being the position, the order of the Appellate Assistant Commissioner cannot possibly be sustained."
6. The Tribunal having disposed of both the appeals by a common order the assessee has made two applications for reference under section 66 (1). It is needless to set out the questions suggested by the assessee inasmuch as it is now agreed that only one question need be referred to the Hon'ble High Court and the one framed by us has been accepted by the assessee.
7. In reply to the application for reference the respondent, Commissioner of Income‑tax, East Bengal, maintains that no question of law arises out of the Tribunal's order. In our opinion, however, a question of law does arise and we propose to refer the same to the Hon'ble High Court.
8. Under section 66 (1) of the Act we, therefore, refer the following question to the Hon'ble High Court at Dacca for its opinion
"Whether, in the facts and circumstances of the case, the Tribunal was justified in refusing registration on the basis of an instrument which had been subsequently tampered with in material particulars after it had been executed "
(The same question arises in both the applications for reference.)
Asrarul Hussain with Kamaluddin Hussain for Appellant.
A. F. M. Mesbahuddin with Abdul Matin Khan Choudhury for Respondent.
‑This is a reference under subsection (1) of section 66 of Income‑tax Act made at the instance of the assessee, Messrs Dacca Tobacco Stores. The point of reference is:
"Whether, in the facts and circumstances. of the case, the Tribunal was justified in refusing registration on the basis of an instrument which had been subsequently tampered with in material particulars after it had been executed "
The material facts are that the assessee respondent, made an application in connection with the assessment year 1952‑53, based on the "previous year" ending the 13th of April 1951, under section 26‑A of the Act on the 29th of November 1952. This claim for registration was made on the basis of a partnership deed dated the 7th of August 1952. Along with the application for registration, a copy of the instrument of partnership was also enclosed, and the original instrument of partnership was subsequently produced and taken away by the assessee. The registration was refused by the Income‑tax Officer on the grounds, (1) that the page 3 of the original deed of partnership was not typed to the end like the preceding and subsequent pages; (2) that the original page 3 was substituted by another page 3 after the 27th of November 1952; (3) that the sheet of cartridge paper used in page 3 was smaller in size than the sheets used for other pages of the deed; and (4) that the deed of partnership made on the 7th of August 1952, was drawn up on a stamp paper purchased on the 6th of September 1952.
On appeal the Assistant Commissioner of Income‑tax held in favour of the assessee. He found that the assessee had made 4 bona fide mistake in putting down the date, the 7th of August 1952, instead of the 7th of September 1952, and that the deed was not tampered with but it was an amended one.
On appeal to the Appellate Tribunal the Tribunal did not accept this finding of fact of the Income‑tax Assistant Commis sioner and held that the partnership deed was altered in material particulars. However, at the instance of the assessee, the Appellate Tribunal has matte this reference on the point mentioned above.
From the very term of reference it is more than clear that it is a finding of fact that the instrument in question was tampered with in material particulars, and the only point for determination is, whether, in spite of such material tampering of the instrument the Tribunal was justified in refusing registration on the basis of such instrument.
Mr. Asrarul Hussain, counsel who appears for the assessee, has strenuously argued that the Income‑tax Tribunal should have accepted the finding of the Appellate Assistant Commissioner when the Assistant Commissioner has clearly come to a finding that there was a bona fide mistake on the part of the assessee and that the assessee did not really tamper with the instrument but only amended the same.
The terms of subsection (1) of section. 66 allow the Tribunal only to make a reference to this Court on a point of law. Here, on the face of the terms in the letter of reference, it is evident that no point of law is involved. We fail to appreciate the point raised by the learned counsel for the assessee at this stage, namely, that, in spite of the reference being made in the form as it is, we should go behind the finding of the Tribunal and accept the finding of the Appellate Assistant Commissioner on a finding of fact. It is not one of the terms of reference, whether the instrument was tampered with in material particulars or not, but whether in spite of the instrument being tampered with in material particulars, the registration was rightly refused or not. That being the position, we do not think that the Appellate Tribunal was justified in making this reference under subsection (1) of section 66 on a point which relates only to facts. It is abundantly clear, that if a party does not make a proper application for registration or files an application accompanied by a faked instrument or a tampered instrument, such a party cannot claim registration under the provisions of law, and, therefore, it cannot be said that on these facts the Tribunal had any difficulty as to the applicability of law. Under section 26‑A of the Income‑tax Act all that the Income‑tax authorities have to be satisfied is as to the constitution or the bona fides of the firm which applies for registration.
Hence, the answer to this reference is that the Tribunal was justified in refusing registration on the basis of the instrument which was tampered with in material particulars after it had been executed and the reference is answered in the affirmative with costs.
CHAKRABORTI, J.‑I agree with my Lord the Chief Justice.
Reference answered in the affirmative.
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