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Income‑tax Appeal No. 3309/1 B of 1982‑83, decided on 16th November, 1984.

‑‑‑S. 68‑‑Registration of firm‑‑Income‑tax Officer refusing to grant registration to assessee firm on ground' of variation in statements of some of partners whom she regarded as not genuine partners‑ Discrepancy in their statements was in regard to knowledge of name of partners, date of signing of deed, presence of partners at time of signing deed, knowledge of profit and loss account by firm and place of signing partnership deed‑‑Record showing that one of such partners was proprietor of another firm and in whose individual name business was being conducted while two other such partners were his brothers‑ Still two other partners who were doubted by Income‑tax Officer were existing assessees‑‑Income‑tax Officer 'not doubting investment of partners but only relying upon discrepancies in their statements while adjudging them as not genuine members‑‑Assessing Officer had on one hand; assigned status of an A.O.P. meaning thereby that she accepted them as associating persons in business but on other hand had refused registration on same ground‑‑Difference between A.O.P. and a firm being only of technicalities‑‑Assessing Officer had not refused grant of registration of firm on any technical ground or for want of‑any formality remaining uncomplied with‑‑All requirements of law having been fulfilled, registration ordered to be granted to assessee firm in circumstances.

C.I.T. v. Hussain Corporation, Karachi (1983) 48 Taxation 150 ref.

Siraj Khalid for Appellant.

Akhtar Nazar, AC/DR for Respondent.

This appeal relating to the assessment year 1982‑83 has been filed by the assessee who is aggrieved against refusal to grant registration.

2. Brief facts of the case are that the assessee filed application of registration on 31‑12‑1981 on the basis of the partnership deed executed on 27‑8‑1981. In all they were 12 partners including two female partners. The assessing officer called all the male partners and recorded their statements. The assessing officer however found that there was variation in the statement of the following partners:‑

Broadly the discrepancy in the statement was in regard to the knowledge of the name of the partners, the date of signing of the deed, presence of the partners at the time of the signing the deed, knowledge of the profit and loss account maintained by the firm and place of signing of the partnership deed.

3. The learned counsel for the assessee vehemently contended that all the partners were genuine partners inasmuch as Mr. M.S. is an existing assessee, Mr. M. H. and Mr. M. H. are brothers of Mr. Q. H . While Mr. Q. H. himself is the original proprietor of Messrs J. I. , Lahore and in whose name three contracts were awarded by WAPDA on 12‑8‑1981. As for Mr. H.U.C. he invested as much as Rs.6,00,000 in the business and is also an existing assessee. It was further submitted that according to clause 13 of the partnership Deed Mr. M.H. and Mr. H.U.C. operated the Bank account of the firm and, therefore, there was no question of their not being genuine persons. Lastly, the learned counsel contended that the status of AOP has been assigned to the assessee while making an assessment which amounts that the persons who are associated with the business and whose association is being doubted while considering the registration question have been accepted while making assessment. The learned counsel gas relied upon the case of CIT v. Hussain Corporation, Karachi reported as (1983) 48 Tax 150.

4. The learned D.R. on the other hand submitted that .the discrepancies mentioned by the assessing officer are sufficient to disbelieve the assessee's condition. It was contended that some of the partners are not aware of very important factors which go to show that they w e not genuine partner.

5. I have considered the arguments of the parties. It is evident from the record that Mr. Q. H. was the original proprietor of Messrs J.I. and in whose individual name the contracts were awarded by WAPDA. Therefore, Mr. Q.H. cannot be, regarded as not a genuine partner in the firm. Similarly, Mr. M.H. and Mr. M.H. being the brothers of Mr. Q.H. could also not be regarded as not genuine partner. This is but natural that when Mr. Q.II. being short of funds invites outsiders to join his business by making investment. He would like to have his own kith and kin also as partners to look after the affairs of the firm. It may be noted that the assessing officer has not doubled the investment of the partners. She has only relied upon the discrepancies in the statements of the aforesaid five partners. Mr. M.S. and Mr. H.U.C. again cannot be regarded as not genuine partners as they are existing assessee. Mr. H.U.C. has invested an amount of Rs.6,00,000 while Mr. M.S. has invested Rs.2,00,00. They are also existing assessee. Furthermore Mr. H.U.C. along with Mr. M.H. has also been assigned the duty of operating the Bank Account. Obviously if they are not genuine persons and only name‑lenders nobody would allow them to operate the Bank Account of the firm.

6. As for the discrepancies, suffice it is to say that they are not only minor but most of them are irrelevant. For instance Mr. M.H. in his statement has only stated that he does not remember the name of the 11th partner. Any body can forget to narrate the name of ore of the partners out of 12. As for the share of profits, the learned counsel was placed on record the copy of the balance‑sheet in which the profits of all the partners has duly been recorded in the books of accounts.

7. The contention of the learned counsel for the assessee has also force that the assessing officer having assigned the status of an AOP impliedly accepts this that all the persons are conducting the business jointly. The registration is being refused on the sole ground that all these partners are not genuinely engaged to conduct this business of the firm. The assessing officer has, therefore, contradicted herself by accepting all those members as members of the AOP by assigning the status of AOP. In the similar circumstances, the Karachi High Court in the case of CIT v. Hussain Corporation, Karachi reported as (1983) 48‑Tax 150 has held as under:

"We may also mention here that in spite of the fact that the I.‑T.0 was of the view that the partnership was not genuine one but still he assessed the firm as AOP under section 10 of the Income‑tax Act. After reading the orders of the two authorities below we a‑r convinced that this circumstance alone was sufficient for the reversal of the finding of the I.‑T.O. in the case."

8. Here we would like to mention that the rule laid down by the Karachi High Court has no general application but in the peculiar circumstances of that case. However, the rule is fully applicable in the case under consideration as the assessir1g officer has on the one hand assigned the status of an AOP meaning thereby that she accepted, the members of the AOP as associating persons in the business but on the other hand had refused the registration on the same ground. The difference between an AOP and a firm is only of technicalities. The assessing officer has not refused the grant of registration or any technical ground or for want of any formality remaining uncomplied with. All the requirements of law appear to have been fulfilled as there is no objection by the assessing officer to that effect.

9. We, therefore, direct that the registration should be grant to the assessee for the assessment year 1982‑83. The appeal is accepted.

M. Y. H. Appeal accepted.

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