Law:

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Section 26A of the indian income-tax act, 1922 [Corresponding to section 185 of the income-tax act, 1961]-Firm-Registration-ITO refused registration as he was not satisfied with genuineness of firm-One lady partner failed to appear before ITO in spite of notices-Whether ITO justified in refusal-Held, on facts, yes Facts The assessee-firm, consisting of three partners, was reconstituted on retirement of one lady partner by an instrument of partnership, dated 6-4-1960, admitting therein another lady as partner with effect from 1-11-1959. An application for registration of the firm was filed on 1-4-1960 for the assessment year 1961-62 along with a copy of the partnership deed. In response to specific summons to her under section 131 and subsequent opportunities to the firm, the new lady partner failed to appear on grounds of her being out of town. The firm claimed that she was not an active partner but only a financing partner with a capital contribution of Rs. 50,000. However, no such reference to capital contribution could be found in the partnership deed. For want of sufficient proof that the lady was a partner, the ITO refused to grant registration. In appeal, the AAC confirmed the ITO's order holding that the firm failed to prove the genuineness of its constitution. The assessee's appeal to the Tribunal also was likewise dismissed. Before the High Court, the assessee argued that all the authorities had proceeded merely on a suspicion that the new lady partner was not in fact a partner. On reference : Held The ITO was entitled to find out by cross-examining the lady partner whether she had really contributed her capital and its source thereof and had been taken as a partner. Since the firm failed to produce her before the ITO in spite of repeated opportunities, the ITO was justified in doubting the genuineness of the firm and refusing its registration. The fact that there was a partnership deed did not necessarily mean that the partnership was genuine. JUDGMENT Chandurkar, J.-The assessee, Messrs. Brijlal Madanlal, is a firm which originally consisted of three partners, namely, Mandanlal Paliram, Kishorilal Fatehchand and Anardevi, widow of Brijlal Paliram.…

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