Law:

Section:

Section 185 of the Income-tax Act, 1961 - Firm - Registration - Application for - Licence for sale of foreign liquor obtained in an individual's name but worked by assessee-firm right from date of commencement of licence - Application made to collector on 1-8-1967 for permission to form partnership - Collector's permission granted on 30-11-1973 retrospectively from 1-8-1967 after charging composition fee for breach of general licence conditions framed under the state excise act - Commissioner, acting under section 263, set aside ITO's order granting registration for assessment year 1968-69 and its continuation thereafter on the ground that formation of partnership firm without collector's prior permission was illegal - Whether commissioner's action justified - Held, on - Facts, no Facts SM, a liquor contractor, was being assessed in the status of individual. Two contracts for the sale of foreign liquor from 1-8-1967 to 31-3-1968 were obtained by him from the Government on 24-7-1967. On 1-8-1967, he informed the Collector of Excise, through the District Excise Officer, that he had taken the contracts in his name on behalf of the assessee-firm consisting of 5 members and that the contracts would be executed by the said partnership. The licenses were, however, issued in the name of SM on 4-8-1967. Subsequently, a partnership deed was executed in respect of the said contract on 1-9-1967, and a copy of it was sent to the Collector on 4-9-1967 with a letter requesting him to do the needful in the matter. However, no orders were passed by the Collector on SM's applications and the matter remained pending. In the meantime, the licenses were renewed year after year in SM's name. On 6-1-1972, the ITO registered the partnership for the assessment year 1968-69 under section 185 and continued the said registration till the assessment year 1972-73. On 19-11-1973, SM wrote to the Collector again reminding him of his letters dated 1-8-1967 and 4-9-1967. The District Excise Officer, after examining matter, reported to the Collector (i) that a licensee could not enter into a partnership without the Collector's written permission ; (ii) that the breach might be regularised and…

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