Law: Income Tax Act, 1961

Section: 263

Income-tax---Firm---Registration -Assesses-firm carrying on business of manu­facture of machinery, etc.-Subsequently assesses closed manufacturing and other trading activities and leased out factory premises--In terms of partnership deed assesses-firm empowered to carry on any other business mutually agreed upon-Leasing out factory, held amounts to business--Assesses-firm, entitled to registration. Dal Chand & Sons v. C. I. T. (1968) 69 I T R 247 (P & H) and Nauhar­chand Chunanram v. C. I. T. (1971) 82.1 T R 189 (P & H) ref. JUDGMENT M. R. SHARMA, J.-The Income-tax Appellate Tribunal, Amritsar Bench, Amritsar, has referred the following question of law to us for our opinion. "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in upholding the orders, dated March 12, 1975, and July 25, 1975, for the assessment years 1972-73 and 1973-74, respectively passed by the Commissioner of Income-tax under section 263 of the Income-tax Act, 1961 ?" The assesses-firm was carrying on business in the manufacture of machinery parts and was also dealing to hand tools. Before the commencement of the accounting period relevant to the assessment year 1972-73, the assessee closed its manufacturing and trading activities and leased out the factory premises to the State Warehousing Corporation and received the following amounts by way of rent: Assessment year Amount returned Rs. 1972-73 50,762 1973-74 75,470 The I. T. O. allowed registration to the firm for both the assessment year in question and completed the assessment oil the basis that the firm had the status of registered firm. The Commissioner of Income-tax examined the records and found that since no business activity was being carried on by the assesses during the relevant accounting periods, the firm could not be treated as a registered firm. He accordingly issued notices under section 263 of the I.-T. Act, 1961, to the assessee requiring it to show cause why the order passed by the I.-T. O. do not cancelled as being erroneous prejudicial to the interest of the Revenue. In response-to the show-cause notices, the assessee contended that the-letting out of the property…

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