Law:

Section:

Section 185, read with section 256, of the Income-tax Act, 1961 (Corresponding to section 26A, read with section 66, of the Indian Income-tax Act, 1922) - Firm - Position prior to 1-4-1993 - Assessment year 1945-46 - 'L', 'G' and several outsiders were partners in a firm - In anticipation of dissolution of said firm, six firms were started and separate deeds of partnership were executed in respect thereof - While completing assessment ITO found that 'L', his brother 'G' and their sons had constituted said six firms, that they had started innumerable shops benami and that all these business belonged to 'L' and his brother 'G' - ITO further found that 'L' and his sons were in control of funds of said firms - He, therefore, held that firms were not genuine and refused registration to said firms - He also determined income of all those firms and assessed it in hands of Firm No. 1 - Tribunal confirmed finding of ITO - High Court dismissed application under section 66(2) of 1922 Act holding that no question of law arose out of order of Tribunal - Whether order of High Court was justified - Held, yes FACTS There was originally a firm 'J' carrying on business in cloth and yarn. Of this firm 'L', 'G' and their brothers and several outsiders were partners. On account of disputes between the partners, this firm was dissolved sometime in the year 1943. In anticipation of dissolution of the firm or shortly thereafter, six firms were started and separate deeds of partnership were executed in respect thereof. The ITO having received information that 'L' and his brother 'G', had started diverse concerns in different names and they had also started innumerable shops benami and that all these businesses belonged to 'L' and his brother 'G', started investigation into the status and ownership of the six firms. The ITO called for information from banks in which accounts were maintained on behalf of the different firms. After a detailed examination of the books of account, the ITO held that it appeared from the declarations given to the banks that 'little discrimination' was observed between 'L' and his sons in the matter of control of funds of the firms. He, therefore, concluded…

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