Law: Income Tax Act, 1961

Section: 132,185,186

Income-tax------Firm---Registration---Genuineness of firm---Search of premises of managing partner---Seizure of documents showing concealment of income by firm and division of profits among persons who were not partners---Tribunal justified in holding that concealed amounts belonged to firm and in canceling its registration---Income Tax Act, 1961, Ss. 132, 185 & 186. The assessee filed returns for 1978-79 showing an income of Rs.49,370 and for 1979-80, a loss of Rs.6,24,030. In May, 1983, the premises of the then managing partner of the assessee, B, were searched under the provisions of section 132 of the Income Tax Act, 1961, and during the search a copy purporting to be the profit and loss account for the two years was found. As it was found that there were several discrepancies in the accounts submitted to the Revenue, reassessment proceedings were taken and penalty proceedings were also taken. It was also found that the profits had been divided among persons who were not partners. The assessing authority, the Appellate Authority and the Tribunal considered the question on the basis of five blatant circumstances, which were that: (1) B was the then managing partner of the assessee-firm alongwith other partners. (2) The documents were seized in pursuance of action under section 132 of the Act from his place of residence. (3) The documents showed as many as 19 items of identities as compared with the profit and loss account filed alongwith the return. (4) None of the partners participated in pursuance of the action taken by the Income-tax Officer. (5) As far as B, the then managing partner, was concerned, the material on record did not show any step taken by him immediately after the search, and even in pursuance of the proposal initiated by the Income-tax Officer, there was no participation in regard thereto. The Tribunal cancelled the registration of the firm. On a reference: Held, that the provisions of section 132(4-A) of the Act spelt out the presumption that the documents belonged to the person from whom they are seized and that their contents are true. In addition, it must be stated that these aspects were not denied. The facts were very clear and…

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