Law:

Section:

Section 185 of the Income-tax Act, 1961 - Firm - Position prior to 1-4-1993 - Assessment years 1983-84 to 1985-86 - Whether a person can be partner of a firm in dual capacity, one as an individual and other as representative of Hindu undivided family - Held, yes - Whether, therefore, registration of a firm cannot be cancelled on aforesaid ground - Held, yes FACTS For the relevant assessment years the petitioner-firm had been granted registration. Subsequently, the Assessing Officer wrote a letter to the petitioner stating that one 'M' who was a partner of the firm was acting in a dual capacity, one as an individual and the other as representative of the HUF, which he represented. Inasmuch as partnership was a contract, there could not be a contract with himself and therefore, the principle of consensus ad idem was affected and he was of the opinion that no genuine firm came into existence and proposed to cancel the registration from the assessment year 1983-84 onwards. On writ : HELD In view of the categorical statement of law made by Board while considering the matter decided by the Bombay High Court in CIT v.Raghavji Anandji and Co. [1975] 100 ITR 246, it was to be held that the view taken by the ITO in this regard was not correct as the ITO was bound by the circulars issued by the Board. Consequently, the notice issued by the respondent would stand quashed. Note : The case was decided in favour of the assessee. CASE REFERRED TO CIT v. Raghavji Anandji & Co. [1975] 100 ITR 246 (Bom.). K.R. Prasad for the Petitioner. H.R. Raghavendra Rao for the Respondent. JUDGMENT S. Rajendra Babu, J.- The petitioner is a partnership-firm. For the assessment years 1983-84 to 1985-86, it had been granted registration. Subsequently, the Assessing Officer wrote a letter to the petitioner on April 14, 1988, stating that one Muthuswamy who is a partner of the firm is acting in a dual capacity, one as an individual and the other as representative of the Hindu undivided family which he represents. Inasmuch as partnership is a contract, there cannot be a contract with himself and therefore, the principle of…

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