ORDER
R.K. Patra, J.
This is a reference under section 256(1) of the Income Tax Act, 1961 made at the instance of the assessee. The question of law referred is as follows .-
'Whether on the facts and in the circumstances of the case, the refusal of registration to the assessee-firm under section 185(1)(b) of the Act for the assessment year 1985-86 is justified and valid in law ?'
2. The assessment year is 1985-86. The petitioner (hereinafter referred to as 'the assessment-firm') consisted of four partners and was assessed in the status of registered firm up to and including the assessment year 1984-85. There was a change in the constitution of the firm with effect from 1-4-1984 following retirement of two partners and admission of one Smt. E. Babirani Patra in place of her husband (E. Arun Kumar Patra a retired partner) as a partner. The firm consisting of three partners applied for registration in Form No. 11-A along with the deed of partnership. The assessing officer for the purpose of considering the application recorded the statement of the incoming partner Smt. E. Babirani Patra on oath on 28-8-1987 in persons of her husband (the former retired partner). On consideration of her statement, the assessing officer in his order dated 21-9-1987 made under section 185(1)(b) of the Act held that the genuineness of the firm is not established. Accordingly, he refused registration to the firm and held it to be an unregistered one. On appeal filed by the assessee-firm, the (Appellate) Assistant Commissioner in his order dated 24-3-1988 held that the assessing officer based his conclusion solely on suspicion and the ground taken by him does not lead to the conclusion that there was no genuine partnership in existence. The appellate authority accordingly directed the assessing officer to grant registration to the firm. Being aggrieved by the aforesaid order, the revenue preferred appeal before the Income Tax Appellate Tribunal which by order dated 17-12-1991 reversed the order and restored the order made by the ITO. It recorded a finding that the assessee-firm was not genuine.
3. Sub-section (1) of section 185 of the Act provides that the assessing officer on receipt of an application for the registration of a firm, shall inquire into the 'genuineness' of the firm, and its constitution as specified in the instrument of partnership, and that if he is satisfied that there is or was during the previous year in existence a genuine firm with the constitution as specified, he shall pass an order in writing registering the firm for the assessment year and if he is not so satisfied, he shall pass an order refusing to register the firm.
4. From the aforesaid it is evident that the applicant seeking registration has to satisfy the assessing officer that it is a genuine firm. The jurisdiction of the assessing officer therefore to go into the question of genuineness of the firm cannot be doubted. In the present case, as indicated, the assessing officer examined the so-called incoming partner Smt. E. Babirani Patra on oath. The questions put and the answers given by her are extracted hereunder:
'Q. Why did you become the partner of the firm
A. My husband, Sri Aruna Kumar Patra was earlier partner in this firm. Since he remained busy in social work and LIC business so I became the partner in the above firm.
Q. Are you giving any share of profit to your husband?
A. I give the share of profit that I get from the firm to my husband Sri Arun Kr. Patra and after that he gives the money for household expenses.
Q. Do you get any profit from the firm and what was the profit in your share in the above firm in first year
A. My share of profit from the first year was of Rs. 80,000.
Q. What was your share of loss in the above firm
A. 1 do not have any share of loss in the above firm.
Q. Do you contribute any capital to the firm?
A. No. I have not contributed any amount. I have taken over the capital of my husband who was earlier a partner.'
Although in the partnership deed there is mention that she is agreeable to share the profits as well as the losses, but to the specific question asked by the assessing officer she denied that she was entitled to any share of the losses of the firm. If she was a real partner, she would have known at least the amount of share of profit in the firm, but she stated that her share of profit was Rs. 80,000, whereas it was only less than Rs. 30,000. In the partnership deed it has been mentioned that she represented H.U.F. of her husband, but there is nothing on record to establish the same. Considering the above, the Tribunal held that the assessee-firm cannot be held to be a genuine one. Whether a firm is genuine or not is an inference drawable from the facts and circumstances. It is essentially finding of fact. The view of the Appellate Authority (Assistant Commissioner) that the assessing officer based his conclusion solely on the suspicion is clearly an error of record and the Tribunal rightly reversed the findings of the Assistant Commissioner. The finding of the Tribunal is based on due consideration of evidence and is a pure finding of fact.
That being the position, we are inclined to hold that no question of law arises out of the impugned order of the Tribunal. Consequently, we answer the question against the assessee and in favour of the revenue. We order accordingly.
5. The reference is accordingly disposed of.
Mohapatra, J. - I agree.
Order accordingly.