Commissioner of Income-tax Vs. Organisation of Chemicals and the Entire Delhi - Court Judgment

Excerpt:
- arijit pasayat c.j. 1. at the instance of the revenue, the following question has been referred by the income-tax appellate tribunal, delhi bench-c (in short 'the tribunal'), under section 256(1) of the income-tax act, 1961 (in short 'the act'), for the opinion of this court :'whether, on the facts and in the circumstances of the case, the tribunal is correct in law in allowing registration to the assessee-firm for the assessment year 1972-73 ?'2. the factual position which is almost undisputed is as follows :the assessee, a partnership firm, applied for registration for the concerned assessment year, i.e., 1972-73, relevant to the accounting period ending on june 30, 1971. the partnership was based on a partnership deed dated july 16, 1970, effective from july 1, 1970. under the deed, the profit/ loss sharing ratio of the partners was as follows :nameof the partnershareof profit/lossrelationshipshriakhil kr. rastogi25/80sonshrideep kr. rastogi25/80sonsmt.chandrskanta devi rastogi25/80mothershrimahesh kr. rastogi5/80son3. prior to july 1, 1970, there was a differently constituted firm which was allowed registration. the assessing officer noticed that as per copies of the capital accounts of the partners submitted, the profits had been distributed equally amongst all partners. he, thereforee, refused registration on the ground that the profits of the firm had not been distributed as specified in the partnership deed. the matter was carried in appeal before the-appellate assistant commissioner (in short 'the aac'), who affirmed the conclusions of the assessing officer. before the tribunal, the assessor's stand was that at the time of filing returns no profit was credited in the books of account so far as the partners' capital accounts are concerned. in the profit and loss account, profit of the firm had been arrived at but while preparing the balance-sheet, profit was wrongly allocated as per the constitution of the firm which existed prior to july 1, 1970, due to clerical error. there was as such no crediting of profit of the year to the accounts of the partners in the books of account of the relevant year. this wrong allocation was made only in the statement of accounts submitted for assessment. on being aware of the clerical error, the assessed credited the shares of profits in the books of account in terms of the partnership deed. the tribunal accepted the assessor's claim for registration. on being moved, the tribunal referred the question as stated above.4. the tribunal has recorded a finding that no sooner the error came to the notice of the assessed than the position was rectified. in fact the asses-see explained how the error came about. in the partnership that was constituted prior to july 1, 1970, the partners had equal shares and that is how the allocation was incorrectly made for the relevant assessment year. the explanationn was found to be plausible and it was held that there being no doubt about the genuineness of the firm, it would be entitled to registration. it has to be noted that the position was rectified much before the assessment was completed and previous allocation shall be deemed to be substituted by the correction. on the facts found by the tribunal the conclusions arrived at by it are in order. we answer the question in the affirmative, i.e., in favor of the assessed and against the revenue.5. the petition stands disposed of.