Commissioner of Income-tax Vs. Kanhaiyalal Ramgopal Kawai - Court Judgment

Excerpt:
- section 2(k), 2(1), 7 & 40 & juvenile justice (care and protection of children) rules, 2007, rule 12 & 98 & juvenile justice act, 1986, section 2(h): [altamas kabir & cyriac joseph, jj] determination as to juvenile - appellant was found to have completed the age of 16 years and 13 days on the date of alleged occurrence - appellant was arrested on 30.11.1998 when the 1986 act was in force and under clause (h) of section 2 a juvenile was described to mean a child who had not attained the age of sixteen years or a girl who had not attained the age of eighteen years - it is with the enactment of the juvenile justice act, 2000, that in section 2(k) a juvenile or child was defined to mean a child who had not completed eighteen years of a ge which was given prospective prospect - appellant was about sixteen years of age on the date of commission of the alleged offence and had not completed eighteen years of age when the juvenile justice act, 2000, came into force - juvenile act, of 2000 has been given retrospective effect by rule 12 of juvenile justice rule, 2007 - as such, accused has to be treated as juvenile under the said act. v.k. singhal, j.1. this reference arises out of the order of the income-tax appellate tribunal, jaipur bench, jaipur, in respect of theassessment year 1977-78 and the following question of law has been referred by the income-tax appellate tribunal for decision by this court :'whether, on the facts and in the circumstances of the case, the tribunal was justified in cancelling the order of the commissioner of income-tax made under section 265 of the income-tax act, 1961 ?'2. the brief facts of the case are that the income-tax officer allowed registration to the firm under section 185 observing that the firm was genuine and the profits had been divided in the account books in accordance with the terms of the partnership deed. the commissioner of income-tax initiated proceedings under section 263 and he took the view that the profits had not been divided by the assessee in accordance with the share ratio as stated in the partnership deed dated november 4, 1975. the share of three partners, namely, shri brij mohan, shri satyanarain and shri bhagwan swaroop, was 35 per cent., 35 per cent. and 30 per cent. respectively, whereas the assessee has divided the profits to the extent of one-third each. since profits having not been divided according to the share ratio as laid down in the partnership deed, the commissioner of income-tax took the view that the income-tax officer was in error in granting registration to the firm and that the order was erroneous and prejudicial to the interests of the revenue. the registration, therefore, was cancelled and the income-tax officer was directed to withdraw the consequential benefits. the commissioner of income-tax rejected the plea of the assessee that there was no alteration in the share ratio and it was only a bona fide mistake and the said mistake was rectified by the assessee soon after receiving the notice issued under section 186 from the income-tax officer.3. in appeal, the income-tax appellate tribunal held that the assessee wrongly distributed the profits by virtue of a bona fide mistake and that there was no alteration in the share ratio and the firm was genuine. the income-tax appellate tribunal has taken into consideration the rectification entries and, relying on its earlier decision and the decision of the allahabad high court in the case of cit v. hari ram khanna : [1979]116itr886(all) the order of the commissioner of income-tax passed under section 263 was cancelled and the order of the income-tax officer granting registration to the assessee-firm originally was restored.4. in cit v. hari ram khanna's case : [1979]116itr886(all) the facts were that there were three partners, i.e., a father and his two sons. according to the partnership deed, the father was entitled to 6 annas share in the profits of the firm and his sons were entitled to five annas share each. there was a minor deviation in the division of shares because of theinadvertent fault of the accountant. the deviation was that the father was credited with 5-1/3 instead of 6 annas and the two sons were credited with 5-1/3 instead of 5 annas each. the judgment of the apex court in khanjan lal sewak ram v. cit : [1972]83itr175(sc) was distinguished on the ground that, in that case, a portion of the profits was not divided amongst the partners at all. the division of shares took place before the application for registration was made and the declaration given that the shares had been divided in accordance with the partnership deed was found to be false. in the case of hari ram khanna, the distribution of profits had not taken place at all when the application for registration was made and the explanation for the irregularity, if any, on facts, was found believable by the tribunal.5. in the present case, though there was a distribution of profits which was slightly different than as specified in the deed of partnership, that defect was rectified and the finding of fact recorded by the income-tax appellate tribunal was that it was on account of an inadvertent mistake. if an honest mistake is committed in the division of profits, then on broad principles, it cannot affect the genuineness of the firm. the question as to whether the firm is genuine or not is a question of fact. the expression 'genuine firm' means that the firm is really in existence and the partners are carrying on the business of the firm in accordance with the deed of partnership. the finding of fact as stated above has already been recorded by the income-tax appellate tribunal that it was only a technical mistake which has since been corrected.6. in view of the above position, we are of the opinion that the income-tax appellate tribunal was justified in cancelling the order of the commissioner of income-tax made under section 263 of the income-tax act, 1961.7. the reference is accordingly answered against the revenue and in favour of the assessee. no orders as to costs.