ORDER: ABRAR HUSSAIN NAQVI-- 1. This appeal relating to the assessment year 1982-83 has been filed by the assessee who is aggrieved against refusal to grant registration.
2. Brief facts of the case are that the assessee filed application for registration on 31.12.1981 on the basis of the partnership deed executed on 27.8.1981. In all they were 12 partners including two female partners. The assessing officer called all the male partners and recorded their statements.
The assessing officer however found that there was variation in the statement of the following partners:- 1) Mr. M. H.
2) Mr. Q. H.
3) Mr. M. 5.
A) Mr. H. U. C.
3) Mr. M. H.
Broadly the discrepancy in the statement was in regard to the knowledge of the name of the partners, the date of signing of the deed, presence of the partners at the time of the signing the deed, knowledge of the profit and loss account maintained by the firm and place of signing of the partnership deed.
3. The learned counsel for the assessee vehemently contended that all the partners were genuine partners in as much as Mr. M. S. Is an existing assessee, Mr. M. H. & Mr. M. H. Are brothers of Mr. Q. H.
While Mr. Q. H. Himself is the original proprietor of M/s. J. I., Lahore and in whose name three contracts were awarded by WAPDA on 12.8.81. As for Mr. H. U. C. He invested as much as Rs.
6,00,000/- in the business and is also an existing assessee. It was further submitted that according to clause 13 of the partnership Deed Mr. M. H. & Mr. H.U.C. Operated the Bank account of the firm and therefore there was no question of their not being genuine persons. Lastly, the learned counsel contended that the status of AOP has been assigned to the assessee while making an assessment which amounts that the persons who are associated with the business and whose association is being doubted while considering the registration question have been accepted while making assessm ent. The learned counsel has relied upon the case of CIT vs. Hussain Corporation, Karachi reported as (1983) 48 Taxation page 150.
4. The learned D.R. On the other hand submitted that the discrepancies mentioned by the assessing officer are sufficient to disbelieve the assessee's contention, lt was contended that some of the partners are not aware of very important factors which go to show that they were not genuine partners.
5. I have considered the arguments of the parties. It is evident from the record that Mr. Q. H. Was the original proprietor of M/s. J. I. and whose individual name the contracts were awarded by WAPDA.
Therefore, Mr. Q. H. Cannot be regarded as not a genuine partner in the firm. Similarly Mr. M. H. And Mr. M. H. Being the brothers of Mr. Q. H. Could / also not be regarded as not genuine partner. This is but natural that when Mr. Q. H. Being short of funds invites out siders to join his business by making investment, he would like to have his own kith and kin also as partners to look after the affairs of the firm. It may be noted that the assessing officer has not doubted the investment of the partners. She has only relied upon the discrepancies in the statements of the aforesaid five partners. Mr. M. S. And Mr. H. U. C. Again cannot be regarded as not genuine partners as they are existing assessee.
Mr. H. U. C. Has invested an amount of Rs. 6,00,000.00 while Mr. M. S. Has invested Rs. 2,00,000.00.
They are also existing assessee. Further more Mr. H. U. C. Alongwith Mr. M. H. Has also been assigned the duty of operating the Bank Account. Obviously if they are not genuine persons and only name lenders no body would allow them to operate the Bank Account of the firm.
6. As for the discrepancies, suffice it is to say that they are not only minor but most of them are irrelevant. For instance Mr. M. H., in his statement has only stated that he does not remember the name, of the 11th partner. Any body can forget to narrate the name of one^ of the partners out of 12.
As for the share of profits, the learned counsel has placed on record the copy of the balance sheet in which the profits^ of all the partners has duly been recorded in the books of accounts.
7. The contention of the learned counsel for the assessee has also force that the assessing officer having assigned the status of an AOP impliedly accepts this position that all the persons are conducting the business, jointly. The registration is being refused on the sole ground^ that all these partners are not genuinely engaged to conduct this business of the firm. The assessing officer has therefore contradicted herself by accepting all those members as members of the AOP by assigning the status of AOP. In the similar circumstances, the Karachi High Court--| in the case of C1T Vs. Hussain Corporation, Karachi reported as (7 983 48-Tax. Page 150 has held as under:-- "We may also mention here that inspite of the fact that the IT was of the view that the partnership was not genuine one but ~still he assessed the firm as AOP under section 10 of the Income Tax Act.
After reading the orders of the two authorities below we are convinced that this circumstances alone was sufficient Tor the reversal of the finding of the 1TO in the case".
8. Here we would like to mention that the rule laid down by the Karachi High Court has no general application but in the peculiar circumstances of that case. ^However, the rule is fully applicable in the case under consideration" as the assessing officer has on the one hand assigned the status of an AOP meaning thereby that she accepted, the members of the AOP as associating persons in the business but on the other hand had refused the registration on the same ground. The difference between an AOP and a firm is only of technical ties. The assessing officer has not refused the grant of registration on any technical ground or for want of any formality remaining uncomplied with. All the requirements of law appear to have been fulfilled as there is no objection by the assessing officer to that effect.
9. We therefore direct that the registration should be granted to the assessee for the assessment year 1982-83. The appeal is accepted.