1988 PLP (Trib (PTD)

The relevant facts of the case are that a firm was constituted on the basis of a partnership deed executed on 9-8-1982 amongst six persons. The capital contribution of each partner was at Rs.6,000 whereas share allocation in profit and loss of Mr. Rab Nawaz (hereinafter referred to as Managing Partner) was at 20% and that of each other partner at 16%. The assessee firm was registered with the Registrar of Firms under section 58-A of the Partnership Act on 22-8-1982. For registration under section 68 of the Ordinance, an application was made on 16-10-1982. The I.T.-O. initiated proceedings for the first time on 21-9-1983 directing the assessee to produce original partnership deed, partners alongwith identity cards, wealth statement of' the partners, proof of investment, enrolment application, pre-qualification and cash book/ledger for the period. The requirements as sought for by the I.T.-O. were furnished. Instead of producing the partners, affidavits of all the six partners containing details of sources of investment were duly filed. The I.T.O. vide order dated 22-12-1984 refused the assessee's claim of registration inter alia on the following grounds:-- (i) ??????? that all the partners though having admitted and explained the source of investment but none of them could establish the source of savings; (ii)??????? that the bank statement of Account No. C-295 revealed that the account was opened and operated individually by the Managing Partner and not by the firm; (iii)?????? that during the period under assessment, the assessee firm had received payment of Rs.35,868 only and for that paltry amount there was no justification for constitution of firm and for sharing the profits by other persons. The I.T.O. held that the Managing Partner was conducting business in his individual capacity. Claim of registration was refused and status of individual was assigned.

3. On appeal, the learned A. A. C. repelled the I. T. O.'s objection of non-explanation of sources of investment as the record revealed that after receipt of affidavits the I. T .O. had never summoned any partner for making further probe on the issue of investment. The I. T.O.'s objection regarding opening and operation of bank account by one of the partners was not dealt with. Registration was allowed to the assessee firm. Before making submissions on merits of the case the learned Departmental Representative contended that the assessee's first appeal being time-barred, the learned A. A. C. erred in entertaining the appeal on merits without condoning the delay. This submission of the learned D.R. is baseless as no such ground has been taken by the appellant I.T.O. in the grounds of appeal. No additional ground to that effect was filed. The established law is that if a ground has not been' taken up in the memo of appeal, the same cannot be allowed to be agitated at the arguments' stage without filing of additional grounds. Rule 10 of the I.T. A. T. Rules 1981 provides that every memorandum of appeal shall set forth concisely and under distinct heads the specific grounds of appeal. In this case, the appellant I. T.O. not only failed to make compliance of the Rules but did not bother even to move in the matter by filing any additional ground to urge that the assessee's appeal before the first Appellate Authority was time-barred The oral objection of the learned, D.R. thus cannot be entertained at arguments' stage. The next submission of the learned D. R. was that the assessee having not affixed his signatures on the memo of appeal before the first Appellate Authority, the appeal was not entertainable and relief allowed on a defective appeal is not valid in the eye of law. Be that as it may, the objection of the learned D.R. is without any basis as no such ground has been taken in the memo of appeal. The appellant I.T.O. was initially required to take up this objection before the learned A. A. C. and in case his objection was over-ruled, a specific ground to that effect should have been taken in the grounds second appeal. The appellant I. T .O. having not proceeded in the matter as required under law, the learned D.R. cannot be allowed to give a technical knock off to the assessee at second appeal stage. For resolving the I.T.O.'s ground of appeal, I have gone through the partnership deed where in clause No. 7 provided:-- "That Malik Rab Nawaz party of the first part shall manage all the affairs of partnership business for which he may not be entitled to any salary." In pursuance to the provisions of partnership deed, a Special Power of Attorney was also given by the partners on same date to the Managing Partner specifically providing:-- "That Malik Rab Nawaz party of the first part is hereby authorised to open account with any bank or banks, operate bank account, obtain loan or over draw from bank or banks with his own signatures on behalf of this partnership for all the parties shall be responsible and liable." On my specific directions hearing of this appeal was adjourned to enable the parties to furnish the exact date of opening of Account No. C-295 with National Bank of Pakistan, Multan. It has transpired that the account was opened on 6-6-1983 with initial deposit of Rs.500 and thereafter, the account remained inoperative. The facts thus repel the I.T.O's objection of exclusive opening and operation of bank account by one of the partners. The partnership deed empowered: the Managing Partner to manage all the affairs of the partnership business and the special power of attorney entitled him to open account with his own signatures. Mere fact that the Managing Partner had opened account in his individual name instead of opening it in the Firm's name was not enough to hold that no genuine firm was constituted and that the business was of an individual partner. The I.T.O's objections regarding opening and operation of bank account by one of the partners thus stands duly repelled. The next objection of the I.T.O. regarding investment of the five partners has no validity in the eye of law as the partners had filed affidavits deposing source of investment of Rs.6,000 per head and the I. T.O. did not make any effort to send for the partners for cross-examination. Affidavits of the partners having not been doubted, it shall be presumed that the partners deposition stood duly accepted. The I.T.O. also failed to appreciate that for the purposes of grant of registration to the firm, source of investment of the partners was totally immaterial. Capital contribution of the partners is not an objection sine qua non to the validity or genuineness of the partnership. When the five partners deposed that they had contributed Rs.6,000 each out of their past savings, source of investment was totally immaterial for the purposes of grant of registration as the I.T.O. could make investigation on the issue of investment in the individual cases of the partners. The I.T.O's objection regarding investment of the partners was thus frivolous. The last objection of the I.T.O. about earning of nominal contract receipts by the firm in the year under review has no bearing on the issue of grant of registration. The partners were the best judges of their business and registration could be claimed and granted without any income as well.

5. Under these circumstances on the reasons as recorded by me, I confirm the impugned order holding that the assessee firm was genuinely constituted and requirements of law having been duly complied with the firm was entitled for registration. Departmental appeal being devoid of any merits is dismissed. M.B.A./465/T?????????????????????????

?????????????????????????????????????????????????? Appeal dismissed.