N. M. Kasliwal, J.: Both above cases are disposed of by one single order as they arise our of same order of Tribunal, dt. 22nd Sept. 1973. Brief facts as set out in statement of case are that Narnauli Jewel Corporation, Jaipur (hereinafter referred to as assessee ) filed its return of income-tax in respect of asst. yr. 1968-69 declaring its status as firm on 2nd July, 1968. According to partnership deed which was filed along with application for registration under s. 185 of IT Act, 1961, firm was constituted on 14th Nov., 1967. following persons were declared in said deed as partners: (i) Gyan Devi Mother Share 30 per cent (ii) Bai Krishna Agrawal Son Share 35 per cent (iii) Chandra Mohan Son Share 35 per cent aforesaid partnership deed was registered with Registrar of Firms o n 2nd Dec., 1967 and account of firm was opened with bank of Baroda, M. I. Road, Jaipur on 23rd Nov., 1967. All three partners were authorised to operate said Bank account. Gyan Devi mother of other partners had brought in as per books of firm capital of Rs. 22,631. She remained partner in firm upto 31st March, 1970. Capital in her account in books of firm in respect of assessment year ended on 31st March, 1968, 31st March, 1969 and on 31st March, 1970, showed no withdrawals meant to cover her house-hold expenses. withdrawals were, however, made to make gift of Rs. 9,950 to her son Kaushal Kishore and another sum of Rs. 10,000 was similarly gifted. income-tax payable to her share was also debited to her capital account. credit balance in capital account of Smt. Gyan Devi when she left assessee firm on 31st March, 1970 was Rs. 33, 425. This credit balance in her account continued in books of firm for sometime and interest was credited thereon. Ultimately entire credit balance was withdrawn and as such withdrawals were invested in purchases of plot of land. assessee firm submitted application to ITO in From No. 11 on 26th Dec., 1967 for granting registration under s. 184 of Act. application was accompanied by original partnership deed and was found technically complete in all respects. During course of assessment proceedings, ITO wanted to ascertain t h e genuineness of firm. In course of his inquiry in this regard, he directed Inspector to contact Gyan Devi and to elicit from her information with regard to her being partner in said firm. Inspector contacted Gyan Deyi and recorded her statement on 24th Aug., 1971. ITO found aforesaid statement of Gyan Devi as unsatisfactory. As such he wrote letter to assessee on 27th Oct., 1971 wherein he indicated that personal attendance of Gyan Devi partner was very necessary for verification of geniuses of firm. ITO pointed out in letter that "Inspector, who was sent to contact above lady has reported that lady had not replied to his queries properly". ITO, therefore, required firm to produce Gyan Devi, in this office on 17th Nov., 1971. It was also mentioned at end of letter to note that if lady was not produced on date, it would be presumed that she was not genuine partner and claim for registration will be liable to be refunded. In response to aforesaid letter application for adjournment was moved on ground that all partners were busy in marriage of one of their partners which was to be held on 21st Nov., 1971. ITO accepted request of assessee and fixed 6th Oct., 1971 for examination of Gyan Devi. On this date representative of assessee appeared before ITO and informed that it was not possible to produce lady in office. No reasons for aforesaid stand was given to ITO. ITO in these circumstances came to conclusion that assessee has deliberately withheld production of Gyan Devi partner before him. He, therefore, drew adverse inference and refused registration of firm treating it as not genuine because in his opinion Gyan Devi did not appear to be genuine partner. After refusing registration to firm he accorded assessee status of AOP and completed assessment in that status. assessee aggrieved against order of ITO filed appeal before AAC. assessee took plea before AAC that Gyan Devi, whose statement was recorded on oath on 24th Aug., 1971, was mentally ill and such could not give proper answer to Inspector and such fact was also made known to Inspector at time of recording statement of Gyan Devi. It was further pleaded that Gyan Devi could not be produced before ITO as she was mentally ill. assessee also filed certificate of Vaidya and affidavit of husband of Gyan Devi before AAC on 7th April, 1972. AAC discarded above submissions of assessee and also placed no reliance on certificate of Vaidya as he found discrepancy in dates in certificate. It was pointed out that this certificate was dt. 20th Aug., 1971 and yet it was certified that lady was under treatment of Vaidya w.e.f. 10th Aug., 1972. AAC thus dismissed appeal by his order dt. 14th April, 1972. assessee then filed appeal before Tribunal and raised several contentions regarding genuineness of firm as mentioned in para 10 of statement of case. Contentions were also raised that there was not legal basis for examination of Gyan Devi by Inspector. Such statement recorded by Inspector had no evidentary value. It was also argued on behalf of assessee that partners of firm had already been assessed on their share of income from firm and as such with regard to same income appellant i.e. assessee firm could not have been assessed in status of AOP. Tribunal did not find favour with arguments of assessee and dismissed appeal by order dt. 22nd Sept., 1973. assessee then move application to refer following six questions for opinion of this Court: Whether, on facts and in circumstances of case, ld. Tribunal was correct in holding that Gyan Devi was not partner in appellant firm and no firm came into being as result of deed dt. 14th Nov., 1967? Whether, on facts and in circumstances of case, ld. Tribunal was justified in refusing to grant registration and according status of AOP to appellant firm? Whether, ld. Tribunal had material and evidence on records to held that Gyan Devi did not consent under s. 13 of Contract Act to become partner and appellant firm did not exist under section (sic) of Indian Partnership Act? Whether, in view of individual assessment of Gyan Devi Svs. Chandra Mohan and Bal Krishan, ld. Tribunal was correct in holding that appellant could be subsequently assessed as AOP? Whether, there was no evidence on basis of which ld. Tribunal could record finding that Gyan Devi was not partner, partnership evidence by deed dt. 14th Nov., 1967 did not exist and was not genuine? Whether, ld. Tribunal was correct in law in considering and basing their division on Department s recorded by Inspector? Tribunal declined to refer questions No. 1, 2, 3 and 5 as being not questions of law and were para questions of fact. As regards question No. 6 Tribunal held that same was purely academic because it had already been concluded by their Lordships of Supreme Court in case of Dhakeshwari Cotton Mills Ltd. vs. CIT (1954) 26 ITR 775 (SC). Tribunal thus found that only following questions of law arose out of order of Tribunal, which in their opinion, was proper to be referred to this Court: "(1) . Whether, on facts and in circumstances of this case, ld. Tribunal is right in holding that appellant could be assessed as AOP notwithstanding assessments of members of AOP earlier then assessment of AOP?" Tribunal, therefore, referred only one question as mentioned above which is subject matter of IT Ref. No. 26/1974. assessee has filed application under s. 256(2) of IT Act for giving direction to Tribunal to state case and refer remaining 5 questions also and that is subject matter of IT Case No. 172/74. In our view, Tribunal has already sent statement of case in IT Ref. Case No. 26/74 and all relevant Annexures to J have also been annexed with statement of case with respect to one question and ld. annexed with statement of case with respect to one question and ld. counsel for assessee and Department submitted that no further statement of case would be needed in deciding other questions also in case No. 172/74 which in opinion of this Court, would be questions of law arising our of order of Tribunal dt. 22nd Sept., 1973. In our view apart from question of law sent by Tribunal for our opinion, following question has arisen in following manner: "Whether, on facts and in circumstances of case, ld. Tribunal was correct in holding that Gyan Devi was not partner in assessee firm and no firm came into being as result of partnership deed dt. 14th Nov., 1967. As there is already statement of case available to us for deciding above question also, as such we would now decide above two questions, viz., one referred by Tribunal and other as framed by us. It was contended by Ranka, ld. counsel for assessee, that assessee firm had submitted partnership deed executed in writing and in which shares of all three partners had been shown separately. aforesaid partnership deed was duly registered with Registrar of Firms on 2nd Dec., 1967. account was opened with Bank of Baroda, M. I. Road, Jaipur in name of firm on 23rd Nov., 1967 and all three partners including Gyan Devi were authorised to operate said bank account. Bank s certificate, certifying above position has been filed vide Annexure C . Annexure D shows separate account of Gyan Devi in books of assessee firm for asst. yrs. 1068-69 to 1971-72. According to said account during period of asst. yr. 1968-69 Gyan Devi had invested Rs. 4,255 on 3rd Nov., 1967, 15,145 on 21st Nov., 1967 and Rs. 5261 on 1st Feb., 1968 in partnership firm. Not only that Rs. 717 were allowed to her by way of interest and Rs. 5,782 by way of profit towards her share in partnership. Similarly, for asst. yr. 1969-70, her account was credited by interest amounting to Rs. 1,769 and towards her share of profit also amount of Rs. 8,085 has been credited. Similarly interest and share of profit have been credited in her account for asst. yr. 1970-71 in books of account of assessee firm. It is submitted that there was no reason whatsoever to doubt genuineness of partnership deed and books of account and there was no occasion whatsoever for recording oral statement of Gyan Devi on 24th Aug., 1971. It was further submitted that in any case according to admitted case of assessee Gyan Devi had remained partner in firm only upto 31st March, 1970. Her statement was recorded by Inspector on 24th Aug., 1971, thus admittedly after she had ceased to remain partner in firm. Annexure E statement of Gyan Devi dt. 24th Aug., 1971, shows that first question put to her was in following manner: Q. 1. In how many firms are you partner? If so, please let me know names. To this Gyan Devi answered as follows: A. 1. I am partner only in one firm but do not know name. second question put to her was: Q. 2. When you became partner? How much amount your have invested therein and source of investment? To this Gyan Devi answered in following manner: A. 2. year ago I became partner. I did not know money invested by me and source thereof. third and last question put to Gyan Devi was in following term: Q. 3. Do you know activity of firm and bank account, etc.? To this answer given by Gyan Devi was: A. 3. I do not know or remember anything as I am mentally not well. Ranka thus, submitted that firstly, Gyan Devi was mentally ill as she had clearly stated that she neither know nor remembered anything as she was not mentally well and further no questions regarding her partnership in assessee firm i. e. Narnauli Jewel Corporation were specifically put to Gyan Devi. She had admittedly ceased to be partner in said firm after 31st March, 1970 and no adverse inference at all should have been drawn against her if above kind of statement was given by her o 24th Aug., 1971. It is further submitted that though it was not specifically submitted before ITO that Gyan Devi could not be produced on account of her mental illness but representative of assessee firm had submitted before ITO that Gyan Devi was unable to be produced before him. Thereafter certificate of Vaidya dt. 20th Aug., 1971 was filed before AAC and due to clerical mistake only date in respect of 10th Aug., 1971 had crept in as 10th Aug., 1972 in certificate. affidavit of husband of Gyan Devi stating that she was suffering from mental disease w.e.f first week of August, 1971, was also filed before AAC and there was nothing on record to rebut aforesaid facts and as such there was no valid reason for not accepting above contentions made on behalf of assessee. Ranka further submitted that ITO, Central Circle-I, Jaipur made order under s. 185 of Act on 19th Nov., 1975, granting registration to assessee firm for asst. yr. 1970-71 and assessment was also made on 29th July, 1976 taking status of assessee as registered firm. registration has also been allowed for succeeding years. statement of Gyan Devi dt. 13th Nov., 1975, recorded by ITO, Central Circle-I, Jaipur, has also been placed on record of this Court and her statement has been relied upon for purpose of granting registration of firm for asst. yr. 1970-71. ITO, B-Ward, Jaipur, also granted registration for asst. yr. 1971-72 and in this order dt. 24th Dec., 1973 placed reliance on partnership deed and book profit distributed according to partnership deed. It was held that firm appeared to be genuinely constituted. Ranka placed reliance on Subhash Medical Stores vs. CIT (1984) 40 CTR (Raj) 54: (1984) 147 ITR 486 (Raj). bench of this Court in above case observed as under: "In order to claim registration under IT Act, what is required to be established is that legal requirements of partnership are fulfilled." From principles enunciated in above referred case it is clear that inter se relations of partners and all of them not being concerned with control and management of business, are not circumstances coming in way of registration of partnership under IT Act. It was held that there was no satisfactory material before Tribunal to come to conclusion that partnership firm constituted by deed dt. 1st July, 1959, was not genuine. Surolia, ld. counsel for Department on other hand, submitted that Gyan Devi was unable to state that she was partner in assessee firm and did not come forward to give her statement before ITO to prove that she was consenting party in constitution of firm on 19th Nov., 1967 and finding that Gyan Devi was not partner and no genuine partnership came to be constituted on 14th Nov., 1967 was purely question of fact. We have given our careful consideration to entire facts and circumstances of case and material placed on record. We are clearly of view that as Gyan Devi had separated from partnership on 31st March, 1970, and her statement was recorded by Inspector on 24th Aug., 1971, and in manner in which questions were put to her, no adverse inference at all could be drawn for answers given by her. In all three questions were put to her and she had clearly answered to third question that she did not remember anything as she was not mentally well. Even if it may be considered that certificate of Vaidya was obtained subsequently fact remains that even before Inspector Gyan Devi had stated that she was not mentally well. That apart, we fail to understand as to why partnership deed reduced to writing and firm having been registered before Registrar of Firms as early as on 2nd Dec., 1967 and accounts of firm clearly showing that share of profit of Gyan Devi was credited to her account should be disbelieved strangely enough, same partnership deed and accounts maintained by firm have been believed for granting registration under s. 185 of Act for subsequent years of assessment. We are in agreement with view taken in Subhash Medical Stores (supra), wherein it was observed as under: "The Tribunal attached much importance to fact that two ladies had limited education and they had little or no knowledge above business carried on by firm. factors should not come in way of partners claiming registration because there is nothing illegal in getting business conducted through some person employed by partners or some one authorised by them. IT authorities should not have misconstrued provisions of partnership deed upon irrelevant considerations. Correct it is that mere registration of firm under Partnership Act will not entitle firm as of right to be registered under s. 185 of IT Act, 1961, because question of tax is involved. IT authorities are of course expected to taken into consideration facts and circumstances of given case to find out whether in grab of sham transaction assessee was avoiding liability to tax. However, if from circumstances taken as whole it can be deduced that it is not unlawful attempt to avoid payment of tax and at most it may be legal device to reduce tax liability, there is no justification for rejecting request for registration under IT Act." Thus, we are clearly of view that tin facts and circumstances of this case, ld. Tribunal had no material and was not correct in holding that Gyan Devi was not partner in appellant firm and no firm came into being as result of partnership deed dt. 14th Nov., 1967. answer to above question is thus given in negative and against Department Now taking question referred to us by Tribunal, it may be mentioned at out-set that it is admitted case that all three partners had already been assessed as individual taking into consideration profits earned by them in assessee firm i. e. Narnauli Jewel Corporation. question of assessing firm arose subsequently and it is contended by; ld. counsel for assessee that once partners of firm having already been assessed same income cannot be assessed treating assessee firm as AOP. Ranka placed reliance on basic authority of Supreme Court reported in CIT vs. Murlidhar Jhawar and Purna Ginning and Pressing Factory (1966) 60 ITR 95 (SC). He further submitted that after above decision almost all High Courts in India have followed and interpreted above case of Supreme Court and have taken view that once partners of firm having been assessed individually, firm cannot be assessed as AOP or as unregistered firm. Reliance in this regard was placed on CIT, Madras-II vs. Blue Mountain Engineering Corporation 1978 CTR (Mad) 142: (1978) 112 ITR 839 (Mad), CIT, Madras vs. R. Dhandayutham & Ors. 1978 CTR (Mad) 112: (1978) 113 ITR 602 (Mad), Ramanlal Madanlal vs. CIT Central Calcutta (1979) 116 ITR 657 (Cal), CH. Atchaiah vs. ITO, B Ward (1979) 116 ITR 675 (AP), Laxmichand Hirjibhai CH. Atchaiah vs. ITO, B Ward (1979) 116 ITR 675 (AP), Laxmichand Hirjibhai v s . CIT, (1981) 21 CTR (Guj) 181: (1981) 128 ITR 747 (Guj), Universal Commercial Co. vs. CIT (1981) 130 ITR 775 (Mad) and CIT vs. V. H. Sheth (1984) 41 CTR (Bom) 380: (1984) 148 ITR 169 (Bom). above view has thus been followed by High Courts of Andhra Pradesh, Bombay, Calcutta, Gujarat and Madras. Surolia, ld. counsel for Department, in view of weighty decisions of all High Court in India had nothing to say contrary to above view. In view of these circumstances, we also hold that once assessment of partner or member of association having been made by taxing directly his proportionate share from firm or association, ITO is precluded from assessing firm in status of unregistered firm or AOP. In result, question referred to us in IT Ref. No. 26/1974 is answered in negative and against Department. In facts and circumstances of this case, parties shall bear their own costs. *** NARNAULI JEWEL CORPORATION v. COMMISSIONER OF INCOME TAX