JUDGMENT : Misra, J. - These are three applications by one Abdul Zikar Abal Haji Musa under Sub-section (2) of Section 66 of the Indian income tax Act. For the purpose of assessment during the assessment year 1947-48 for the accounting period 5-11-45 to 4-10-46 the Petitioner has been treated as an association of persons. The Assessee deals in sundry grains and also supplies rice to the Sambalpur United Trading Company as a sub-agent of the firm. The Petitioner filed a return showing a net income of Rs. 915/-. The income tax Officer found from the accounts that on the opening day, that is, on 5-11-45, the cash-book showed that each of the three brother had contributed cash of Rs. 10,101/- towards the capital of the present business. On being required by the income tax Officer to explain the source of this capital, a petition was filed supported by an affidavit in which an explanation was given be the following effect namely, one Abbal Haji Musa his five sons and four daughters. He was carrying on business in foodgrains and had paddy lending business. After the death of Abbal Haji Muss, his five sons, four daughters and his widow Rabiya Bai carried on the business under the style of "Abbal Haji Musa" which consisted of food-grains and paddy lending. In 1924 Zikar Abbal, one of the one, separated from the firm and executed a deed of relinquishment on 9-8-1924. In 1926 Adam Abhal another son did riot pull on well with the other members of be firm and he also separated from the firm. Therefore, the firm consisted of the other three sons, viz., Gani Abbal, Musa Abbal and Aziz Abbal and the widow Rabiya Bai. This firm continued till 21-10-35 and as the brothers did not pull on well, the business was wound up on 21-10.35. On that day the assets of the firm consisted of cash to the extent of Rs. 27,591/4/- and paddy worth Rs. 1,381/-. There was an amicable partition of the assets between the mother and the three brothers in which each of the three brothers gob cash Rs. 4125/- and paddy weighing 150 mds, one bullook cart and two bullooks and the mother got the rest of the assets. After the partition, the three brothers Gani, Musa and Aziz carried on business independently. There was an amicable partition of the assets between the mother and the three brothers in which each of the three brothers gob cash Rs. 4125/- and paddy weighing 150 mds, one bullook cart and two bullooks and the mother got the rest of the assets. After the partition, the three brothers Gani, Musa and Aziz carried on business independently. One brother, however, Gani Abbal alone carried on the business under the style of 'Abbal Hazi Musa' and this firm of Abbal Haji Musa paid the income tax from 1922 to 1933. On 5-11-45 each of the three brothers contributed Rs. 10,101/- and contributed a partnership for carrying on business in food-grains, and an agreement to that effect was recorded in the 1st page of the Khata, embodying the terms of the partnership and, the firm was named "Abdul Zikar Abal Haji Musa". Thus, according to them the capital of Rs. 10,101/- contributed by each of the three brothers, viz., Gani, Musa and Aziz, consisted of the amount received by each of them on partition on 21-10-35, and the savings act of the profits of their separate business during the period from 21-10-35 to 4-11-45, and the capital of Rs. 10,101/- contributed-by Zikar Abbal of the said partnership firm consisted of the savings out of his separate and independent business during the period from 10-8-24 to 4-11-45. These facts are to be gathered from the copy of the petition supported by an affidavit which was filed before income tax officer and a copy of which has been proceed before us by Mr. B.K. Ghosh, learned Counsel for the Petitioner. 2. The income tax Officer however did not accept this explanation of the Petitioner mainly on the ground that no account of the period between 21-10-35 and 4-11-45 was produced before him. It appears from his order that a Khatian, i.e., a ledger for 1991 Sambat corresponding to 1984-35 Dewali year was produced before him which showed a capital account in the name of the father Abal Haji Musa showing a credit opening balance of Rs. 27,551/- and another account was also produced which stood in the name of Zikar Abal showing a credit opening balance of Rs. 3624/- and a credit closing balance of Rs. 4713/-. No cash book however was produced. In the opinion of the income tax Officer as the Assessee was no able to prove that Rs. 27,551/- and another account was also produced which stood in the name of Zikar Abal showing a credit opening balance of Rs. 3624/- and a credit closing balance of Rs. 4713/-. No cash book however was produced. In the opinion of the income tax Officer as the Assessee was no able to prove that Rs. 40,404/- was the capital and not secreted income, he treated the same as secreted income act of undisclosed sources and accordingly he added this amount to the income for the accounting period. There was an appeal to the Appellate Assistant Commissioner of income tax (appeal No. 57 of 50-51), which was dismissed on 21-5-195l. The Appellate Assistant Commissioner also held that the onus lay on the Assessee to prove by positive evidence that in fact each brother had capital savings amounting to Rs. 10,101/- on 5-11-45 and as the Assessee had not been able to prove that the amount of Rs. 40,404/- was the capital, it will be treated as secreted income out of undisclosed sources and would be taxed as income. Then the Petitioner appealed to the income tax Appellate Tribunal Madras Bench 'B' against the order of the Appellate Assistant Commissioner, and the Appellate Tribunal also confirmed the order of the income tax Officer. Thereupon the Petitioner required the income tax Appellate Tribunal under Sub-section (1) of Section 66 to refer the case to the High Court for decision on the following question of law, viz, Whether in the circumstances, the sum of Rs. 40,404/- can be treated as profits of the Petitioner Assessee and assessed to income tax. The Appellate Tribunal rejected this petition and accordingly the present petition S.J.C. 17 of 1953 has been filed in this Court for a direction to the income tax Appellate Tribunal, Madras Bench 'B' to state a case on the point stated above. 3. In the assessment year 1947-48, a claim was made u/s 26-A for registration of the firm. This was rejected on 25-8-50 by the income tax Officer who held that the Assessee will be treated as an association of persons. The Assessee relied upon the agreement in the opening page of the cash-book dated 5-11-45 and a regular instrument of partnership dated 11-4-1950. This was rejected on 25-8-50 by the income tax Officer who held that the Assessee will be treated as an association of persons. The Assessee relied upon the agreement in the opening page of the cash-book dated 5-11-45 and a regular instrument of partnership dated 11-4-1950. The income tax Officer held that the instrument of partnership dated 11-4-1950 cannot have retrospective effect and that the agreement in the opening page of the cash-book did not constitute a partnership. He accordingly rejected the claim, and proceeded thereupon to make the assessment on that basis. There was an appeal to the Appellate Assistant Commissioner against that order vide appeal No. 57/67 or 1950-51 which was also dismissed on 21-5-51. It may be noted that by this time the claim for registration for the subsequent assessment year 1948-49 had been rejected, and the appellate order governs both the appeals, one against the refusal to register in 1947-48 and the other against the refusal to register in 1948-49. Against this order of the Appellate Tribunal, Madras Bench, in I.T.A. Nos. 2167 and 2168 of 1951-62. These two appeals and the appeal against the quantum of assessment for the year 1947-48 in appeal No. 2166 of 1951-52 were heard together by the income tax Appellate Tribunal and were dismissed by them on 6-9-52. It may be noted that neither the income tax Officer nor the Appellate Assistant Commissioner had recorded any finding that the account books produced before them were not genuine. It is for the first time that the Appellate Tribunal in their order dated 6-9-52 recorded a finding to the effect that "a, scrutiny of the books leaves no room for doubt that the day books look fresh and newly written in more or less uniform ink and with one pen and we have no hesitation io holding that these books have been fabricated at a subsequent date to enable the present claim for registration u/s 26-A of the Indian income tax Act." The Petitioner then filed two applications for reference to this Court, one, against the refusal to register the firm for the assessment year 1947 48 and the other against the order refusing to register the firm for the assessment year 1948-49. Both were rejected. S.J.C. 18 and 19 of 1953 are directed against these two orders. 4. Mr. Both were rejected. S.J.C. 18 and 19 of 1953 are directed against these two orders. 4. Mr. R.K. Ghosh learned Counsel for the Petitioner contends before us that the income tax authorities committed an error of law in-presuming that the advance of Rs. 10,101/- by each of the brothers was secreted income, and not capital, merely because they did not accept the explanation of the Petitioner about the source of the income. The facts have been stated in detail in the earlier part of this order. We have gone through he orders of the income tax authorities. The fact that in 1935 there was a division of the profits of the then existing firm "Abal Hazi Musa." does not seem to have bees challenged by the income tax authorities. All that they say is that it is difficult to believe that for ten years that amount of money was lying in the hands of the persons who received the amounts at the partition. But this ignores the Petitioners case the each of them was carrying an their separate business with the amounts received by each of them at the partition and was earning profits and the amount of Rs. 10,101/- contributed by each of them represents the original sum of Rs. 4000/- and odd, plus the profits during the period from 21-10-35 to 4-11-35. It may be that each one of them was liable to income tax during that period if the income of each reached the assessable limit, but that is a question with which we are not concerned. The Khatian for the year 1934-35 which has been produced, seems to have been accepted by the department and the ledger produced by the Petitioners was also accepted by the income tax Officer and the Appellate Assistant Commissioner. They simply say that the source of the amount contributed by each of the partner was not sufficiently explained to the satisfaction of the department, and therefore, they presumed that it represented undisclosed profits, or secreted income. Mr. Ghosh refers to the case of Mithoo Lal Tek Chand Vs. Commr. of Income Tax, United Provinces, Lucknow. The question for consideration in that case was, if the accounts showed the receipt of a particular sum of money during an accounting period, on whom the burden lay to prove whether it was capital receipt or income. Mr. Ghosh refers to the case of Mithoo Lal Tek Chand Vs. Commr. of Income Tax, United Provinces, Lucknow. The question for consideration in that case was, if the accounts showed the receipt of a particular sum of money during an accounting period, on whom the burden lay to prove whether it was capital receipt or income. After discussing a large number of authorities, their Lordships laid down the proposition as follows: An examination of these cases would, therefore, go to show that, if from the backs of account of the Assessee it appears that during the relevant account period he had received certain sums of money, it is for him to explain from where he got the same, and if his explanation is accepted there is an end of the matter.... Where however his explanation is rejected the Tribunal has to Record a finding on such materials as may be available, whether the money represents revenue receipt taxable as income of the relevant account period. The burden, in the first instance, must be on the Assessee to show the true natura of the receipt and why he claims that it is not taxable income. When the Assessee furnishes an explanation, if that explanation is unsatisfactory, that may in itself be a circumstance which the income tax Officer may be entitled to take into consideration, but it need not necessarily in every case, lead to the conclusion that the receipt is a revenue receipt taxable as income received in a particular year. The question must always remain a question of fact which has to be decided on the materials available. Mr. Ghosh argues that the explanation offered by the Petitioner was supported by an affidavit and there was no reason to discard the explanation particularly when the first two courts did not doubt the genuineness of the ledger for the year 1935, as also the ledgers for the years 1935-1945. Mr. Ghosh then refers to the case, Firm of Narayandas Kedarnath Vs. Commissioner of Income Tax, Central. In that case it was found that the partners had brought certain sums of money into the offers of the partnership firm by trades from Jaipur. Mr. Ghosh then refers to the case, Firm of Narayandas Kedarnath Vs. Commissioner of Income Tax, Central. In that case it was found that the partners had brought certain sums of money into the offers of the partnership firm by trades from Jaipur. Their Lordships pointed out that it was not for the firm which was being assessed to satisfy the department that the moneys which it received from the partner or stranger were moneys which the partner or the stranger obtained by honest means. Their Lordships further pointed out that the fact of remittance from Jaipur having been established, it was not for the Assessee to prove as to the source of the share of each of the partners. Mr. Ghosh then refers to the case, In re: Ram Datta Sita Ram of Basti 1947 ITR 175. It was held in the circumstances of that case that "where there was no evidence before the income tax Officer from which it was permissible to draw the inference that some income or accounts has been necessarily suppressed or concealed by the Assessee, it was not open to the income tax Officer to make a best judgment assessment." Lastly Mr. Ghosh refers to not made in 1953 Taxation (May Part), p. 101 wherein their Lordships of the Bombay High Court held that were the accounts of the Assessee had been accepted by the income tax Officer as genuine, it was not open to the appellate court to reject the Assessee's books of accounts. 5. Mr. G.C. Das, learned Counsel for the income tax Department, contends that if the income tax authorities rejected the explanation to the source of the capital, the department is entitled to treat the same as undisclosed profits. For this proposition, he relies upon a decision in Jadunandan Sahu Deokisanram v. Commissioner of income tax, Bihar and Orissa 1948 ITR 175. In that case all that was found is that in assessing a Binda undivided family which was carrying on a business, the income tax authorities held that certain sum shown as cash credits in the persons ledger account of the business in the name of the family, actually represented not capital sums brought from the home chest of the family, but secreted pro fits of the business, and this finding was affirmed by the Tribunal. The High Court held that: It was not open to them to express any opinion on the question whether the conclusion which the Tribunal aid draw upon the materials was in fact justified. But their Lordships held that on the facts, there was legal evidence to support the finding of the Tribunal. It appears from that case that this was not a close where the department was considering the question of the starting year when the business was first constituted, and whether the amount contributed by each partner was capital or income. Mr. Das has also relied upon the case, G.N. Madappa v. Commissioner of income tax, Madras 1948 ITR 385. It was held in that case that Whether an Assessee has failed to prove positively the source and nature of certain amounts of cash received during the accounting year, the income tax Officer is entitled to draw the inference that the receipts are of an income nature. 6. Mr. Ghose contends that the mere fact that the Assessee has not been able to produce the account of individual business of each of the persons during the period from 1935-45, is not sufficient ground for discarding their explanation. It is not for the Assessee to disclose the source of income once the fact that he has contributed a particular sum on the date of the starting of the firm is accepted. The Appellate Tribunal was apparently conscious of this fact, and it found a new ground for rejecting the explanation of the Petitioner by holding that the account-books produced by the Petitioner look fresh and appear to have been written not one stretch with the same ink and pen. Mr. Ghosh rightly points out that the Appellate Tribunal ought to have given an opportunity to the Assessee to explain this circumstance, if this was going to be made a ground for refusing the Assessee's claim. 7. Mr. Ghose also contends that the income tax authorities were wrong in refusing registration of the firm merely because there was no written instrument of partnership prior to 1950. For the purpose of partnership, it is not necessary that there should be any formal document. All that has to be proved is that there is an agreement between the parties to share in the profits and loss of the business. This is clearly stated in the 1st. For the purpose of partnership, it is not necessary that there should be any formal document. All that has to be proved is that there is an agreement between the parties to share in the profits and loss of the business. This is clearly stated in the 1st. page of the account-book and the terms of the agreement are also clearly mentioned. Prima facie, they constituted good evidence of the existence of the partnership firm. 8. After hearing both parties, we have come to the conclusion that in these three cases we should direct the income tax Appellate Tribunal, Madras Bench 'B' Madras, to state a case on the following questions, viz., (1) Whether in the facts and circumstances of the case the sum of Rs. 40,404/- can be treated as secreted profits of the Petitioners for the assessment year 1947-48? and (2) Whether the partners are not entitled to be registered as a partnership firm in the facts and circumstances of the case u/s 26-A of the Indian income tax Act. This order will govern all the three petitions. Panigrahi, C.J. 9. I agree.