2004 (8) TMI 40 - HC - Income Tax

Firm renewal of registration - 1. Whether, Tribunal was justified in law in holding that the omission to sign the declaration under section 184(7) on Form No. 12 by two out of five partners was treatable as a defect within the meaning of section 185(3)? 2. If the answer to question No. 1 be in the affirmative, whether the Appellate Tribunal was also justified in taking the view that the said defect could be removed even beyond February 28, 1980, i.e., beyond one month of the service of the notice dated January 25, 1980, pointing out the defect? - it is clear that the Tribunal has not recorded any specific finding that the omission by some of the partners to sign the declaration under section 184(7) of the Act on Form No. 12 is a defect within the meaning of section 185(3). In view of the conclusion arrived at on question No. 1, it is not necessary to go into question No. 2. In this view of the matter, the reference is answered accordingly.

Summary

Issues:
1. Interpretation of provisions under section 185(3) of the Income-tax Act, 1961 regarding defects in the application for registration of a firm.
2. Determination of whether the delay in rectifying a defect in the application can be condoned based on sufficient cause.

Issue 1: Interpretation of section 185(3) of the Income-tax Act, 1961:
The case involved a firm that filed an application for registration with Form No. 12 signed by only three out of five partners. The Income-tax Officer issued a notice pointing out the defect, and the firm submitted a revised Form No. 12 with all five partners' signatures after the specified period. The court analyzed section 185(3) which requires the assessing authority to intimate the defect and provide an opportunity to rectify it within one month. However, clause (ii) of the proviso to section 184(7) empowers the authority to allow late submission if the firm was prevented by sufficient cause. The court emphasized that genuine firms should not be deprived of registration if other conditions are met.

Issue 2: Condonation of delay based on sufficient cause:
The court considered the delay in rectifying the defect and the reasons provided by the firm for the late submission of the revised Form No. 12. It noted that the partners who had not signed the initial form had retired and were reluctant to sign the revised declaration. The court referred to a Madras High Court decision emphasizing that under section 185(3), the assessing authority cannot condone delays in rectifying defects. However, in this case, the court treated the revised declaration filed late as a fresh declaration under section 184(7) and allowed continuation of registration to the firm based on sufficient cause for the delay.

The judgment highlighted the importance of ensuring that genuine firms are not unfairly penalized for technical defects in registration applications and emphasized the need to consider the specific circumstances and reasons for any delays in rectifying such defects.