2000 (2) TMI 19 - HC - Income Tax

Reference, Firm, Change In Constitution Of Firm - It was contended by learned counsel for the assessee that the Assessing Officer should have given an opportunity to the assessee to remove the defects in terms of section (2) of section 185. We have reproduced the provision of sub-section (2) of section 185 which patently show that the defects contemplated are of a procedural or clerical nature and the defects like the non-execution of the partnership within the accounting period or non-filing of the applications for registration/renewal within time are not defects which are capable of being cured or removed. - there is nothing on record to show what happened in the intervening assessment years, i.e., the assessment years 1982-83 and 1983-84. The Tribunal has proceeded on the basis that the grant of renewal of registration for the assessment years 1984-85 and 1985-86 is consequential to the grant of registration for the assessment year 1981-82 and the questions, as proposed, also adopt the same approach. Therefore, registration having not been allowed for the assessment year 1981-82, no question of renewal of registration for the aforesaid years would arise

Issues Involved:
1. Justification of refusal to grant registration to the firm for assessment year 1981-82.
2. Impact of procedural formalities on the refusal of registration.
3. Consideration of section 185(2) for opportunity to remove defects in the application.
4. Timeliness and procedural requirements of filing Forms Nos. 11 and 11A.
5. Assessment of partners in their individual capacity.
6. Justification of refusal to grant renewal of registration for assessment years 1984-85 and 1985-86.
7. Legal discrepancies versus procedural defects in the refusal of renewal of registration.

Detailed Analysis:

1. Justification of Refusal to Grant Registration for Assessment Year 1981-82:
The Tribunal confirmed the refusal of registration under section 185(1)(b) of the Income-tax Act, 1961, due to a change in the constitution of the firm. The death of a partner and the admission of a new partner constituted a change, necessitating a fresh partnership deed and application for registration. The firm failed to execute a new partnership deed within the accounting period, which ended on June 30, 1980. The deed was executed on August 2, 1980, post the accounting period, and the application for registration was filed on June 30, 1981, without the required deed.

2. Impact of Procedural Formalities on Refusal of Registration:
The Tribunal upheld the refusal of registration based on procedural grounds, emphasizing that the application for registration must comply with the statutory requirements. The failure to execute and file the partnership deed within the stipulated period was not a mere technicality but a substantive requirement under section 184.

3. Consideration of Section 185(2) for Opportunity to Remove Defects:
The Tribunal did not find merit in the assessee's argument that the Assessing Officer should have provided an opportunity to rectify defects under section 185(2). The defects in question were not procedural or clerical but substantive, such as the non-execution of the partnership deed within the accounting period, which could not be rectified post facto.

4. Timeliness and Procedural Requirements of Filing Forms Nos. 11 and 11A:
The Tribunal noted that Forms Nos. 11A and 12 were filed after the close of the accounting period, which contravened the requirement that the application for registration must be made before the end of the previous year. The partnership deed accompanying the application was also filed much later, on December 22, 1982, further invalidating the application.

5. Assessment of Partners in Their Individual Capacity:
The Tribunal dismissed the argument that registration should be granted because the partners were assessed individually on their share income from the firm. The individual assessments did not rectify the procedural lapses in the firm's registration application.

6. Justification of Refusal to Grant Renewal of Registration for Assessment Years 1984-85 and 1985-86:
The refusal to renew registration for the assessment years 1984-85 and 1985-86 was deemed consequential to the denial of registration for the assessment year 1981-82. The Tribunal found no new partnership deed was filed for these years, and the non-compliance with procedural requirements persisted.

7. Legal Discrepancies Versus Procedural Defects in Refusal of Renewal of Registration:
The Tribunal concluded that the procedural defects, such as the improper filing of Form No. 12 and the absence of a valid partnership deed, were sufficient grounds for refusal. The Tribunal's decision was consistent with the Supreme Court's rulings in similar cases, emphasizing the necessity of adhering to statutory requirements for registration and renewal.

Conclusion:
The High Court found no referable question of law arising from the Tribunal's order and rejected the applications. The Tribunal's decisions were upheld based on substantive non-compliance with statutory requirements, rather than mere procedural formalities.

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