1999 (7) TMI 11 - HC - Income Tax

Summary

Issues Involved:
1. Status of the petitioner firm: whether it should be assessed as a registered firm or an unregistered firm under the Income-tax Act, 1961.
2. Validity of the belated return filed by the petitioner.
3. Applicability of the Central Board of Direct Taxes (CBDT) circular dated June 26, 1965.
4. Sufficient cause for the delay in filing the declaration in Form No. 12.
5. Justification of the Commissioner of Income-tax's decision.

Issue-wise Detailed Analysis:

1. Status of the Petitioner Firm:
The primary issue was whether the petitioner firm should be assessed as a registered firm or an unregistered firm under the relevant provisions of the Income-tax Act, 1961. The petitioner, a firm engaged in manufacturing C.R.G.O. sheets, filed its return of income for the assessment year 1991-92 belatedly on September 26, 1994, and claimed the benefit of continuation of registration of the firm. The Income-tax Officer refused to grant the benefit of continuation of registration, assessing the firm as an unregistered firm.

2. Validity of the Belated Return:
The return was filed beyond the due date of August 31, 1991, and was regularised by the Income-tax Officer through a notice under section 148 of the Act. The court held that the return, once regularised by the notice under section 148, should be treated as a valid return for all purposes of the Act, including for the continuation of registration under section 184(7).

3. Applicability of the CBDT Circular:
The petitioner relied on a CBDT circular dated June 26, 1965, which stated that if a declaration under section 184(7) is filed along with a belated return and no ex parte assessment under section 144 is made, the declaration should be accepted. The court agreed, stating that the circular is binding on the officers of the Department and should be liberally construed to provide benefits to the assessee. The circular applies to belated returns, including those filed in response to a notice under section 148.

4. Sufficient Cause for Delay in Filing the Declaration:
The petitioner cited reasons such as the abrupt departure of their chartered accountant, the retirement of a partner, and the death of their accountant for the delay in filing the declaration. The Income-tax Officer and the Commissioner of Income-tax did not find these reasons sufficient. However, the court emphasized the binding nature of the CBDT circular and held that the declaration filed along with the return constituted sufficient compliance with section 184(7).

5. Justification of the Commissioner of Income-tax's Decision:
The Commissioner of Income-tax held that the reasons provided by the petitioner were insufficient and that the circular was inapplicable as the return was not valid. The court disagreed, stating that the return, once regularised under section 148, was valid for all purposes, including the continuation of registration. The court set aside the Commissioner's order, directing the renewal of the firm's registration and proper adjustment in the assessment order.

Conclusion:
The court allowed the writ petition, setting aside the order of the Commissioner of Income-tax and directing the renewal of the firm's registration. The court emphasized the binding nature of the CBDT circular and the validity of the belated return once regularised under section 148. The writ petition was allowed with no costs, and the rule nisi was made absolute.