1984 (8) TMI 24 - HC - Income Tax

Appeal To AAC, Delay In Filing Application For Registration, Firm, Refusal To Condone Delay, Registration

Issues Involved:
1. Whether the order passed by the ITO refusing to condone the delay in filing an application for registration of the firm and refusing to register the firm falls under Section 185(1)(b) of the I.T. Act, 1961.
2. Whether an appeal against such an order is maintainable before the Appellate Assistant Commissioner (AAC) under Section 246(j) of the I.T. Act, 1961.

Issue-Wise Detailed Analysis:

1. Whether the order passed by the ITO refusing to condone the delay in filing an application for registration of the firm and refusing to register the firm falls under Section 185(1)(b) of the I.T. Act, 1961:

The core issue revolves around the interpretation of Sections 184 and 185 of the I.T. Act, 1961. Section 184 outlines the procedure for filing an application for registration of a firm, including the requirement that the application must be made before the end of the previous year. However, the proviso to Section 184(4) allows the ITO to entertain an application made after the end of the previous year if he is satisfied that there was sufficient cause for the delay.

Section 185 details the ITO's responsibilities upon receiving an application for registration, specifically to inquire into the genuineness of the firm and its constitution as specified in the partnership deed. If the ITO is not satisfied, he shall pass an order in writing refusing to register the firm under Section 185(1)(b).

In this case, the ITO refused to condone the delay in filing the application for registration and consequently refused to register the firm. The Tribunal held that such an order should be deemed to have been passed under Section 185(1)(b) of the Act. The Tribunal emphasized that refusal to condone the delay and refusal to register the firm are interconnected, and both decisions fall within the ambit of Section 185(1)(b).

2. Whether an appeal against such an order is maintainable before the Appellate Assistant Commissioner (AAC) under Section 246(j) of the I.T. Act, 1961:

The Tribunal's decision was challenged by the Revenue, arguing that the scope of inquiry under Section 185(1) is limited to the genuineness of the firm and its constitution. However, the Tribunal and the High Court concluded that an appeal is maintainable against the ITO's order refusing to condone the delay and refusing to register the firm.

The High Court referred to the legislative intent and judicial interpretations, including precedents from the Indian I.T. Act, 1922, which provided for appeals against orders refusing to register a firm. The court noted that the provisions of Sections 184 and 185 of the 1961 Act are similar to the earlier Act, and there is no justification for depriving the assessee of the right to appeal against such orders.

The court also cited several judgments from other High Courts, including the Gujarat, Andhra Pradesh, Punjab and Haryana, Kerala, and Madhya Pradesh High Courts, which held that an appeal lies against an order refusing to condone the delay and refusing registration under Section 185(1)(b). The court emphasized that a liberal construction should be applied to the provisions of Section 185(1)(b) to advance the cause of justice.

The High Court ultimately held that the order passed by the ITO refusing to condone the delay and refusing to register the firm falls under Section 185(1)(b) of the I.T. Act, 1961, and an appeal against such an order is maintainable before the AAC under Section 246(j) of the Act. The question referred to the court was answered in the affirmative and in favor of the assessee.

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