1984 (2) TMI 55 - HC - Income Tax

Summary

Issues Involved:
The issues involved in this case are related to the renewal of registration of a partnership firm under section 26A of the Indian Income-tax Act, 1922, for the assessment year 1961-62. The key issues include the signing of the application for renewal of registration by all partners, the effect of a defective application, the cancellation of renewal of registration by the Commissioner of Income Tax (CIT), and the applicability of Circular No. 14 (XL-35) of 1955 issued by the Central Board of Revenue.

Renewal of Registration Application:
The assessee-firm, constituted under a partnership deed, applied for renewal of registration under section 26A of the Indian Income-tax Act, 1922, for the assessment year 1961-62. The application was signed by three partners, excluding a minor who had become a major and a partner during the relevant year. The absence of the minor's signature rendered the application defective. Despite this defect, the Income Tax Officer (ITO) renewed the registration of the firm based on the application.

Cancellation of Renewal of Registration:
Subsequently, the CIT issued a notice under section 33B of the Indian Income-tax Act, 1922, to the assessee-firm, leading to the cancellation of the renewal of registration. The CIT directed the ITO to treat the firm as unregistered and collect taxes accordingly. The firm later filed another application for renewal of registration, signed by all partners, including the previously minor partner. However, the CIT declined to grant renewal based on this application as the assessment had already been completed.

Legal Interpretation and Circular No. 14 (XL-35) of 1955:
The Tribunal referred a question of law regarding the entitlement of the assessee-firm to renewal of registration under section 26A. It was highlighted that as per Rule 2, an application for registration or renewal of registration of a partnership firm must be signed by all partners. The judgment emphasized the significance of strict compliance with the requirements of the law. The Circular No. 14 (XL-35) of 1955 issued by the Central Board of Revenue emphasized the duty of officers to assist taxpayers and guide them in claiming reliefs. It was noted that the circular, despite any deviation from the law, is binding and officers must act in accordance with it.

Decision and Precedent:
The High Court declined to answer the question of law and sent the matter back to the Tribunal for re-examination in light of Circular No. 14 (XL-35) of 1955. The judgment highlighted that the CIT should have given the assessee-firm an opportunity to rectify the defect in the application before canceling the renewal of registration. The decision was supported by a precedent from the Gujarat High Court, emphasizing the importance of considering the circular in similar situations. No costs were awarded in this matter.