1980 (7) TMI 33 - HC - Income Tax

Summary

Issues Involved:

1. Whether the declaration filed beyond the time prescribed under section 184(7)(ii) of the Income-tax Act, 1961, could be considered not in order within the meaning of section 185(2) of the Act.
2. Whether the order of the Income-tax Officer (ITO) rejecting such a declaration amounts to an order passed under section 185(3) of the Act.
3. Whether an appeal lies against the order of the ITO under section 185(3) of the Act.

Detailed Analysis:

1. Declaration Filed Beyond Time under Section 184(7)(ii):

The assessee, a firm previously granted registration, filed a declaration under section 184(7) on October 15, 1971, though it was due on June 30, 1971. No extension for the filing of the return was obtained from the ITO, and the delay was not condoned. The ITO refused to continue the registration. The Tribunal found that there was no provision for rectification relating to the declaration filed under section 184(7) of the Act prior to the amendment effective from April 1, 1971. The Tribunal held that the phrase "not in order" need not be limited to defects other than being out of time.

2. Order of ITO Rejecting Declaration under Section 185(3):

The Tribunal restored the appeal and directed the AAC to dispose of the appeal on merits, concluding that refusal to allow the benefit of registration virtually came under section 185(3) of the Act. The revenue contended that section 185(3) applied to defects other than delay, and hence, section 185(3) had no application. The Tribunal's decision was challenged based on the precedent set by the case of New Orissa Traders v. CIT [1977] 107 ITR 553, which stated that an application rejected as being out of time is an order under section 184(4) and not under section 185, making the appeal non-maintainable.

3. Appeal Against Order of ITO under Section 185(3):

The Tribunal's decision was based on the view that an appeal lay against the impugned order. The revenue argued that the Tribunal's decision contradicted the court's opinion in New Orissa Traders' case. Mr. Mohanty for the assessee argued that the decision could be distinguished post-amendment of sections 184, 185, and 246 effective from April 1, 1971. The court reviewed the provisions of sections 184, 185, and 246 pre- and post-amendment, noting that the amendment allowed the ITO discretion to condone delays.

The court referred to various High Court decisions, including Addl. CIT v. Chekka Ayyanna [1977] 106 ITR 313, CIT v. Dineshchandra Industries [1975] 100 ITR 660, ITO v. Vinod Krishna Som Prakash [1979] 117 ITR 594, and CIT v. Beri Chemical Industries [1980] 121 ITR 87, which supported the view that refusal to condone delay in filing the declaration amounts to an order under section 185(3) and is appealable under section 246(j). However, the court emphasized that delay is not a defect, and without condonation, the authority lacks jurisdiction to deal with the matter. The court maintained the distinction between defects in maintainable appeals and jurisdictional issues due to delay.

Conclusion:

The court concluded that delay in filing the declaration under section 184(7)(ii) could not be considered a defect under section 185(2), and the ITO's order rejecting the declaration did not amount to an order under section 185(3). The court answered the reference in favor of the revenue, directing parties to bear their own costs.