1979 (5) TMI 15 - HC - Income Tax

Appeal To AAC, Application For Continuation Of Registration, Application For Registration, Registered Firm

Summary

Issues Involved:
1. Whether the Tribunal rightly directed the Income-tax Officer (ITO) to take the status of the assessee as a registered firm for the assessment year 1968-69.
2. Whether an appeal was maintainable before the Appellate Assistant Commissioner (AAC) against the ITO's order refusing to renew registration under section 184(7) of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

Issue 1: Tribunal's Direction to ITO to Recognize Assessee as Registered Firm for AY 1968-69

The Tribunal had directed the ITO to recognize the assessee-firm as a registered firm for the assessment year 1968-69. The Tribunal's decision was based on its earlier order in ITA No. 753/72-73, where it had directed the ITO to grant registration to the assessee-firm for the assessment year 1967-68. Consequently, for similar reasons, the Tribunal accepted the claim of the assessee-firm for the assessment year 1968-69.

However, the High Court observed that the provisions of section 184(7) of the Income-tax Act, 1961, require that for registration to have effect for a subsequent assessment year, the firm must furnish a declaration within a specified period stating that there was no change in the constitution of the firm or the shares of the partners. Rule 24 prescribes that this declaration must be in Form No. 12 and signed by all partners. These formalities are factual matters that need determination by the Income-tax authorities.

The High Court concluded that without examining these factual aspects, the Tribunal was not right in directing the ITO to take the status of the assessee as a registered firm for the assessment years 1968-69 and 1969-70. Therefore, the High Court decided question No. 1 in the negative, in favor of the revenue.

Issue 2: Maintainability of Appeal Against ITO's Order Refusing Renewal of Registration

The Tribunal held that an appeal was maintainable before the AAC against the ITO's order refusing to renew registration under section 184(7) of the Income-tax Act, 1961. The Tribunal relied on the Delhi High Court's decision in Sant Lal Kashmiri Lal v. CIT [1972] 86 ITR 76 (Delhi), which held that an order refusing to continue registration under section 184(7) is tantamount to an order refusing registration under section 185, thus making it appealable.

The High Court supported this view, noting that sections 184 and 185 of the 1961 Act, along with related rules, outline the procedure for registration and continuation of registration of firms. The Court referenced the Central Board of Revenue (CBR) circular, which clarified that if an application for registration is not disposed of by the ITO, the firm should file an application for registration for subsequent assessment years, and not just a declaration for continuation of registration.

The High Court also cited the Supreme Court's decision in Sir Hukumchand and Mannalal Co. v. CIT [1966] 60 ITR 99, which established that an order canceling registration is akin to refusing to renew the certificate of registration, thus making it appealable under section 30 of the 1922 Act. Despite changes in the 1961 Act, this principle still holds. The High Court disagreed with contrary views from the Allahabad and Calcutta High Courts, which did not consider the Supreme Court's ruling.

Therefore, the High Court concluded that the Tribunal was correct in holding that an appeal was maintainable before the AAC against the ITO's order refusing to renew registration under section 184(7) of the 1961 Act. Question No. 2 was decided in the affirmative, in favor of the assessee.

Conclusion:

The High Court decided question No. 1 in the negative, in favor of the revenue, and question No. 2 in the affirmative, in favor of the assessee. There was no order as to costs.