1978 (5) TMI 15 - HC - Income Tax

Summary

Issues involved:
The issues involved in the judgment are related to the refusal of renewal of registration to a partnership firm by the Income Tax Officer (ITO) based on the failure to file a declaration along with the return of income, as required under section 184(7) of the Income Tax Act, 1961.

Judgment Details:

Issue 1: Validity of the return and refusal of renewal of registration
The ITO refused renewal of registration to the partnership firm on the grounds of not filing the declaration in Form No. 12 along with the return of income. The Appellate Authority upheld the assessment in the status of an association of persons. However, the Tribunal observed that since the declaration was filed before the assessment order was passed, the firm was entitled to continuation of registration. The Tribunal directed the ITO to allow continuation of registration after the firm complied with the terms of section 185(2) of the Act.

Issue 2: Interpretation of section 184(7) and procedural requirements
Section 184(7) of the Act states the requirements for registration of a firm for subsequent years, including the filing of a declaration along with the return of income. The question arose whether the phrase "the firm furnishes, along with its return of income, a declaration to that effect" is mandatory, leading to refusal of registration if not strictly complied with. The Court held that the requirement to file the declaration along with the return is procedural and not of substance, and the ITO should have clear-cut evidence of no change in the firm's constitution. The Tribunal's decision to allow continuation of registration was justified as the declaration was filed before assessment.

Conclusion:
The Court answered both questions in favor of the assessee, stating that the firm was entitled to continuation of registration as the declaration was filed before assessment. The Tribunal's direction to rectify any defects in the declaration was deemed justified under section 185(2) of the Act. The Court awarded costs to the assessee amounting to Rs. 200.