1974 (9) TMI 13 - HC - Income Tax

1922 Act, Act Of 1961, Application For Registration, Firm Registration, Partnership Deed, Previous Year, The Constitution

Summary

Issues Involved:
1. Proper form for filing the application for registration of the partnership firm.
2. Opportunity to rectify defects in the application for registration.
3. Validity of the Income-tax Officer's rejection of the application based on non-filing of a certified copy of the partnership deed.
4. Continuation of registration under the old Act for the assessment year 1962-63 under the new Act.

Detailed Analysis:

1. Proper Form for Filing the Application for Registration:
The principal question was whether the petitioner's application for registration should have been filed in Form No. 11 or Form No. 11A. The legal position under the new Income-tax Act, 1961, was examined. The application for registration related to the assessment year 1962-63, governed by the new Act. The previous year for this assessment year was from April 1, 1961, to March 31, 1962. According to Rule 22 of the Income-tax Rules, 1962, if no change in the constitution of the firm or the shares of the partners occurred during the previous year, the application should be in Form No. 11. If changes occurred, the application should be in Form No. 11A.

The Income-tax Officer erroneously concluded that there was a change in the constitution of the firm during the previous year. However, the partnership deed indicated that one partner retired effective April 1, 1961, meaning no change occurred during the previous year. Thus, Form No. 11 was the correct form.

2. Opportunity to Rectify Defects in the Application:
Section 185(2) of the new Act mandates that the Income-tax Officer must not reject an application for registration merely because it is not in order. Instead, the officer must inform the firm of the defect and provide an opportunity to rectify it within one month. The Income-tax Officer failed to provide such an opportunity to the petitioner, which vitiated the impugned orders.

3. Validity of the Income-tax Officer's Rejection Based on Non-Filing of a Certified Copy:
The Income-tax Officer rejected the application for not being accompanied by a certified copy of the partnership deed. This rejection was also based on the suspicion that the partnership deed might not have existed on the application date. However, the deed was dated August 24, 1961, and there was no material evidence to doubt its existence. The officer should have conducted an inquiry if any doubts existed. Additionally, the officer should have allowed the petitioner to rectify the defect by certifying the copy of the deed, as per Section 185(2).

4. Continuation of Registration Under the Old Act:
The Income-tax Officer and the Additional Commissioner of Income-tax were under the misconception that registration under the old Act for the assessment year 1961-62 could continue for the assessment year 1962-63 under the new Act without fresh registration. This view was incorrect. The new Act required a fresh application for registration for the assessment year 1962-63, as supported by the decision in Amar Singh Gowamal and Sons v. Commissioner of Income-tax.

Conclusion:
The orders of the Income-tax Officer and the Additional Commissioner of Income-tax were quashed. The Income-tax Officer was directed to afford the petitioner an opportunity to rectify the defect by certifying the copy of the partnership deed and then dispose of the application for registration accordingly. Consequently, the orders in the related writ application were also quashed. Both writ applications were allowed without any order as to costs.