1956 (2) TMI 1 - SC - Income Tax

Whether the Appellate Assistant Commissioner was legally competent to direct the Income-tax Officer to register the firm after obtaining the signature of Gokulchand both in the application for registration and in the deed of partnership? Held that - The only answer which the High Court could give was that the Appellate Assistant Commissioner was not legally competent to direct the Income-tax Officer to register the firm after obtaining the signature of Gokulchand both in the application for registration and in the deed of partnership. Rule 2(c) above quoted did not empower the Appellate Assistant Commissioner to do anything of the sort and we are of the opinion that the answer given by the High Court in the negative was, therefore, correct. Appeal dismissed.

Summary

Issues Involved:
1. Validity of the partnership deed without the signature of all partners.
2. Powers of the Appellate Assistant Commissioner regarding registration of the firm.
3. Application of Rule 2(c) of the Indian Income-tax Rules, 1922.

Detailed Analysis:

1. Validity of the Partnership Deed Without the Signature of All Partners:
The appellant firm, consisting of seven partners, executed a partnership deed on February 12, 1944. However, one partner, Gokulchand Goti, did not sign the deed as he was imprisoned. The Special Income-tax Officer rejected the application for registration under section 26A of the Indian Income-tax Act, 1922, because the deed was not signed by all partners. The Tribunal upheld this decision, stating that the deed must be signed by all partners for it to be valid. The appellant argued that it was not necessary for the partnership agreement to be signed by all partners if the agreement was assented to by all and put forward for registration. However, this argument was not considered as it was not raised in the initial proceedings.

2. Powers of the Appellate Assistant Commissioner Regarding Registration of the Firm:
The Appellate Assistant Commissioner initially directed the Income-tax Officer to register the firm after obtaining Gokulchand's signature on the application and the partnership deed. The Tribunal, however, ruled that the Appellate Assistant Commissioner was not justified in giving such a direction. The High Court agreed, stating that the Appellate Assistant Commissioner could only order registration if there was an application duly signed by all partners before him, which was not the case. The Supreme Court concurred, emphasizing that the Appellate Assistant Commissioner could not direct the Income-tax Officer to register the firm under these circumstances.

3. Application of Rule 2(c) of the Indian Income-tax Rules, 1922:
Rule 2(c) allows an application for registration to be made with the permission of the Appellate Assistant Commissioner before the assessment is confirmed, reduced, enhanced, or annulled. The appellant claimed to have submitted an application signed by all partners on March 20, 1947, but this was disputed and not found in the records. The Tribunal, after investigation, concluded that no such application was submitted. The Supreme Court held that the Appellate Assistant Commissioner did not have the power under Rule 2(c) to direct the Income-tax Officer to register the firm after obtaining the missing signature. The appellant did not seek permission from the Appellate Assistant Commissioner to submit a proper application, nor did they pursue a revision under section 33A of the Act.

Conclusion:
The Supreme Court dismissed the appeal, agreeing with the High Court that the Appellate Assistant Commissioner was not legally competent to direct the Income-tax Officer to register the firm after obtaining the missing signature. The decision was based on the interpretation of Rule 2(c) and the statutory requirements for the registration of a partnership deed under section 26A of the Indian Income-tax Act, 1922. The appeal was dismissed with costs.