1983 (2) TMI 62 - AT - Income Tax

Issues Involved:

1. Validity of the CIT's order under Section 263(1) of the Income Tax Act.
2. Continuation of registration of the assessee-firm for the assessment years 1975-76 to 1977-78.
3. The effect of discrepancies in the partnership deed on the continuation of registration.
4. The jurisdiction of the CIT under Section 263(1) in the context of continuation of registration.

Issue-wise Detailed Analysis:

1. Validity of the CIT's order under Section 263(1) of the Income Tax Act:

The CIT issued a notice under Section 263(1) of the Act, contending that the orders passed by the ITO for the assessment years 1975-76, 1976-77, and 1977-78 were erroneous and prejudicial to the interest of the revenue due to discrepancies in the partnership deed. The CIT argued that the ITO failed to examine the partnership deed dated 1st January 1972, which mentioned the date of attainment of majority by Shri Krishna Kumar as 10th March 1973. The CIT concluded that the ITO's orders allowing the continuation of registration were erroneous and prejudicial to the revenue, thereby justifying the initiation of proceedings under Section 263(1).

2. Continuation of registration of the assessee-firm for the assessment years 1975-76 to 1977-78:

The ITO had granted continuation of registration to the assessee-firm for the assessment years 1975-76 to 1977-78 based on the assessee's applications in Form No. 12. The CIT, however, noticed discrepancies in the partnership deed and argued that the ITO did not properly examine the deed before granting continuation of registration. The CIT directed the ITO to make fresh orders after giving the assessee an opportunity to be heard.

3. The effect of discrepancies in the partnership deed on the continuation of registration:

The partnership deed executed on 1st January 1972 contained a typographical error, showing Shri Krishna Kumar as a full-fledged partner before he attained majority on 10th March 1973. A supplementary agreement was executed on 20th October 1973 to correct this error. The ITO initially granted continuation of registration based on the corrected deed and supplementary agreement. However, the CIT argued that the ITO overlooked the discrepancies and failed to apply his mind to the issue, making the orders erroneous and prejudicial to the revenue.

4. The jurisdiction of the CIT under Section 263(1) in the context of continuation of registration:

The assessee contended that the CIT could not assume jurisdiction under Section 263(1) because the continuation of registration does not require a formal order under Section 184(7) of the Act. The assessee relied on the decision of the Hon'ble Allahabad High Court in the case of CIT v. Nityanand Deokinandan, which held that continuation of registration does not necessitate an order and that the CIT had no jurisdiction under Section 263 to cancel it. The Tribunal found considerable force in the assessee's submissions, noting that the decision in Nityanand Deokinandan was binding and directly applicable to the present case. The Tribunal concluded that the CIT's order under appeal should be set aside.

Conclusion:

The Tribunal, after considering the rival submissions and the material placed before it, found that the CIT's order under Section 263(1) was not justified. The Tribunal relied on the decision of the Hon'ble Allahabad High Court in the case of Nityanand Deokinandan, which held that continuation of registration does not require a formal order and that the CIT had no jurisdiction under Section 263 to cancel it. Consequently, the Tribunal set aside the CIT's order and allowed the appeals filed by the assessee.

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