1985 (4) TMI 118 - AT - Income Tax

Summary

Issues:
1. Validity of registration of a firm under the Income-tax Act, 1961 for the assessment year 1974-75.
2. Cancellation of registration under section 186(1) by the Income-tax Officer (ITO).
3. Interpretation of the provisions of section 186(1) in relation to section 185(1)(b) regarding registration of a firm.

Detailed Analysis:
1. The appeal before the Appellate Tribunal ITAT Delhi-E involved a dispute regarding the registration of a firm for the assessment year 1974-75 under the Income-tax Act, 1961. The Income-tax Officer (ITO) rejected the assessee's claim of registration, citing delays in providing information about the formation of the partnership. However, the Assistant Commissioner (AAC) reversed the ITO's order, granting registration to the firm as all formalities had been completed, and a valid deed of partnership was in place. The AAC's decision was accepted by the revenue.

2. Subsequently, the ITO initiated proceedings under section 186(1) and canceled the firm's registration for the years 1974-75 to 1978-79. The assessee contended that after the AAC's order granting registration, section 186(1) could not be invoked. The first appellate authority, relying on a precedent, held that once registration is directed by an appellate authority, the ITO cannot cancel it.

3. The Tribunal upheld the AAC's order and criticized the ITO for misdirecting himself in canceling the registration for the assessment year 1974-75. The Tribunal emphasized that the ITO lacked the authority to delve into the genuineness of the firm once registration had been granted by the AAC. The Tribunal also rejected arguments that the ITO's powers under section 186(1) were independent of section 185(1)(b) and that approval from a higher authority justified the cancellation of registration. The Tribunal clarified that once section 185(1)(b) was invoked, section 186(1) could not be applied, as evident from the relevant provisions of the Income-tax Act.

4. In conclusion, the Tribunal dismissed the revenue appeal and clarified that its decision was limited to the assessment year 1974-75. The Tribunal did not express any opinion on the ITO's orders under section 186(1) for other years. The appeal was ultimately dismissed, affirming the registration of the firm for the assessment year in question.