1989 (8) TMI 118 - AT - Income Tax

High Court High Court Registered Firm Registered Firm Unregistered Firm Unregistered Firm

Summary

Issues:
1. Estimation of income for assessment year 1982-83.
2. Refusal of continuation of registration to the firm under section 185(5).
3. Interpretation of section 186(1) and (2) regarding continuation of registration.
4. Justification for refusal of continuation of registration under section 186(2).

Analysis:

1. The appeal pertains to the assessment year 1982-83 where the Income-tax Officer estimated the total income of the assessee at Rs. 22,000, differing from the disclosed income of Rs. 14,550. The status of the assessee was determined as that of an unregistered firm. The primary issue raised was the estimation of income, which the counsel for the assessee did not press, focusing instead on the refusal of continuation of registration.

2. The contention of the assessee was that the Income-tax Officer should have granted continuation of registration to the firm since Form No. 12 was filed in time, and the genuineness of the firm was not in doubt. The Appellate Assistant Commissioner (AAC) upheld the Income-tax Officer's decision under section 185(5) and justified the refusal based on non-compliance with statutory notices. The assessee challenged this decision, citing a Patna High Court case to argue that refusal of renewal cannot be based solely on non-renewal in the preceding year.

3. The assessee argued that section 185(5) only applies to initial grant of registration, not continuation of registration. They contended that section 186(1) and (2) should be read together, asserting that in cases where registration was granted over 8 years ago, continuation of registration cannot be denied. The Departmental Representative, however, argued that the refusal was justified under section 186(2) and not section 185(5), emphasizing the lack of proper notice under section 186(2).

4. The Tribunal agreed with the assessee's arguments, holding that section 185(5) is not applicable to requests for continuation of registration. Since the Income-tax Officer did not invoke section 186(2) or provide the necessary notice for cancellation of registration, the Tribunal directed the Income-tax Officer to grant renewal of registration to the firm. The appeal was partly allowed, confirming the total income determination at Rs. 22,000 due to the assessee not pressing the appeal on the quantum aspect.