1999 (7) TMI 103 - AT - Income Tax

Summary

Issues:
- Continuation of registration for a partnership firm under section 184(7) of the IT Act, 1961.

Analysis:
The appeal before the Appellate Tribunal ITAT Jabalpur concerned the Revenue's challenge against the order of CIT(A)-II, Raipur, regarding the direction to grant continuation of registration to the assessee-firm. The dispute arose as the AO initially refused continuation of registration to the firm under section 184(7) of the IT Act, 1961, citing the firm's alleged suppression of receipts and failure to distribute profits among partners, following the decision in Khanjan Lal Sewak Ram vs. CIT (1972) 83 ITR 175 (SC). However, the CIT(A) directed the AO to allow continuation of registration, leading to the Revenue's appeal.

During the hearing, the Departmental Representative relied on the decisions of the Hon'ble Supreme Court and the Jurisdictional High Court under the 1922 Act to support the Revenue's position. In contrast, the assessee's counsel argued that under the 1961 Act, section 184(7) did not mandate profit distribution, emphasizing compliance with the conditions of no change in firm constitution and timely submission of Form No. 12. The assessee cited relevant judgments such as Nemichand Rajmal & Co. vs. CIT (1981) 23 CTR (Bom) 100 and Addl. CIT vs. Chanderbhan Harichand & Co. (1980) 126 ITR 709 (Del) to bolster their stance.

The Tribunal analyzed section 184(7) of the IT Act, 1961, emphasizing the conditions for continuation of registration: no change in firm constitution or partners' shares and submission of a declaration before the due date for filing returns. It noted the firm's compliance with these requirements and the absence of a profit distribution condition in the provision. Referring to the decision in Khanjan Lal Sewak Ram and the Jurisdictional High Court case, the Tribunal clarified that these were under the 1922 Act and not applicable to the current scenario under the 1961 Act. Drawing from the precedent set by the Hon'ble Bombay High Court in Nemichand Rajmal & Co., the Tribunal upheld the CIT(A)'s decision, ruling in favor of the assessee's entitlement to continuation of registration.

Ultimately, the Tribunal dismissed the Revenue's appeal, affirming the continuation of registration for the partnership firm under section 184(7) of the IT Act, 1961.