1983 (5) TMI 88 - AT - Income Tax

Summary

Issues Involved:
1. Whether the order of the Income Tax Officer (ITO) refusing the renewal of registration of the firm is appealable.
2. Whether the ITO's order under section 143(1) is appealable.
3. Whether the ITO followed the correct procedure under section 185(3) for non-granting of renewal of registration.

Issue-wise Detailed Analysis:

1. Appealability of the ITO's Order Refusing Renewal of Registration:
The assessee contended that the ITO's refusal to renew the registration of the firm should be considered under section 185(3) of the Income-tax Act, 1961, which is appealable according to section 246 of the Act. The ITO had refused the renewal under section 184(7), citing the late filing of Form No. 12 without sufficient cause. The Appellate Assistant Commissioner (AAC) upheld the ITO's decision, stating that no appeal lies against such an order under section 143(1) and 184(7). However, the Tribunal found that the ITO's action falls under section 185(3), which mandates that if the declaration furnished by the firm is not in order, the ITO must intimate the defect and provide an opportunity to rectify it within one month. The Tribunal concluded that the ITO's order is indeed appealable under section 246(j), and the AAC's decision was therefore illegal.

2. Appealability of the ITO's Order under Section 143(1):
The Tribunal addressed the argument that no appeal lies against an order under section 143(1). It emphasized that the right of appeal is a vested right and can only be taken away by express legislative provision. The Tribunal noted that section 143(1) involves summary assessment, where the ITO must accept the return as filed. If the ITO deviates from this and changes the status of the assessee without giving an opportunity to be heard, it results in an enhancement of the assessment, which is not permissible under section 143(1). The Tribunal held that such an order is prejudicial to the assessee and is appealable under section 246(c). The AAC's conclusion that no appeal lies against the ITO's order under section 143(1) was thus deemed unconstitutional and against the principles of natural justice.

3. Correct Procedure under Section 185(3):
The Tribunal highlighted that the ITO failed to follow the mandatory procedure under section 185(3), which requires giving the assessee an opportunity to rectify any defects in the declaration within one month. The ITO's refusal to renew the registration without issuing such notice was found to be illegal. The Tribunal emphasized that section 184(7) merely lays down conditions for claiming continuation of registration, and any non-satisfaction of these conditions should be addressed under section 185(3). The Tribunal concluded that the ITO's order, being contrary to section 185(3), was illegal and could not stand even if confirmed by the AAC.

Conclusion:
The Tribunal set aside the orders of the ITO and the AAC, directing the ITO to reconsider the case afresh, providing the assessee with a proper opportunity to be heard in accordance with the law. The appeal was treated as allowed for statistical purposes.