1988 (6) TMI 95 - AT - Income Tax

Firm Entitlement To Registration Revision Of Order Order Prejudicial To Interests Of Revenue

Issues Involved:
1. Limitation for exercising revisional powers under section 263.
2. Validity of the partnership deed signed by a power of attorney holder.
3. Validity of the application for registration signed by a power of attorney holder.

Detailed Analysis:

1. Limitation for exercising revisional powers under section 263:

The assessee contended that the order under section 263 was barred by limitation. The original order granting registration was passed on 18-5-1983, and the Commissioner issued a show-cause notice on 22-1-1986, passing the order on 25-3-1986. The assessee argued that the order should have been passed by 17-5-1985. However, the departmental representative submitted that, according to the amendment effective from 1-10-1984, the order could be passed within two years from the end of the financial year when the original order was passed. Since the last date of the financial year was 31-3-1984, the limitation subsisted up to 31-3-1986. The Tribunal agreed with the departmental representative, citing the decision in N. Mahalingam v. WTO [1986] 19 ITD 747 (Mad.), and rejected the contention that the action was barred by limitation.

2. Validity of the partnership deed signed by a power of attorney holder:

The main issue was whether the partnership deed could be deemed invalid because it was signed by a power of attorney holder on behalf of one of the partners, who was out of India. The Commissioner had relied on the Supreme Court's observation in CIT v. Jagannath Pyarelal [1985] 156 ITR 220, which stated that the deed must be signed personally by each partner. The Tribunal noted that the Supreme Court in Rao Bahadur Ravulu Subha Rao v. CIT [1956] 30 ITR 163 had held that the Income-Tax Act was a self-contained code, and an application for registration had to be signed personally by all partners. However, the Tribunal clarified that this requirement was specific to the application for registration and did not necessarily apply to the partnership deed itself.

The Tribunal emphasized that section 184 of the Income-tax Act requires the application for registration to be signed personally by all partners, but the Explanation allows a duly authorized agent to sign if a partner is absent from India. Since Chandini was out of India, her agent, N. Krishnaswamy, signed the application. The Tribunal found that the partnership deed was validly executed as Krishnaswamy had the authorization to sign on behalf of Chandini, and there was no requirement in the Partnership Act that each partner must personally sign the deed.

3. Validity of the application for registration signed by a power of attorney holder:

The Tribunal examined whether the application for registration was valid despite being signed by a power of attorney holder. The Supreme Court had previously ruled that an application for registration must be signed personally by all partners. However, the Tribunal pointed out that the Supreme Court's decision in Rao Bahadur Ravulu Subha Rao's case dealt specifically with the application for registration and not the partnership deed. The Tribunal concluded that the application for registration signed by N. Krishnaswamy, as an agent of Chandini, was valid under the provisions of the Explanation to section 184.

Conclusion:

The Tribunal held that the registration was rightly allowed by the Income-tax Officer, as there was a valid application for registration and the partnership deed was validly executed. Therefore, the exercise of power by the Commissioner under section 263 was without jurisdiction, and the order of the Income-tax Officer was restored. The appeal was allowed.

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