1972 (10) TMI 14 - HC - Income Tax

Income-tax Officer passed an assessment order under section 144 in default, estimating the business income of the assessee and treating the assessee as an unregistered firm. Coming to know of this order, the assessee made an application under section 146 for the cancellation of the assessment order and for passing orders afresh, but this application was rejected - When the assessee files the declaration without filing the return of income and assessment is made ex parte whether the assessee-firm is entitled to registration

Summary

Issues:
Interpretation of section 184(7) of the Income-tax Act, 1961 regarding the continuation of registration for a firm for the assessment year 1965-66.

Analysis:
The judgment pertains to an assessee, a partnership firm, which had been registered under section 185 of the Income-tax Act, 1961 until the assessment year 1964-65. For the assessment year 1965-66, the firm failed to file the return of income, leading to the Income-tax Officer treating it as an unregistered firm and passing an assessment order under section 144 in default. The firm appealed against this order, with the Appellate Assistant Commissioner ruling in favor of the firm's registration status, stating that cancellation of registration can only occur after providing the assessee with a reasonable opportunity of being heard. The Appellate Assistant Commissioner directed the Income-tax Officer to revise the assessment by considering the firm as a registered entity.

The matter was further appealed to the Tribunal, where the appeal filed by the assessee was dismissed. The Tribunal held that for the registration to have effect under section 184(7), two conditions needed to be fulfilled: filing the requisite declaration and the return of income. As the firm had not filed the return, the registration did not have effect for the assessment year 1965-66. Consequently, the Income-tax Officer's order was upheld.

The court analyzed the relevant provisions of the Income-tax Act, particularly section 184(7), which outlines the conditions for the continuation of registration for subsequent assessment years. The court emphasized that the requirement to furnish the declaration along with the return of income was not mandatory but merely provided a time limit for submission. The legislative intent was interpreted to allow the declaration to be valid if made earlier, without being dependent on the filing of the return.

Referring to past and future legislative history, the court noted that the requirement to file the application for registration along with the return of income was not present in the earlier provisions of the Income-tax Act. The subsequent amendment to section 184(7) clarified that the declaration must be furnished before the time allowed for filing the return, reinforcing the interpretation that filing the return was not a prerequisite for the validity of the declaration.

In conclusion, the court answered the question in favor of the assessee, ruling that the registration of the firm should be considered to have effect for the assessment year 1965-66 despite the non-filing of the return of income. The court awarded costs to the assessee and clarified the interpretation of section 184(7) in the context of registration of firms under the Income-tax Act, 1961.