9911796707
TMI Blog1984 (4) TMI 114X X X X Extracts X X X X X X X X Extracts X X X X ..... 980. This declaration was signed only by partners Ramachandra Rao and Karuna Sagar or, in other words, Prakash Rayudu was not a signatory. It is not in dispute again that the declaration as filed was in time. On 29-7-1980, Prakash Rayudu wrote a letter to the ITO which read as under : " I was a partner in the firm Maddala Ramachandra Rao as per the deed or partnership from 1-4-1976 till 31-3-1980. The managing partner of the firm asked me through mediators in the month of June 1980 to sign Form No. 12 for assessment year 1980-81, which was rejected by me as he rejected to produce the accounts for my verification. I had some information that he was in an idea to forge my signature in the Form No. 12 for assessment year 1980-81. So, I request your goodself to please inform me if any Form No. 12 for assessment year 1980-81 was filed with my signature, so as to enable me to give a police complaint for forgery. " The ITO wrote to the firm on 23-8-1982 as under : " For the assessment year 1980-81, you have filed declaration under section 184(7) in Form No. 12 on 25-7-1980. The declaration filed is not in order since one partner out of the three partners has not signed on the decl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the firm as constituted at the date of application. According to the appellant, on the date of application, i.e., on the last day of the closing of the year, there were only two partners. Further, it is stated that the third partner, who retired, has given a letter to the managing partner admitting that he is a partner for the earlier period a copy of which has been filed in the income-tax office. In view of these factors and since all the partners of the firm at the close of the accounting year have signed Form No. 12, I direct the ITO to grant registration since all the formalities have been complied with. " The revenue is aggrieved with the decision of the AAC and is in appeal before us. 3. The revenue has taken five grounds in appeal and the learned departmental representative was rather particular that we should go through each of the grounds and in such circumstances we set out the five grounds below : " 1. On the facts and circumstances of the case the order of the AAC granting renewal of registration is contrary to law and weight of evidence. 2. The AAC erred in granting renewal of registration to the firm in the absence of Form No. 12 which is duly signed by al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll compliance with the rules, because there had been only a change in constitution and not a succession and, hence, this is not a case where the earlier firm of three partners had dissolved. He, therefore, submitted that signing the declaration by two persons who were partners on the date of making the declaration fully satisfied the requirements of the rule. 6. We have considered the rival submissions. There were three persons including Prakash Rayudu who were partners till the close of the accounting period when Prakash Rayudu went out of the firm. Since such event took place only after the closure of accounts, in the entire accounting period the partners were three. The change in constitution took place only subsequent to the accounting period when Prakash Rayudu retired and the firm was continued by the remaining two partners. The revenue did not contend for the proposition that there was dissolution of the earlier firm. As a matter of fact, in ground No. 5, the contention proceeds on the basis that there was only a change in constitution when Prakash Rayudu went out. 7. The rule relevant to declarations for continuation of registration is rule 24 which reads as under : " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lved firm should all sign because the new firm is an entity different from the firm which has dissolved. But, where there is only a change in constitution, the same firm continues and the signature by the continuing partners would be sufficient, because it would bind the entity existing before the change which is the same. Therefore, in the present case, the requirements of rules 24 and 22(5) are fully satisfied notwithstanding that Prakash Rayudu has not signed. 8. The learned departmental representative submitted that where the ITO chose to give notice requiring the third person, who was a partner in the accounting period, to sign, such requirement had to be complied with and if it was not complied with, the non-compliance would be at the peril of the assessee. The ITO put forward the requirement that Prakash Rayudu also should sign the declaration in terms of section 185(3) which reads as under : " Where the Income-tax Officer considers that the declaration furnished by a firm in pursuance of sub-section (7) of section 184 is not in order, he shall intimate the defect to the firm and give it an opportunity to rectify the defect in the declaration within a period of one month ..... X X X X Extracts X X X X X X X X Extracts X X X X
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