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TMI Blog1986 (4) TMI 126X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment years 1982-83 and 1983-84. The accounting years of the assessee is the financial year. The assessee had been granted registration for the earlier years. The law, therefore, requires the assessee only to file a declaration in Form No. 12. Now the declaration in Form was filed on 29-3-1982 for the assessment year 1982-83. For the assessment year 1983-84, the form was signed by the partners on 31-3-1983. On the basis of these declarations, the ITO had granted the benefits of registration. 3. The Commissioner in his order under section 263, first pointed out that there was certain blanks in the declaration for both the years. For the assessment year 1982-83, the averment in the first paragraph that the first was granted registration in respect of an earlier year has been left blank. So also the assessment year concerned has been left blank in the second paragraph of the declarations. So the declarations were defective according to him. Further, insofar as the declarations were signed before the end of the previous years, i.e., two days before the assessment year 1982-83 and on the last day for the assessment year 1983-84, the declarations themselves were not valid. In suppor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the assessee an opportunity to regularise it under section 185(3). He then submitted that the order of the Commissioner directing the ITO to treat the assessee as an unregistered firm has the effect of truly lying the benefit granted by the law. He submitted that such an action cannot be permitted as per the ruling given by the Madras High Court in the case of CGT v. T. S. Krishna [1984] 149 ITR 99. He then referred to the decision of the Supreme Court in the case of Badri Prasad Jagan Prasad v. CIT [1985] 156 ITR 430 and submitted that in such matters one should not get enmeshed in technicalities and take a pragmatic approach. Finally he referred to the decision relied on by the Commissioner and pointed out that case the declaration in Form No. 12 was given in the month of June when the accounting year ended in November. Further, the facts of the case show that the assessee had not approached the Court with clean hands. They were actually trying to palm of a declaration given for different year as the declaration given for the assessment year. 6. Shri Santhanam for the department submitted that the assessee had left many blanks in the forms which is fatal to their for registra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to the order under section 263. 8. We have considered the submissions. Although a time limit is given in section 184(7) for the filing of the declaration in Form No. 12, that the time limit is only the point beyond which the assessee cannot file the declaration. The section does not bar the filing of the declaration at any point of any time before the expiry of the time fixed in sub-section (7). But Shri Santhanam wants us to infer the such a time limit is implied when the section requires a declaration that there is no change in the constitution of the firm or the shares of the partners. It is his case that unless the entire accounting period had elapsed it is impossible for anyone to predicate that there will be no change in the constitution of the firm or the shares of the partners. Sub-section (7) reads as follows: "(7) Where registration is granted to any firm for any assessment year, it shall have effect for ever subsequent assessment year : Provided that - (i) there is no change in the constitution of the firm or the shares of the partners as evidenced by the instrument of partnership on the basis of which the registration was granted; and (ii) the firm furnishes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uage and content of section 184(7) and Form No. 12. What Form No. 12 wants the assessee to declare is not what is found in the section. Thus, it is apparent that the form oversteps the contents of section 184(7). Where there is no implied time limit, as per section, the form brings it into existence. 11. Now the question whether a rule can bring a certain time limit, which is not mentioned in the section, has been considered by various High Courts while considering the validity of the time limit given in Form No. 10. Now this form has to be given by a charitable trust for permission for accumulation of the profits. Paragraph 2 of the Form and rule 17 of Income-tax Rules, 1962 ('the Rules') provided a time limit of four months which was not present in the section. The High Court had held that such a time limit in the Rules and in the form was wholly ultra vires. Please see the decision of the Madras High Court in the case of Second ITO v. M. C. T. Trust [1976] 102 ITR 138 and the decision of the Kerala High Court in the case of CIT v. Shree Padmanabhaswami Temple Trust [1979] 120 ITR 42. Both these decision had held that the Rules which had prescribed time limit were ultra vires o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee how a declaration given on the last day of the accounting year could be held invalid even on the basis of Gujarat High Court decision in Trinity Trader's case. When on the last day itself, they had filed the declaration, it must be assumed that as far as they were concerned, the accounting year was over. In this connection, we may refer the decision of the Supreme Court in the case of Badri Prasad Jagan Prasad. That was a case which raised a question as to the date of succession to the business. The assessee, an HUF had carried on business taxed under the English Indian Income-tax Act, 1918. The family underwent partial partition on 11-10-1948. Entries in the books of account on that date showed the partition. A partnership firm was effected by the erstwhile members of the family with the effect from the next day, i.e., 12-10-1948. The question was whether the succession by the firm was on 11-10-1948 or 12-10-1948. The Supreme Court, in the course of judgment, itself disapproved such verbal quibblings in strong terms. All their observations would be applicable to the facts for the year 1983-84 before us. They had filed the declaration on 31-3-1983 and that means, as far as they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... portunity to rectify the same. Insofar as a declaration given two days before the end of the accounting year would be considered as defective, the assessee has a right under this section to get the defect rectified. In this connection, we may refer to a statement made by Shri Santhanam that the application was non est and not merely defective. On the facts of that case, the High Court has observed at p. 86 "under the circumstances the declaration, which is made by the assessee in the middle of the accounting period, is found to be not a declaration". Now in the case before us, the declaration is made at the end of accounting year and not in the middle of the accounting year. Apart from that, as we have pointed out in paragraph 10 and 11, the Gujarat High Court decision rested on the assumption that the paragraph in Form No. 12 is intra vires. Therefore, the decision given on that assumption will not be relevant to us. We have no other material to hold that the declaration was non est. Therefore, it is only a defective declaration and provisions of section 184(3) will be available to rectify it. 15. Shri Santhanam has pointed out certain other defects in the form like the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al profit would only Rs. 3,09,937 as per the working given by the Commissioner in paragraph 8 of his order for the year 1981-1982. This would amount to only 3 per cent of the contract receipts. According to him the ITO was not justified in accepting the low profit rate without a proper inquiry. The ITO ought to have recast the profit and loss account and inquired into the reasons for the low gross profit. Not having done so, the order passed by him was prejudicial to the revenue. 19. He then looked into the question of depreciation admissible to the assessee on certain jeeps. According to the Commissioner, jeeps could be allowed depreciation only at 20 per cent. For these reasons, he set aside the assessment order and directed the ITO to redo the same. Practically, same type of reasons had been given for the other two assessment years. It is not necessary to give further details of these two years. 20. Shri Ratnakar for the assessee submitted that the profit rate shown by the assessee is reasonable. He submitted that the Commissioner could come to finding that the profit rate is not reasonable, if there was a comparative case. He submitted that there were not many other assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he book results. The department must show other defects in the books of account maintained by the assessee and the defects must be such that it is nut possible to determine the income properly. Since no other material had been brought on record, other than the low gross profit, the direction that the proviso to section 145 should be considered, is, according to us, certainly not justified. We also find some force in the submission of Shri Ratnakar that there are no comparative cases shown by the ITO or the Commissioner. In order to show that the profit rate disclosed is low, it is necessary that the results of the assessee should be compared with another comparative case. If there are no comparative cases shown, it will be very difficult to come to a finding that the results are poor. So we do not find any justification for the setting aside of the assessments in order to apply the proviso to section 145(1). We have no quarrel with the proposition submitted by Shri Santhanam that the Commissioner has powers to apply the provisions of the proviso to section 145(1). What we point that out here is that the basic facts for the application of the proviso have not been shown. We will acc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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