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TMI Blog1966 (2) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of section 46(1) on account of the assessee's default to pay the amount of tax as demanded by the Income-tax Officer. The relevant account year for the said assessment year 1956-57 is S.Y. 2011 (October 27, 1954, to November 14, 1955). During the said accounting year and also during the past several years, there and exist a firm constituted of four partners, viz.: 1. Shri R.S. Pawar, 2. Shri D.S. Pawar, 3. Shri A.S. Pawar, and 4. Shri G.R. Pawar. The said firm was being granted registration under section 26A year after year, in the past and it was so granted even for the assessment year 1955-56. One of these four partners, viz., R.S. Pawar, died on February 3, 1956, i.e., after the close of the said account year ended November 14, 1955. The surviving partners, thereafter, entered into partnership with two other persons, viz., a major son of the said RS. Pawar and a major son of another partner, A.S. Pawar, and also admitted to the benefits of the partnership two minor sons of the late R.S. Pawar. The partnership agreement was executed on June 28, 1956. It mentioned the individual shares of the said major partners in the profits and losses of the firm and als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in appeal to the Tribunal contending that the Appellate Assistant Commissioner erred in directing the Income-tax Officer to grant registration to the new firm on the basis of the deed of June 28, 1956, for the assessment year 1956-57. By its order dated January 11, 1961, in I.T.A. No. 11238 of 1959-60, the Tribunal accepted the department's contention by mainly relying upon the Supreme Court decision in the case of R.C. Mitter Sons v. Commissioner of Income-tax ([1959] 36 I.T.R. 194; [1959] SUPP. 2 S.C.R. 641). A copy of the said order is marked annexure B and forms part of the case. 5. On these facts, the assessee-company now requires the Tribunal to refer to the High Court the following question: Whether, on the facts and in the circumstances of the case, the Tribunal was right in refusing registration to the firm? In our opinion, on the facts of the case, the following question of law arises: Whether the new firm that was in existence at the time of making of the assessment for the assessment year 1956-57 is entitled to registration for that assessment year on the basis of the deed made on June 28, 1956, when in the material acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellate Assistant Commissioner directing the Income-tax Officer to grant registration related back to the date of assessment and as such the demand raised upon it was illegal, and hence no tax demand was legally payable when the Appellate Assistant Commissioner disposed of the penalty appeal by his order of November 23, 1959. It is significant to add that the Appellate Assistant Commissioner also disposed of the assessee's appeal against the Income-tax Officer's refusal to grant registration on that very date. The Tribunal, however, was not impressed by this contention and by its following brief order, it rejected the assessee's appeal: Admittedly no tax has been paid and the Appellate Assistant Commissioner was justified in holding that the appeal of the assessee under section 30 was incompetent. We, accordingly, dismiss the appeal. This order was made by the Tribunal on January 11, 1961. It may be added that on that very date and by its order in I.T.A. No. 11238 of 1959-60 (annexure B ), the Tribunal set aside the Appellate Assistant Commissioner's order whereby he directed the Income-tax Officer to grant registration to the firm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i R.S. Pawar, (2) Shri D.S. Pawar, (3) Shri A.S. Pawar and(4) Shri G.R. Pawar. Ever since its formation in the year 1946, or thereabouts, this firm had been granted registration under section 26A of the Indian Income-tax Act up to the assessment year 1955-56. On 3rd February, 1956, that is, some time after the close of the account year with which we are concerned in the present case, one of the four partners, viz., Shri R.S. Pawar, died. The surviving partners formed another partnership firm in the same name and style taking up one major son of Shri R.S. Pawar as a partner and admitting two other minor sons of him to the benefits of the partnership. They also took up a major son of another partner, Shri A.S. Pawar, as a partner in the fresh partnership. An agreement of partnership in respect of this partnership was duly executed on 28th June, 1956, and it stated in terms that it was operative from the very day on which Shri R.S. Pawar had died, viz., 3rd February, 1956. It is the new partnership firm which is the assessee in the present case. On the 30th June, 1956, it made an application under section 26A for registration on the basis of the instrument of partnership dated the 28t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the benefits of the partnership and since the business of the firm had continued without a break, there was in fact no dissolution of the old firm and the formation of a new firm, but merely a change in the constitution of the firm. Under section 26(1) the assessment was to be made on the newly constituted firm and it was, therefore, entitled to ask for its registration under rule 2 of the Income-tax Rules. According to him, since the assessee-firm was the firm on which the assessment had to be made in respect of the year of account, it was entitled to be registered for the said year of account. In his opinion, therefore, the Income-tax Officer had erred in refusing registration to the firm. Against this decision of the Appellate Assistant Commissioner, the department went in appeal to the Income-tax Appellate Tribunal. The Tribunal agreed with the view taken by the Income-tax Officer and held that inasmuch as the firm of which registration could be obtained for the relevant account year was the old firm and inasmuch as there was no application made by the assessee for the registration of the said firm, it was not entitled to registration of that firm. The Tribunal, accordingly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal dismissed the said appeal and, thereafter, at the instance of the assessee, referred the following question to us under section 66(1) of the Indian Income-tax Act, 1922: Whether the assessee's appeal against the penalty imposed under section 46(1) was properly rejected by the Appellate Assistant Commissioner as being incompetent? Mr. J.P. Pandit, the learned counsel who appears for the assessee, has contended that on the application made by the assessee in the present case it was entitled to registration of the firm as it existed during the account year for the assessment year 1956-57. He has complained in the first instance of the question which has been framed by the Tribunal on the ground that it does not bring out the real controversy between the parties. The question as framed is: Whether the new firm which was in existence at the time of making the assessment for the assessment year 1956-57 was entitled to registration for that assessment year on the basis of its own instrument of partnership, when it was not the firm that was in existence in the material account year but some other firm was actually in existence in that year. Mr. Pandit says, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the Tribunal, in refusing registration to the assessee on the ground that no application for the registration of the firm as it existed during the account year was made, have laid too much stress on technicalities. There is no difficulty in the present case, he says, in treating the application made by the assessee as for registration of the firm as it existed during the account year. In support of this submission he has sought to derive support from certain decisions of this court, viz., Commissioner of Income-tax v. Dayaram Gangabishan Co. [1957] 31 I.T.R. 997 and Chhotalal Devchand v. Commissioner of Income-tax [1958] 34 I.T.R. 351. In Chhotalal Devchand v. Commissioner of Income-tax**, a partnership firm was first constituted by a deed of partnership dated 13th September, 1945. This partnership continued till 22nd January, 1954, and on that date, a change in the constitution of the partnership having occurred by the retirement of one of the partners and by the admission of certain other persons as partners, another partnership agreement was executed on the said date. There was a further change of a similar nature in its constitution a little later and a third partn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e two decisions for his submission that what is required to be considered is not whether the assessee has followed the letter of the law but whether he has substantially complied with the requirements of law. Mr. Pandit has argued that in the present case the assessee has substantially fulfilled all the requirements of law and procedure to be entitled to obtain registration of the firm as it existed during the year of account. Mr. Joshi, learned counsel for the revenue, on the other hand, has contended that section 26A of the Indian Income-tax Act confers a benefit of registration, and it has been, time and again, emphasised by the Supreme Court that in order to be entitled to the said benefit, the requirements of the said section must be strictly complied with. According to him there has not been a strict compliance or even a substantial compliance with the material provisions in the present case and the assessee, therefore, has been rightly held to be not entitled to registration by the Income-tax Officer and by the Tribunal. Mr. Joshi points out that the present case is not, in the first place, a case of change in the constitution of the firm but the case of a dissolution of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... old firm was its dissolution and the firm thereafter constituted is a new firm. Now, the firm, which existed during the year of account, was the old firm and registration of the said firm was necessary to be applied for. The said old firm had been granted registration in prior years up to the present assessment year. The proper procedure, therefore, was to ask for the renewal of the registration of the old firm in which case the provisions of rule 6 had to be complied with or, even if a fresh registration was to be applied for, it had to be of that firm. In the present case, the registration, which the assessee has applied for, is patently of the new firm. It is not possible also to regard it as in substance an application for registration of the old firm as well as containing, at any rate, all the particulars and requirements of an application for the registration of the said firm because the application is not signed by the legal representatives of the deceased partner nor do the particulars disclose who the legal representatives are. In our opinion, therefore, the application made by the assessee in the present case could not be said to be a proper application made for the regis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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