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TMI Blog1991 (12) TMI 288X X X X Extracts X X X X X X X X Extracts X X X X ..... r before 31-3-1987. However, the application under section 11A was actually filed on 20-7-1987 with a delay of 3 months 19 days. They have filed a petition dated 15-7-1987 to condone the delay caused in filing Form No. 11 A. They filed a return for asst. year 1983-84 on 22-7-1987 disclosing an income of ₹ 49,740. It is the contention of the assessee in the delay of excuse petition, that it was prevented by sufficient cause from making the application before the end of the previous year. The assessee firm had set up two grounds as constituting the cause for the delay. After its execution on 14-5-1986, the partnership deed was given to the bankers of the assessee firm viz. Canara Bank, in order to obtain an overdraft account called hundi loan. The retiring partner viz. Sri Ali Mohammed also tried to obtain a hundi loan from the same bankers for his proprietary business. After prolonged negotiations for about four months, the partnership deed was returned without any loan sanctioned. The said partnership was returned to Ali Mohammed who was new to the income-tax procedure and therefore, he kept away the information from his father that the partnership deed was returned to him fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasons for condonation of delay were not proved to be convincing and there was no sufficient cause for the delay in filing the application and ultimately the ITO refused continuation of registration under section 184(4). The ITO relied upon the following decisions in support of his stand:- 1. Excel Motors v. CIT [1980] 122 ITR 379 (Ker.), 2. Pannalal Ramkumar Co. v. ITO [1970] 75 ITR 309 (Mad.), 3. Kalinga Saw Mills v. CIT [1975] 99 ITR 102 (Ori.), and he had treated the assessee firm as unregistered for assessment year 1987-88. 2. Aggrieved against the orders of the ITO dated 31-12-1987, the assessee went in appeal before the Dy. Commissioner (Appeals), Visakhapatnam. Even before the DC (Appeals), the two reasons for condoning the delay put forward before the ITO remained the same. The DC (Appeals) held that the delay of 3 months 19 days in filing Form No. 11A was condonable delay and he justified his stand by stating as follows in his orders:- I have carefully considered the ITO s reasons for rejecting registration and the contentions of the Counsel for the appellant against it. I do not know under what circumstanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pliance of the same would not be sufficient. The learned DR relied upon the Hon ble Supreme Court decision in Sri Ramamohan Motor Service s case (supra) and Bengal Decorators v. CIT [1978] 113 ITR 805 (Cal.). The learned DR particularly relies upon the following ratio of the Hon ble Supreme Court Decision in the above case which is found noted in the head note at page 275:- Before a person can claim the benefit of section 26A he must strictly comply with the requirements of that section; and in view of sub-section (2) of that section he is also required to comply with the requirements of the relevant rules. Substantial compliance with the rules is not sufficient. The Calcutta High Court in the second cited case held the following as per the head note at page 805 of Bengal Decorator s case (supra): Where a firm consisted of two partners and one of the partners was legally presumed to be dead from the date of his disappearance and an administrator pendente lite was appointed to represent the estate of the deceased partner and there was no provision in the partnership deed that the partnership will not be dissolved on the death of a partner, there was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove under the proviso the ITO is quite competent to excuse the delay if any caused in filing the application contemplated under section 184(4). No doubt it should be shown that the assessee was prevented by sufficient cause from making the application before the end of the previous year. Now two reasons were assigned for excusing the delay viz., that the partnership deed dated 14-5-1986 was held up with the Manager of the Canara Bank, Vizianagaram with whom the assessee negotiated for obtaining an overdraft; secondly the partnership deed was returned not to Hazi Ismail but to his son Ali Mohammed who already went out of the business, to start a new business of his own. When Ali Mohammed used to be the partner of the firm that is up to asst. year 1986-87, it is only Sri Ali Mohammed who used to look after the business of the assessee firm. Sri Hazi Ismail never used to take interest in the affairs of the firm and especially either in maintaining account or in getting the income-tax returns etc. prepared and filed. Therefore, it is but natural that Sri Hazi Ismail forgot to file Form No. 11A. When he approached his auditors for filing income-tax return, on being educated on this asp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d if only such defects had been pointed out and rectified in time. To cite only one instance of judicial criticism of the harsh administration of the law relating to registration of firms under the Income-tax Act, witness the following observations of Jagadisan J., in V.M. Periasamy Chettiar Co. v. CIT [1964] 52 ITR 134 (Mad.) at p. 136: We must also observe that the department is over-punctilious in considering applications for registration of firms and is not averse to refuse registration quite readily in a facile manner. Section 185(2) and (3) of the I.T. Act, 1961, is a welcome parliamentary reaction to judicial observations of this kind. At this time of the day, therefore, it would be too much to urge that the ITO is not under a duty bound to give a helping hand to assessees, who even with expert professional advice, might falter here and there in filing the applications, which the ITO might not quite regard as being in order. In those cases, not only normal courtesy, but the dictates of the statutory requirements would make for a return of the (defective) applications with an express reference to the defects contained in the applications and an oppor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be mentioned that the Income-tax Officer can pass an order under section 185(1)(b) of the Act only in cases where he is satisfied that there was no genuine firm in existence during the previous year; the provisions of that section will not apply in a case where the Income-tax Officer refuses to condone the delay in the filing of an application for registration and as such does not consider the application on its merits. 5. The above would make the legal position abundantly clear. It clearly states that when the ITO refuses to condone the delay in filing Form No. 11A, the order should not be passed under section 185(1)(b). This view is the same on the view expressed by the Madras High Court from which we have already quoted. It is now axiomatic to say that the CBDT Circular would be binding against the ITO and in support of the said position we may cite the decision of the Andhra Pradesh High Court in CIT v. T. V. Ramanaiah Sons [1986] 157 ITR 300. In the said decision speaking about the binding nature of the CBDT Circulars it is stated in the head note of the decision at pages 300 and 301 as follows:- Wherever instructions given by The Central Board of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay in filing Form No. 11 A, no appeal lies to the AAC. On the strength of the decision it is contended that the appeal itself is incompetent. In reply, the learned advocates for the assessee relied upon the decision of the Mysore High Court in Sree Ramakrishna Mining Co. v. CIT [1967] 64 ITR 197 in which in the head-note at page 198 of the decision, it was held that:- registration of partnership cannot be refused under section 26A if there is a genuine partnership and one exists in the eye of the law. The refusal of registration is possible only when there is no genuine partnership or the partnership is illegal. . . . It is also contended by the learned advocates for the assessee that if the ultimate order of the ITO is refusal to condone the delay cause in filing Form No. 11A, then only the Madras High Court decision in A.S.S.S.S. Chandrasekaran Bros. case (supra) would apply; but if the ITO did not stop by merely refusing to condone the delay caused in filing Form No. 11A, but also passes a further order cancelling continuation of registration to the firm, or order under section 185(1)(b), the said order is certainly appealable and the Madras High Court d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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