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TMI Blog1984 (10) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... asked the assessee to give reasons for the belated filing of Form No. 12. The assessee did not reply to the notice. On March 29, 1976, the Income-tax Officer assessed the firm as an unregistered firm by refusing renewal of registration. The order was made in the following terms: " Order under section 185 : The assessee has filed Form No. 12 along with the return of income on August 30, 1975. There is a delay in filing the return as well as Form No. 12 by 2 months. A letter to the assessee calling for the assessee's explanation for late filing of Form No. 12 was issued. There is no response to the said letter till date. Therefore, renewal of registration is refused and the status of the assessee is taken as that of unregistered firm. (Sd.) A. V. Sreenivas Iyengar, VIth Income-tax Officer, Hubli. " Against the said order, the assessee preferred an appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner held that the appeal was not maintainable under section 246, since the order of the Income-tax Officer although purports to have been passed under section 185 really falls under section 184(7) of the Act, inasmuch as the Income-tax Officer ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order, declare that the registration granted shall not have effect for the relevant assessment year. It will be useful in this context to read the relevant provisions as to registration of firms provided under the Indian Income-tax Act of 1922. Section 26A(1) provided for filing of application for registration and section 26A(2) provided that the application must be in the prescribed form, filed within the prescribed time and verified in the prescribed manner. Rule 2 framed thereunder empowered the Income-tax Officer to condone the delay in filing the application. Rule 4 enabled the Income-tax Officer to grant or refuse registration depending on his satisfaction about the existence or otherwise of the firm constituted as shown in the instrument of partnership. Rule 5 provided that the certificate of registration granted under rule 4 shall have effect only for the concerned assessment year. Rule 6 enabled the filing of application for renewal of registration for subsequent assessment year and rule 6A provided power to grant or refuse renewal of registration. The material changes introduced in the 1961 Act are: (i) The procedure under the 1922 Act to make a fresh applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee, where the assessee denies his liability to be assessed under this Act or any order of assessment under subsection (3) of section 143 or section 144, where the assessee objects to the amount of income assessed, or to the amount of tax determined, or to the amount of loss computed, or to the status under which he is assessed The relevant portion of the clause for our purpose reads: " Where the assessee denies his liability to be assessed under this Act or...... where the assessee objects...... to the status under which he is assessed." In either case, there is a right of appeal to the assessee against the order of the Income-tax Officer. We will first examine the scope and meaning of the expression " where the assessee objects to the status under which he is assessed ". The assessee in this case claims to be assessed as a registered firm, but the Income-tax Officer has assessed it as an unregistered firm. Can it be said that the assessee objects to the status under which it is assessed ? If the answer to this question is in the affirmative, then it must be held that the assessee in this case has a right of appeal to the Appellate Assistant Commissioner under section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 2, and where the assessee is a firm, its classification as a registered firm or an unregistered firm." The " status " explained herein thus expressly includes the classification of the assessee as a registered firm or an unregistered firm. Since section 246(1)(c) refers to section 143(3), the above Explanation, in our opinion, is the real focus to consider the scope of the words " and so on " used in Explanation (c) to section 246. Mr. Srinivasan, however, urged that Explanation (2) to section 143 is applicable only to sub-section (3) of section 143 and it cannot be extended to the entire section 143, since that Explanation was meant only to explain the scope of the said sub-section. This contention is plainly contrary to Explanation (2) to section 143 itself. The said Explanation begins with the words : " For the purposes of this section " which means to the entire section 143. Section 143 provides for cancelling the assessment under section 143(1) and for making a fresh assessment. The order of assessment so made under section 143(3) is appealable under section 246(1)(c). Since Explanation (2) to section 143 specifically states that " status " of the assessee whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of assessment. The Supreme Court, while examining the scope of the expression " denial of liability ", observed (at p. 229): " Under section 30, an assessee objecting to the amount of income assessed under section 23 or the amount of tax determined under the said section or denying his liability to be assessed under the Act can prefer an appeal against the order of the Income-tax Officer to the Appellate Assistant Commissioner. It is said that an order made by the Income-tax Officer rejecting the plea of an association of persons that the members thereof shall be assessed individually does not fall under one or other of the three heads mentioned above. What is the substance of the objection of the assessee ? The assessee denies his liability to be assessed under the Act in the circumstances of the case and pleads that the members of the association shall be assessed only individually. The expression 'denial of liability' is comprehensive enough to take in not only the total denial of liability but also the liability to tax under particular circumstances. In either case, the denial is a denial of liability to be assessed under the provisions of the Act. In one case, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etween a registered firm and an unregistered firm for the purpose of taxation under the Act. An unregistered firm is a distinct assessable entity quite different from a registered firm for the purposes of the Act. The registration of a firm affects the assessment procedure. It makes a difference for the purpose of determination of the tax payable and the demand for the tax so found due. Before 1956, i.e., prior to the amendments made by the Finance Act 1956, the position under the 1922 Act in regard to firms was as follows Where the firm was unregistered, the tax payable by the firm itself was determined as in the case of any other distinct entity and the levy was made on the firm itself. On the other hand, where the firm was registered, the firm did not itself pay the tax and, therefore, the tax payable in respect of the firm's income was not determined; but each partner's share in the firm's income was added to his other income, the tax payable by each partner on the basis of his total income (including his share of the firm's income) was determined and the levy was made on the partners individually. But after 1956, income-tax at special rates is now assessable on registere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ections also impliedly confer power on the Income-tax Officer to reject a belated application or declaration if no sufficient cause was shown by the firm. Section 185(2) and (3) provides for intimating the firm of the defect in the application or in the declaration, with an opportunity to rectify the defect within one month. If the defect pointed out is not rectified within that period, the Income-tax Officer shall, by order in writing, reject the application or the declaration, as the case may be. One view is that the defects contemplated under section 185(2) and (3) relate to formal defects noticed in the application or declaration filed in time and do not relate to the application or declaration filed beyond the prescribed time and since the latter type of cases are specifically covered by section 184(4) and (7), the order made thereunder is not appealable under section 246(1)(j). The Madras High Court in A.S.S.S.S. Chandrasekaran v. CIT [1974] 96 ITR 711, the Orissa High Court in New Orissa Traders v. CIT [1977] 107 ITR 553 and CIT v. Pohop Singh Rice Mill [1981] 132 ITR 390 and the Allahabad High Court in Ashwani Kumar Maksundan Lal v. Addl. CIT [1972] 83 ITR 854 have taken ..... X X X X Extracts X X X X X X X X Extracts X X X X
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