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TMI Blog1990 (1) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... wed continuation of registration for the assessment years 1974-75 and 1975-76 respectively on 4-9-1974 and 11-8-1973 which are the dates of completion of respective regular assessments. The Income-tax Officer, Kaithal, made an order under section 186(1) of the Income-tax Act, 1961 for the assessment year 1974-75 on 23-3-1983 cancelling the continuation of registration allowed earlier on the ground that signatures of Shri Sewa Ram had been forged by the other partner Shri Tilak Raj on form No. 12 as was apparent from the report if the Government Examiner of Questioned Documents at Shimla and that Sewa Ram partner confirmed that he did not receive any profit from the assessee firm for that year. According to him, this was done after affording opportunity of being heard to both the partners under his office letter dated 14-3-1983 fixing the date of hearing on 21-3-1983. He has recorded in his order that Shri Sewa Ram did not appear before him but Shri Tilak Raj appeared and asked for adjournment to 2-4-1983 but the Income-tax Officer recorded his inability as the limitation would strike the proceedings on 31-3-1983. In this order, he has recorded that previous approval of the Inspecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of cancellation of continuation of registration as distinct from a case of refusal of continuation of registration. He further contended that the Income-tax Officer lacked jurisdiction to make the impugned orders because he issued letter dated 14-3-1983 to Shri Tilak Raj to show cause why continuation of registration allowed to the firm should not be cancelled as there was no genuine firm in existence as registered because form No. 12 filed, "in this case was not genuine", that Shri Sewa Ram had in a written reply averred that no profit was received by him from the firm and that his signatures on form No. 12 were forged by Shri Tilak Raj Partner. This notice was for the assessment years 1974-75 to 1977-78. There is no evidence on record as to the date of service of this notice on Shri Tilak Raj. The order made by the Income-tax Officer cancelling continuation of registration mentions that for doing so, the Income-tax Officer obtained the previous approval of the Inspecting Assistant Commissioner of Income-tax, Ambala Range, Ambala. This approval was received on 11-3-1983. In other words, the approval for cancellation of continuation of registration was given by the Inspecting A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e had shown share of profit from the firm at Rs. 3,960. The revenue in its approach to the problem has clearly ignored the sacred verification made by Shri Sewa Ram and has blown his statement out of proportion to cancel the continuation of registration. 10. The revenue, on the other hand, emphasised that the orders of the two authorities below were speaking orders though there was no evidence of affording of opportunity to Shri Tilak Raj other than the letter dated 14-3-1983 addressed to him and that obtaining the approval of the Inspecting Assistant Commissioner before issuing show-cause notice was in order and no fresh approval was necessary. It was contended that no case has been made out by the assessee for an interference in the impugned orders of the Appellate Assistant Commissioner and the appeals of the assessee be dismissed. 11. Now when we come to the appreciation of evidence along with the provisions of law, it appears the approach of the authorities below has been not one which accords with the provisions enshrined in the statute book. Section 186 (1) provides that if, where a firm has been registered, or its registration has effect under sub-section (7) of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tant Commissioner, Ambala Range, Ambala and the Income-tax Officer wrote a polite reminder on 9-3-1983 bearing No. 2701. In this it was pointed out that there were two partners in the assessee firm as per records and one of them Shri Sewa Ram has intimated that he did not receive any profit from M/s. Tilak Raj Sewa Ram, Kaithal, for the assessment years 1973-74 to 1977-78. Here again the Income-tax Officer seeks instructions because the action for the assessment year 1974-75, "is getting time barred". 13. By letter No. JB/82-83/7198 dated 11-3-1983, the Inspecting Assistant Commissioner, Ambala Range, Ambala, wrote to the Income-tax Officer according approval to cancel the registration u/s. 186(1) of the Act for the assessment years 1974-75 to 1977-78. 14. The Income-tax Officer wrote to Shri Tilak Raj/Sewa Ram partners of M/s. Tilak Raj Sewa Ram on 14-3-1982 a letter in which it was projected that declaration filed in form No. 12 for continuation of registration for the assessment years 1974-75 to 1977-78 were not signed by Shri Sewa Ram partner, that his signatures were forged by Shri Tilak Raj partner, that as per written reply filed by Shri Sewa Ram, no profit was received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs that passed between the Income-tax Officer and the Inspecting Assistant Commissioner of Income-tax, Ambala Range, Ambala, approval for cancellation of registration was granted by the Inspecting Assistant Commissioner vide letter dated 11-3-1983 whereas the Income-tax Officer issued to the assessee a notice to show cause why registration need not be cancelled vide his latter dated 14-3-1983. In other words, the Inspecting Assistant Commissioner's approval was mechanical and without examination of the evidence on which the Income-tax Officer had to arrive at a judicial satisfaction that it was necessary to do so as envisaged in section 186(1) of the Act. The entire proceedings were, therefore, not in accordance with law. 16. It is also to be noted that law provides cancellation of registration u/s. 186(1) and the Income-tax Officer has to form an opinion that there is no genuine firm in existence to which registration has been granted. The Income-tax Officer did arrive at this conclusion but on the slander evidence that Sewa Ram said so and the signatures on form No. 12 purported to be that of Sewa Ram were not his. Sewa Ram apparently was not telling the whole truth to the Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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