Patna High Court
Commissioner Of Income-Tax vs M.N. Ghosh And Sons on 31 March, 1987
Author: B.N. Agrawal
Bench: B.N. Agrawal
JUDGMENT
1. This is a reference under Section 256(1) of the Income-tax Act, 1961 (hereinafter called "the Act"). In this case, we are concerned with the assessment year 1973-74. The questions referred to us for our opinion are the following:
"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the question of registration under Section 184(7) was appealable before the Appellate Assistant Commissioner ?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that there was a defect in the declaration filed in Form No. 12 which could be corrected subsequently by the partners of the firm ?"
2. The assessee is a partnership firm. In the year in question it applied for registration in terms of Section 184(7) of the Act. The application was, however, signed by only one of the partners. By order dated December 30, 1974, the assessee was asked to show cause why its application for registration under Section 184(7) of the Act be not refused, as the application was not signed by all the partners. The very following day, i.e., on December 31, 1974, the assessee filed fresh Form No. 12 with the signatures of all the partners. The original application having been filed only under the signature of one of the partners, the Income-tax Officer held that the assessee was not entitled to the benefit of registration. The assessee had contended that at the time the application for registration was filed all the partners were not available and, therefore, they could not put their signatures on the application. This explanation did not find favour with the Income-tax Officer with the result that registration was refused. The assessee being aggrieved by the order of the Income-tax Officer appealed to the Appellate Assistant Commissioner, The Appellate Assistant Commissioner accepted the explanation of the assessee that all the partners were not available at the time the application for registration was filed. The appeal of the assessee thus was allowed by the Appellate Assistant Commissioner.
3. Being aggrieved by the order of the Appellate Assistant Commissioner, the Department filed an appeal before the Tribunal. Two points were agitated before the Tribunal. The first was that the appeal by the assessee before the Appellate Assistant Commissioner in regard to the status of the firm was not appealable. The second contention on behalf of the Department was that the application for registration having been defective, there was no scope for rectification although the fresh application without defect had been filed before assessment. None of these stands found favour with the Tribunal. The appeal of the Revenue was, therefore, rejected on all counts. The Revenue, being aggrieved by the order of the Tribunal, filed an application for reference to this court. The Tribunal has thus referred the questions mentioned earlier for our opinion.
4. In regard to the validity of the appeal which has been raised in the first question, for our opinion, it must be observed that the, question is concluded by the decision of this court in CIT v. Gyanchand Bedi [1987] 163 ITR 693, This court, following the dedision of this court in Madhur Jalpan v. CIT [1983] 143 ITR 351, held that where the appeal is against the, order of assessment as well as against the rejection of the status of the assessee, appeal against the rejection of the stand in regard to status would be maintainable. The question whether the assessee was a registered firm or an unregistered firm is a question affecting the status of the assessee. The consistent view of this court, therefore, has been that an order rejecting a prayer for registration along with an order of assessment is appealable. In that view of the matter, it must be held that the answer to the first question must be in the affirmative, in favour of the assessee and against the Revenue. The Tribunal was absolutely correct in holding that the question of registration under Section 184(7) was appealable before the Appellate Assistant Commissioner.
5. The second question also calling for our opinion is covered by the decision of this court in CIT v. J. B. Coal Traders [1987] 164 ITR 450 and Ganga Motor Service v. CIT [1977] 106 ITR 132, in both of which Uday Sinha J. was a party. Upon an appraisal of the provisions of Section 185(3), it was held in those decisions that where the application for registration is defective, the Income-tax Officer is obliged to intimate the defect to the firm and give it an opportunity to rectify the defect. In terms of Section 185(3), the defect must be rectified within one month from the date of intimation of the defect by the Income-tax Officer. If it is not rectified within the period of one month, registration may be refused on that ground. But if the defect is removed within one month of intimation of the defect by the Income-tax Officer, the application for registration cannot be rejected. In the present case, the defect was in the application and not in the partnership deed. The defect was that all the partners had not signed. That defect was removed before the assessment order was passed. In our view, therefore, the Appellate Assistant Commissioner and the Tribunal were absolutely correct in holding that the assessee should be given an opportunity to rectify the defect. The defect having been rectified, registration could not be refused. In our view, therefore, the answer to the second question also must be in the affirmative, in favour of the assessee and against the Revenue. The Tribunal was absolutely correct in holding that the defect in the declaration in Form No. 12 could be corrected subsequently by the partners of the firm.
6. For all the reasons stated above, both the questions are answered in favour of the assessee and against the Revenue with costs. Hearing fee Rs. 250 (Rupees two hundred and fifty) payable by the Revenue to the assessee.
7. Let a copy of this judgment be transmitted to the Assistant Registrar, Income-tax Appellate Tribunal, in terms of Section 260 of the Income-tax Act, 1961.