Patna High Court
Commissioner Of Income-Tax vs Imperial Textiles on 12 March, 1992
Equivalent citations: [1993]201ITR555(PATNA)
JUDGMENT T.L. Viswanatha Iyer, J.
1. The present reference under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), involves the following question of law :
" Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the assessee-firm was entitled to registration for the assessment year 1972-73 under Section 185 of the Income-tax Act, 1961, even though the delay in the filing of the application for registration had not been condoned ?"
2. The facts and circumstances leading to the present reference may be set out in brief. The assessee is a partnership firm During the previous year relating to the assessment year 1972-73, the accounting year ended on October 18, 1971. The application for grant of registration in Form No. 11 was filed on September 18, 1972. Therefore, the application was out of time. The assessee filed an application for condonation but, on the facts, the same was rejected by the Income-tax Officer. On appeal, the Appellate Assistant Commissioner agreed with the Income-tax Officer that there was no sufficient ground for condonation of delay but still he directed grant of registration in view of the law laid down by the Supreme Court in the case of CIT v. Murlidhar Jhatvar and Puma Ginning and Pressing Factory [1966] 60 ITR 95. It was for the reason that the assessment of one of the partners of the assessee-firm, namely, Bali Devi had already been completed by the Income-tax Officer on November 22, 1972. According to the learned Appellate Assistant Commissioner since one of the partners had already been assessed in respect of his share from the firm, it was not open to the Income-tax Officer to treat the firm as unregistered. On appeal by the Department, the Tribunal also took the same view.
3. Mr. Vidyarthi, appearing for the Department, has tried to impress upon us that the view taken by the Tribunal is not correct in law, because once the delay in filing the application for grant of registration has been refused to be condoned, in law there was no application before the Income-tax Officer for grant of registration. Therefore, the question of granting registration cannot arise. According to him, under the scheme of the Act, unless there is an application in the statutory form filed within the statutory period, the Income-tax Officer does not get the jurisdiction to grant the registration. His submission is that the act of the Income-tax Officer assessing one of the partners of the firm in respect of his share income cannot act as an estoppel in assessing the firm as an unregistered firm, because estoppel cannot be applied against the statute. Therefore, as submitted, the appellate authorities could not have granted registration to the firm. He has further submitted that the decision of the Supreme Court in Murlidhar's case [1966] 60 ITR 95 has no application to the cases arising under the Act because that case has proceeded on an interpretation of Section 3 of the Indian Income-tax Act, 1922, which is materially different from the charging section envisaged under the Act of 1961.
4. In our opinion, it is not necessary for us to enter into the question raised by Mr. Vidyarthi because the Central Board of Direct Taxes, pursuant to the statutory powers conferred on it under Section 119 of the Act, has issued a circular to meet the situation like the present case, which is binding on the income-tax authorities. After referring to the Supreme Court judgment in Murlidhar's case [1966] 60 ITR 95, it has proceeded to state that :
"The effect of this decision is that once the Income-tax Officer assesses directly an assessee's share of income from an association of persons or firm, it is not open to him to assess the same income again in the hands of the association of persons or firm. In other words, once the assessment of a partner or a member of an association has been made by taxing directly his proportionate share from the firm or association, the Income-tax Officer is precluded from assessing the firm in the status of an unregistered firm or association of persons. Thus, all the partners of the firm or members of the association will have to be assessed as partners of a registered firm, even though while dealing with the assessment of the firm, the Income-tax Officer comes to the conclusion that the firm is not entitled to registration. Although the Supreme Court's decision is under the Indian Income-tax Act, 1922, the Board is advised that it will equally apply to the assessments made under the Income-tax Act, 1961."
5. The directions contained in the circular set out above are binding on the income-tax authorities as has been laid down by the Supreme Court in the case of Navnit Lal C. Javeri v. K. K. Sen, AAC of I. T. [1965] 56 ITR 198. While referring to this decision, the Supreme Court in the case of Ellerman Lines Ltd. v. CIT [1971] 82 ITR 913, 921, has noticed that, even if the circulars deviate from the provisions of the Act, still according to the apex court, the circulars are binding on the Income-tax Officers. Therefore, even if the application for condonation of the delay in filing the registration application had been rejected and the assessee in strict terms of Section 185 of the Act was not entitled to registration, still, in view of the statutory directions of the Board, the Income-tax Officer was bound to treat the firm as registered. We are fortified in our view by the decision of the Bombay High Court in the case of CIT v. V. H. Sheth [1984] 148 ITR 169.
6. Accordingly, we answer the question referred to us in favour of the assessee with costs assessed at Rs. 250.
S. K. Chattopadhyaya, J.
7. I agree.