Patna High Court
Commissioner Of Income-Tax vs Manuram Babulal on 7 January, 1986
Equivalent citations: [1986]158ITR5(PATNA)
JUDGMENT
1. In this reference under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as the "Act"), we are concerned with the assessment year 1972-73. The assessee is a partnership firm. It has been registered in terms of Section 185 of the Act. In regard to the assessment year 1972-73, it was required to submit its return of income as well as declaration in terms of Section 184(7) by June 30, 1972. The declaration and the return of income were filed on September 21, 1973. Notice for the assessment proceeding was issued to the assessee. In the course of the assessment proceeding, the Income-tax Officer refused continuation of registration to the firm. He, therefore, treated it as an unregistered firm and passed assessment order accordingly.
2. The assessee being aggrieved by the order of the Income-tax Officer refusing continuation of the status of a registered firm as also against the quantum of assessment filed an appeal before the Appellate Assistant Commissioner. The latter held that the (renewal of) registration had been wrongly refused to the assessee. He, therefore, set aside that part of the order of the Income-tax Officer by which the status of the assessee had been taken as that of an unregistered firm. The Department being aggrieved by the order of the Appellate Assistant Commissioner moved the Appellate Tribunal but without any success. Hence, the present reference before us at the instance of the Department.
3. The question referred to us for our opinion is mentioned below :
"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that an appeal is maintainable before the Appellate Assistant Commissioner against the order of the Income-tax Officer under Section 184(7) of the Income-tax Act, 1961 ?"
4. The question, thus, is whether the assessee's appeal was maintainable before the Appellate Assistant Commissioner. Learned standing counsel submitted that the only provision for appeal in regard to the registration of a firm is to be found in Section 246(j) of the Act and that since Clause (j) provides for an appeal only against orders passed under Section 185(2), (3) or (5), the appeal in question being one against the orders passed under Section 184(7) was not maintainable. The precise question referred to us had fallen for consideration before a Division Bench of this court in Madhur Jalpan v. CIT [1983] 143 ITR 351 (Pat). In that decision, upon a very careful elucidation of the subject, Jha J. observed that although Section 246(j) of the Act was not relevant for considering whether orders passed under Section 184(7)(ii) were appealable or not, an appeal did lie in terms of Section 246(c) of the Income-tax Act. His Lordship laid down {at p. 360) that Section 246(c) provides for an appeal where the assessee is aggrieved by an order in regard to the status under which he is assessed.
5. The expression "status" encompasses undoubtedly situations where the assessee is an individual, Hindu undivided family and other categories. Some of the categories are those mentioned in Section 2(31) of the Act. Therein a person has been said to include (i) an individual, (ii) a Hindu undivided family, (iii) a company, (iv) a firm, (v) an association of persons or a body of individuals, whether incorporated or not, (vi) a local authority, and (vii) every artificial juridical person, not falling within any of the preceding sub-clauses. Sub-clause (7) thus indicates that the categories are not exhaustive but rather only inclusive. It was thus evident as held by Jha J. that in determining the status, it was open to the taxing authorities to elaborate whether the status was of a registered firm or an unregistered firm. Jha J. also took note of the Explanation to Section 143 of the Income-tax Act, 1961, which provided that " status " means where the assesseee was a firm, its classification as a registered firm or an unregistered firm. The conjoint effect of the provisions contained in Section 246(c) in regard to the status of the assessee and Section 143, Explanation (2), was obvious that a person aggrieved had the right of appeal. The conclusion of the Income-tax Officer in regard to the firm being registered or unregistered has substantial bearing on the tax liability of the assessee. He is therefore, bound to be aggrieved by the status in which he is assessed.
6. We are, therefore, in full agreement with the views of Jha J. when his Lordship observed that there can be no escape from a construction of all the relevant provisions that the term " status " used in Section 246(c), for the purpose of appeal, will include not only the illustrative example given by way of explanation to that section but shall also govern with effect from April 1, 1971, all categories of firms, registered or unregistered. An appeal against the determination whether the continuation of the status of a registered firm is to be continued or not would be certainly maintainable. Prior to the introduction of Explanation (2) to Section 143, there was some scope for ambiguity that led to the decisions of various High Courts on two divergent lines, but after the introduction of Explanation (2} to Section 143, there should be no controversy about the question in regard to the scope of Section 246(c). In our view, therefore, an order passed under Section 184(7) refusing to continue the registration would be appealable to the Appellate Assistant Commissioner.
7. Learned senior standing counsel submitted that the view propounded by Jha J. in the case of Madhur Jalpan [1983] 143 ITR 351 (Pat) would render the provision of Section 246(j) redundant, inasmuch as Clause (c) would cover all cases of determination of status. This submission was advanced before Jha J. as well. It did not find favour with his Lordship nor does it find favour with us. We are thus in full agreement with the views expressed by Jha J. in the case of Madhur falpan [1983] 143 ITR 351 (Pat). We are unable to find any reason for differing from the views propounded therein. In our view, therefore, the Appellate Assistant Commissioner had the jurisdiction to entertain the appeal of the assessee.
8. For the reasons stated above, the reference is answered in the affirmative, in favour of the assessee and against the Revenue. In the special circumstances of the case, there shall be no order as to costs. Let a copy of this order be transmitted to the Income-tax Appellate Tribunal in terms of Section 260 of the Income-tax Act.