1. This reference arises on a case stated by the Income-tax Appellate Tribunal under s. 256(1) of the I.T. Act, 1961 (referred to hereinafter as 'the Act of 1961'), at the instance of the assessee.
2. The few facts necessary for the appreciation of the contentions raised before us are as follows :
The assessee is a firm, comprising of four partners and was constituted under a deed of partnership dated 6th November, 1955. For some years prior to the financial year 1960-61, the assessee-firm had been granted registration under s. 26A of the Indian I. T. Act, 1922 (referred to hereinafter as 'the Act of 1922'). On 19th May, 1961, the assessee-firm filed an application for the renewal of registration under s. 26A of the Act of the 1922, for the assessment year 1961-62. On 22nd June, 1962, the assessee-firm filed a declaration under s. 184(7) of the Act of 1961 for continuation of registration for the assessment year 1962-63, and filed a similar declaration on 14th June, 1963, for continuation of registration for the assessment year 1963- 64. The business of the assessee-firm was of dealing in kirana, grains, etc. The assessee had started the business of plying a truck on 11th November, 1958, which truck had been purchased for Rs. 27,534. The assessee had a half share in the ownership of the said truck, whilst the other half share belonged to one Ranganath and one Bajirao. For S.Y. 2014 and S. Y. 2015, relevant to the assessment years 1959-60 and 1960-61, respectively, the assessee had disclosed its half share of the income earned from the plying of the said true in its return. In S. Y. 2016, relevant to the assessment year 1961-62, the said Ranganath and the said Bajirao were paid off by the assessee in respect of their shares in the said truck. The assessee, however, did not disclose in its return any income from the said truck for S. Y. 2016, S. Y. 2017 and S. Y,. 2018, which are the relevant previous years for the assessment years 1961-62, 1962-63 and 1963-64, respectively, and the ground that the said truck had been taken over by one Nemichand, one of the partners of the assessee-firm. All the I.T. authorities, including the Tribunal, rejected the case of the assessee that its share in the said truck had been taken over by the said Nemichand, as aforesaid, and hence added the income arising out of the plying of the said truck to the income of the assessee. The ITO declined to grant renewal of registration to the assessee under s. 26A of the Act of 1922 on the ground that the profits of the business of truck plying were not divided in equal proportion amongst the four partners of the assessee-firm and were not credited to the respective accounts in the books of the assessee-firm. For the same reason the ITO declined to continue the benefit of registration under s. 184 of the Act of 1961 to the assessee for the assessment years 1962-63 and 1963-64, respectively. This decision of the ITO was upheld by the AAC as well as by the Tribunal. The following question, arising from the said decision of the Tribunal, has been referred to us for determination :
'Whether, on the facts and in the circumstances of the case, the benefit of registration has been wrongly refused to the assessee-firm for the assessment years 1961-62, 1962-63 and 1963-64 ?'
3. It is apparent, and, it is not in dispute between the parties, that the statutory provisions applicable for the assessment to income-tax in respect of the assessment year 1961-62 are those of the Act of 1922, whereas the provisions applicable for the assessment to income-tax in respect of the assessment years 1962-63 and 1963-64 are those of the Act of 1961. These provisions are materially different, and hence both the counsel state that the question referred to us does not bring out the real controversy between the parties. In order to bring out that controversy we divide the question referred to us into the following two questions, which we propose to answer :
'1. Whether, on the facts and in the circumstances of the case, the benefit of restoration has been wrongly refused to the assessee for the assessment year 1961-62 ?
2. Whether, on the facts and in the circumstances of the case, the benefit of registration has been wrongly refused to the assessee for the assessment years 1962-63 and 1963-64 ?'
4. Before discussing the arguments advanced by the respective counsel it would not be out of place to refer to certain relevant statutory provisions. As already pointed out, the relevant I.T. Act for the purposes of the assessment year 1961-62 is the Act of 1922. Section 26A of the Act of 1922 deals with the procedure for the registration of firms. Sub-section (1) of the said section provides that the application for registration can be made on behalf of any firm constituted under an instrument of partnership, specifying the individual shares of the partners. Sub-section (2) of s. 26A runs thus :
'The application shall be made by such person or persons, and at such times and shall contain such particulars and shall be in such form, and be verified in such manner, as may be prescribed ; and it shall be dealt with by the Income-tax Officer in such manner as may be prescribed.'
5. The relevant rules of the Indian I.T. Rules, 1922, which dealt with applications for registration of firms, were rr. 2 to 6B. Rule 2 provided, inter alia, that the application for registration had to be signed by all the partners, not being minors. A time-limit for making the application was also provided by the said r. 2, with a proviso conferring power on the ITO concerned to entertain an application made after the expiry of the time-limit provided in the said rule. Rule 3 provided that the said application had to be made in the form annexed to the said rule. A form of application for the registration of a firm under s. 26A of the Act of 1922 was annexed to the said rule. It is not necessary to set out the said form in detail here. It is sufficient to note that the said form provided, inter alia, that the profits or losses, if any, which came to the share of each of the partners had to be set out in the schedule and the correctness of the said schedule certified by the partners. It should further be noted that r. 2 made it clear that the registration, when granted, would be in force for one assessment year. Rule 6 provided that any firm, to whom a certificate of registration had been granted under r. 4, could apply to the ITO to have the certificate of registration renewed for a subsequent year. The said r. 6 further, inter alia, provided that the application for a renewal of registration had to be signed by all the partners (not being minors) of the firm and had to be accompanied by a certificate in the form set out in r. 6. The said form, inter alia, provided that the profits or losses, if any, coming to the share of each of the partners had to be set out and the partners had to certify that the partners had to be set out and the partners had to certify that the said profits or losses of the said firm had been divided or credited as set out in the said form. For the purposes of question No. 1, it would be enough to note that it is common ground that under this form the partners had to set out the share of profits or losses coming to each of the partners and had to certify that the profits or losses of the firm had been divided or credited in accordance with the said shares.
6. As far as the assessment years 1962-63 and 1963-64 are concerned, it is the provisions of the Act of 1961 which would be applicable. Section 184 of the Act of 1961 deals with applications for registration. Sub-section (7) of s. 184 is the most material provision for our purposes. Sub-section (7) runs as follows :
'(7) Where registration is granted to any firm for any assessment year, it shall have effect for every subsequent assessment year :
Provided that -
(i) there is no change in the constitution of the firm or the shares of the partners as evidenced by the instrument of partnership on the basis of which the registration was granted; and
(ii) the firm furnishes, before the expiry of the time allowed under sub-section (1) or sub-section (2) of section 139 (whether fixed originally or on extension) for furnishing the returns of income for such subsequent assessment year, a declaration to that effect, in the prescribed form and verified in the prescribed manner, so, however, that where the Income-tax Officer is satisfied that the firm was prevented by sufficient cause from furnishing the declaration within the time so allowed, he may allow the firm to furnish the declaration at any time before the assessment is made.'
7. It is significant that Form No. 12 in the I.T. Rules, 1962, which is the form prescribed for the declaration under s. 184(7) does not provide that the amount of profits or losses coming to the share of each of the partners should be set out therein, unlike the forms provided for a similar declaration under the Indian I.T. Rules, 1922.
8. As far as the first question is concerned, in our view, the matter is practically concluded by the decision of the Supreme Court in Khanjan Lal Sewak Ram v. CIT : 83ITR175(SC) . In that case the appellant-firm had applied for a renewal of registration for the assessment year 1948-49, under s. 26A of the Act of 1922. The application was signed by all the partners, and in para. 3 thereof they appended a certificate to the effect that 'the profits of the previous year were undivided or credited as shown below.' The Income-tax Appellate Tribunal found that the firm had earned profits in the black market and though it had distributed its book profits among the partners according to the instrument of partnership it had not distributed the profits earned by it in the black market amongst the partners according to the instrument of partnership. It was held that the the application for renewal of registration made by the assessee did not comply with the conditions prescribed in para. 3 of r. 6 of the Indian I.T. Rules of 1922 and hence the firm was not entitled to the renewal of registration for the assessment year 1948-49.
9. Mr. Munim, the learned counsel for the assessee, placed strong reliance on the decision of a Division Bench of the Andhra Pradesh High Court in Variety Hall and Ramakrishna Textiles v. CIT : 84ITR202(AP) , wherein it was held that the failure to disclose certain income and to divide the same among the partners in accordance with the terms of the partnership is evidenced by an instrument of partnership and there is no reason to doubt the genuineness of the partnership. This decision, in out view, is of no assistance to the assessee. In the first place, the learned judges who rendered that decision had not noticed the decision of the Supreme Court in Khanjan Lal Sewak Ram v. CIT : 83ITR175(SC) , and, hence, in so far as it conflicts with the said decision of the Supreme Court, it cannot be regarded as good law. Morever, in the case before the Andhra Pradesh High Court it was on the basis of certain cash credits appearing in the accounts submitted by the assessee to the ITO that the ITO arrived at the figure of Rs. 15,000 as the assessee's income from undisclosed sources, and hence it was not a case where the ITO found that there was a complete suppression of income as in the case before us and as in the aforesaid case before the Supreme Court. We may make it clear that a different conclusion might be arrived at in a case where a higher income is assessed in the hands of an assessee-firm than the one disclosed as the assessable income by the said firm in its return on account of, for instance, certain deductions claimed by the not being allowed by the ITO or by reason of certain receipts claimed by the assessee-firm to be of capital nature being held to be of revenue nature. What we have before us, however, is a case where, on the findings given, which are binding on us, the case is one of a plain suppression of income and hence the ratio of the decision of the Supreme Court in Khanjan Lal Sewak Ram's case : 83ITR175(SC) , is clearly applicable. Question No. 1, as reframed by us, must, therefore, be answered against the assessee.
10. As far as question No. 2, as framed by us and set out earlier, is concerned, the submission of Mr. Munim, the learned counsel for the assessee, is that in view of the expression 'for any assessment year' used in sub-s. (7) of s. 184, which we have set out earlier, it is sufficient, for the renewal of a registration under the Act of 1961, that the firm in question should have been granted registration in any previous assessment year, provided that the other conditions prescribed in the said sub-s. (7) of s. 184 are complied with. It was pointed out by him that it was not in dispute in the present case that the assessee-firm has complied with the other conditions prescribed in the said sub-s. (7), and it was submitted by Mr. Munim that as the assessee-firm was admittedly granted registration for some years prior to the assessment year 1961-62, it was entitled to have the registration renewed for the assessment years 1962-63 and 1963-64. In support of this contention Mr. Munim placed strong reliance on the decision of a Division Bench of the Andhra Pradesh High Court in CIT v. Voleti Veerabhadra Rao & Sons : 84ITR764(AP) , and on the decision of a Division Bench of the Patna High Court in Purusottam Lal Kishorilal v. CIT : 115ITR377(Patna) . Had it been necessary for us to decide this question, regarding the construction of the expression 'any assessment year' in sub- s. (7) of s. 184, we would have been inclined to take the view that by the said expression is meant any previous assessment year and not necessarily the assessment year immediately prior to the assessment year for which the renewal of registration is sought. In out view, the definition of the term 'assessment year' in cl. (9) of s. 2 of the Act of 1961, as well as the use of the expression for 'any assessment year' in sub-s. of s. 184 lends strong support to the support to the submission of r. Munim and would militate against the contention of Mr. Kotwal that the term 'any assessment year' refers only to the immediately previous assessment year. It is, however, not necessary for us to decide this question, because it is agreed between the learned counsel for the assessee and the learned counsel for the Department that in view of Circular No. 16 (XXV-17) of 1962, dated 2nd June, 1962, issued by the CBDT, where a firm had already been grated a registration under the Act of 1922 for any assessment year prior to the assessment year 1962-63, and there has been no change in the constitution of the firm or in the shares of the partners, as evidenced by the instrument of partnership on the basis of which such registration was granted, the firm need not apply for fresh registration for the assessment year 1962-63. It will be sufficient, if under sub-s. (7) of s. 184 of the Act of 1961 read with r. 24 of the I.T. Rules, 1962, the firm files before the ITO concerned a declaration in Form No.12 prescribed under the I.T. Rules, 1962. It is agreed by both the counsel that in view of this circular, the assessee-firm was entitled to a renewal of the registration for the assessment years 1962-63 and 1963-64, respectively, and that, question No. 2, as framed by us, must be answered in favour of the assessee.
11. In the result, we answer question No. 1, as reframed by us, in the negative, and question No. 2, as reframed by us, in the affirmative.
12. As both the sides have only partly succeeded in the reference and partly lost, there will be no order as to costs of the reference .