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Shanti Trading Co. Vs. Commissioner of Income-tax, Mysore - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKarnataka High Court
Decided On
Case NumberI.T.R.C. No. 31 of 1970
Judge
Reported in[1973]87ITR38(KAR); [1973]87ITR38(Karn)
ActsIncome Tax Act, 1961 - Sections 139(2), 146, 184 and 184(7)
AppellantShanti Trading Co.
RespondentCommissioner of Income-tax, Mysore
Appellant AdvocateH.L. Narasimha Sastry, Adv.
Respondent AdvocateS.R. Rajasekhara Murthy, Adv.
Excerpt:
.....the assessment year 1965-66. for the assessment year 1966-67, the assessee failed to submit the return of income in response to the notice under section 139(2) and assessment was made on the best of judgment basis on 27th march, 1967. 3. notwithstanding the fact that the assessee had not filed the return of income for the assessment year 1966-67, the firm submitted a declaration in form no. he urged that in madivalappa's case the assessee had not only failed to file his return but also filed to file a declaration in the prescribed form, whereas in the instant case the assessee had furnished a declaration in the prescribed form. 6. in our judgment, this contention is clearly untenable having regard to the clear language of clause (ii) of the proviso to sub-section (7) of section 184 of..........the assessment year 1965-66. for the assessment year 1966-67, the assessee failed to submit the return of income in response to the notice under section 139(2) and assessment was made on the best of judgment basis on 27th march, 1967. 3. notwithstanding the fact that the assessee had not filed the return of income for the assessment year 1966-67, the firm submitted a declaration in form no. 12 on september 30, 1966, to the effect that there was no change in the constitution of the firm or the shares of the partners as evidenced by instrument of partnership on the basis of which registration had been granted. the income-tax officer made assessment on the assessee in the status of an unregistered firm on the ground that the assessee had not filed the return of income for the relevant.....
Judgment:

Govindha Bhat, J.

1. In this reference under section 256(1) of the Income-tax Act, 1961, made at the instance of the assessee, the following question of law has been referred by the Income-tax Appellate Tribunal Bangalore Bench, for the opinion of this court :

'Whether, on the facts and in the circumstances of the case, the assessee is entitled to the benefits of registration envisaged in section 184(7) for the assessment year 1966-67 ?'

2. The assessee is a firm consisting of four partners carrying on business in mill cloth in Bangalore City. It was assessed in the status of a registered firm up to and including the assessment year 1965-66. For the assessment year 1966-67, the assessee failed to submit the return of income in response to the notice under section 139(2) and assessment was made on the best of judgment basis on 27th March, 1967.

3. Notwithstanding the fact that the assessee had not filed the return of income for the assessment year 1966-67, the firm submitted a declaration in Form No. 12 on September 30, 1966, to the effect that there was no change in the constitution of the firm or the shares of the partners as evidenced by instrument of partnership on the basis of which registration had been granted. The Income-tax Officer made assessment on the assessee in the status of an unregistered firm on the ground that the assessee had not filed the return of income for the relevant assessment year and, therefore, the registration granted has ceased to be operative. The Appellate Assistant Commissioner, on appeal preferred by the assessee directed that the assessment should be made in the status of registered firm. That order of the Appellate Assistant Commissioner was reversed on appeal by the department before the Income-tax Appellate Tribunal in I.T.A. No. 2247 of 1968-69. It is relevant to state that after the completion of the assessment on 27th March, 1967, the assessee had filed a return on May 22, 1967, and made an application for re-opening of the assessment under section 146 but that application was rejected.

4. The view of the Tribunal was that, in the face of the clear and unambiguous language of clause (ii) of the proviso to sub-section (7) of section 184 of the Act, registration granted to the assessee cannot have effect for the assessment year in question.

5. In Madivalappa and Sons v. Commissioner of Income-tax we have held that the registration granted to a firm for an assessment year will not ensure for the subsequent years if the firm does not furnish its return of income or declaration as required by the proviso to sub-section (7) of section 184 of the Income-tax Act, 1961. That decision is sought to be distinguished by Sri H. L. Narasimha Sastry, the learned counsel for the assessee. He urged that in Madivalappa's case the assessee had not only failed to file his return but also filed to file a declaration in the prescribed form, whereas in the instant case the assessee had furnished a declaration in the prescribed form. According to the learned counsel, where registration is granted to a firm for any assessment year, it shall have effect for every subsequent year provided that there was 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 the firm furnishes a declaration to that effect in the prescribed form and verified in the prescribed manner. In other words, the submission was that the benefit of sub-section (7) of section 184 of the Act is available to a firm even if it does not furnish a return but files a declaration to the effect firm 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 is granted.

6. In our judgment, this contention is clearly untenable having regard to the clear language of clause (ii) of the proviso to sub-section (7) of section 184 of the Act. If the intention of the legislature was that the benefit of the registration once granted to any firm for any assessment year should be available for every subsequent year even if the firm does not furnish its return of income then the clause 'along with its return of income for the assessment year concerned' was unnecessary and the clause (ii) would have read thus :

'The firm furnishes a declaration to that effect in the prescribed form and verified in the prescribed manner.'

7. The learned counsel was unable to explain any other object in incorporating the clause above referred to.

8. The assesses firm not having satisfied the two requirements of the proviso, the registration granted has ceased to have effect for the assessment year 1966-67 and in that view the Tribunal was right in holding that the registration granted to the assesses firm does not ensure for the assessment year 1966-67. We, accordingly, answer the question referred in the negative and in favour of the department. Answered accordingly. The assessee will pay the costs of the department. Advocate's fee Rs. 100.


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