1. This is a reference under section 256(1) of the Income-tax Act, 1961, to be hereinafter referred to as the 'Act'. The question referred for our answer is :
'Whether on the facts and in the circumstances of the case, the Tribunal was justified in refusing to grant renewal of registration to the assesses firm for the year 1963-64 ?'
2. The assessee was a partnership firm consisting of 5 partners previous to the assessment year 1963-64. It had been registered as such under the relevant provisions of the Act. For the assessment year 1963-64 a declaration in Form No. 12 in accordance with section 184(7) of the Act had been filed for the purpose of continuation of registration as required by section 184(7) and the relevant Rules. But, the declaration in question had been signed by only 4 and 5 partners. According to the assessee, the partners J. S. Venkatesh Rao, was absconding and, as such, his wife, Sharada Bai, had signed on his behalf.
3. The Income-tax officer refused to act and on his declaration and extend the benefit of the continuation of registration to the assessee as envisaged in section 184(7) of the Act. The assessment was accordingly made on the basis that the assessee was an unregistered firm. Before the Income-tax Officer, the assessee, a part from contending that there was substantial compliance with the requirements of section 184(7) of the Act read with rules 22(5) and 24 of the Income-tax Rules, 1962, to be hereinafter referred to as the 'Rules' seems to have also claimed that the absconding partner had retired from the firm on September 30, 1962, and a new firm was formed with 4 partners. The question referred to us, however, is not concerned with this aspect of the assessee's case. The matter was taken up in appeal before the Appellate Assistant Commissioner of Income-tax in Appeal No. 1313/63-64. The Appellate Assistant Commissioner allowed the appeal of the assessee and directed the continuation of the registration of the firm in accordance with section 184(7) of the Act. The Appellate Assistant Commissioner, after contrasting the provision of section 184(3) and section 184(7) of the Act, came to the conclusion that a declaration by any person who is authorized to act on behalf of the firm would amount to sufficient compliance with the requirement of the second proviso to section 184(7) of the Act. According to him, while section 184(3) provided for signature by all the partners (not being minors) personally while making an application for registration of a firm, the provision of section 184(7) merely provided for continuation of such registration for the subsequent year and had not provided for signature by all the partners. The differentiation made by the legislature was deliberate and requirements of signature by all the partners cannot be said to fall within the mandate of sub-section (7) of section 184. It was, therefore, concluded that any partner or person, who was authorized to act on behalf of the firm, could sign the declaration, and any such declaration would be sufficient compliance with the requirement of proviso (ii) to sub-section (7) of section 184. It would, therefore, follow that the provisions of rule 22(5), read with rule 24 of the Rules, were also fulfilled. The department went up in appeal to the Income-tax Appellate Tribunal Madras Bench 'B', in I. T. A. No. 10481 of 1964-65. The Tribunal allowed the appeal of the revenue and sustained the order of the Income-tax Officer relating to the refusal of continuation of registration to the assessee's firm for the assessment year 1963-64. The Tribunal held that on a combined reading of section 184(7) of the Act and the rules 22(5) and 24 of the Rules a declaration under section 184(7) of the Act has to be made in Form No. 12 and has to signed by all the partners of the firm excepting in cases referred to in sub-rule (5) of rule 22 of the Rules.
4. The contention urged by Sri S. P. Bhat, the learned counsel appearing on behalf of the assessee, is two-fold : (1) The clear language of section 184(7) of the Act does not provide for the requirement of signature by the partners personally. This omission to provide for that requirement on the part of the legislature is not unintentional as can be gathered by contrasting this provision with the provisions of section 184(7), which specifically provides for the requirement of signature of all the partners personally. This being the position any provisions made in this behalf in the Rules, namely, rules not in clear terms enjoin that a declaration should be signed by all the partners personally. It is also argued that the words 'persons concerned' occurring in rule 24 will have to be construed as referring to 'persons who are authorized' to act on behalf of a firm, meaning that, in the absence of 'persons concerned' who will have to comply with the requirement of rule 22(5) as enjoined by rule 24 of the Rules. (2) While sub-section (1) to (6) of section 184 of the Act provide for the making of an application for registrations of a firm for the purpose of the Act, sub-section (7) of that section merely provides that where registration is granted to any firm for any assessment year, it shall have effect for every subsequent assessment year provided the conditions specified therein are satisfied. It is, therefore, urged that the provisions of sub-section (7) of section 184 were intended to be less stringent than the provisions of sub-section (7) of section 184 which enjoins that an application made for registrations of a firm shall be signed by all the partners, excluding minors, personally. It is, therefore, submitted that even if the legislative intendment was that the partners should sign personally for the purpose of continuation of registration under section 184(7) of the Act, such requirement will only be directory in character. It, therefore, follows that what is required is substantial compliance with the requirements of section 184(7) of the Act read with rules 22(5) and 24 of the Rules.
5. We are unable to agree with any of the above contentions of Sri Bhat Section 184(7) of the Act provides for furnishing of a declaration in the prescribed form and verified in the prescribed manner. The declaration is to the effect that there is no change in the constitution of the firm or the shares of the partners as evidence by the instrument of partnership on the basis of which the registrations was granted earlier. The relevant form is prescribed by rule 24 of the Rules. A reference to From No. 12 would indicate that it had to be signed by more than person as would be seen by the use of the word 'we' therein. The relevant portion of Form No. 12 reads thus :
The Income-tax Officer, .......................
We, on behalf of............... declare that.............
We further declare that the information given above is correct and complete.'
6. If the argument of Sri Bhat that any person who is authorized to act on behalf of the firm could sign the declaration is assumed to be right, such authorisation should necessarily be in favour of the more than one person in order to satisfy the requirement of verification as enjoined in Form No. 12. Further, it follows that no single partners could act in order to make the declaration in accordance with Form No. 12. Therefore, any single person or partner authorized to act cannot satisfy the requirement of such verification.
7. We cannot also accept the interpretation placed by Sri Bhat on the words 'persons concerned' occurring in rule 24 of the Rules. Under 22(5) of the Rules, persons other than partners could also sign an application for registration of a firm for the purposes of the Act in certain circumstances specified therein. The words 'persons concerned' occurring in rule 24, in our opinion, are referable to such persons as are specified in rule 22(5). It follows from this conclusion of ours that the rule rejoins that persons other than partners can sign only in exceptional circumstances specified in rule 22(5). It is also clear from rule 22(5) that the principle requirement is that all the partners should sign personally.
8. The next argument of Sri Bhat that the requirement of signature by all the partners is directory in nature cannot also be accepted. The basis for this argument is that section 184(7) of the Act merely provides for the continuation of registration of the firm which had been granted earlier, and, therefore, furnishing of a declaration is more or less a formal matter. This will nevertheless be so even if the rule provides for an additional requirement to be fulfilled, as any such additional requirement will also be directory in nature. In support of this contention Sri Bhat referred to the case of A. H. M. Allaudin v. Addl. Income-tax Officer, Tuticorin. This decision cannot be of any assistance to the assessee. It is no doubt true that the Rules are intended to give effect to the statute under which they are made and unless a contrary intention is expressed, failure to comply with the mere formal requirements of a rule cannot be taken to destroy the substantive right created by the provision of the statute. In that case their Lordships of the Madras High Court were concerned with interpreting rule 4 of the Rules made by a notification under section 49A of the Indian Income-tax Act, 1922. The matter related to the relief to be granted in case of double taxation. Rule 4 requires that the application for refund of income-tax under the relevant rules shall be made in Form I appended to the Rules. A claim for relief by the assessee made by means of a letter was held to have satisfied the requirements of rule 4 on the grounds that the prescription of the form of application under that rule was directory in nature. In the instant case, we are concerned with the defective nature of the declaration furnished for the purpose of the continuation of registration, the defect being the want of signature of one of the parties as enjoined by the Rules. In our opinion, the requirements regarding the signature to an instrument of declaration enjoined by a statutory provision cannot be said to be not a matter of substance. It cannot also be asserted that the requirements regarding the signature is a mere matter of form. There is yet another reason why we should not accede to this argument on behalf of the assessee. From the scheme of the provisions relating to registration of firms, it is clear that when an application is made for registration of a firm, it is clear that when an application is made for registration of a firm from for the first time, the Income-tax Officer shall enquire into the genuineness of the firm and its constitution as specified in the instrument of partnership and only after satisfying himself on these points can make an order in writing in regard to the registration of the firm in respect of that particular assessment year. Under the Act of 1922 and the Rules, a firm was required to apply for such registration in respect of each assessment year and there was no provision for continuation of registration for subsequent assessment year or years. But, when a declaration under section 184(7) is furnished as evidence for the purpose of continuation of registration already made, it is not open to the Income-tax Officer to hold any further enquiry into the genuineness and the constitution of the firm. In other words, he is statutorily bound to give effect to the registration once a declaration as required by the provision of section 184(7) of the Act, read with rules 22(5) of and 24 of the Rules, is furnished. In view of this mandatory obligation imposed on the Income-tax Officer, it would follow that the conditions relating to the declaration to be furnished by the assessee should be strictly complied with.
9. It seems to us that the question referred has to be recast in the light of the provision of section 184(7) of the Act. The question as set out refers to 'renewal of registration' whereas, under section 184(7), what is enjoined is that the registration once accorded shall continue to have effect provided the conditions specified therein are satisfied. This is not the same thing as renewal of registration. Hence, we recast the question as hereunder :
'Whether, on the facts and in the circumstance of the case, the Tribunal was justified in refusing to grant continuation of registration to the assesses firm for the year 1963-64 ?'
10. For the above reasons, we answer the question as recast above in the affirmative and against assessee. Our answer to the question, therefore, is that, on the facts and in the circumstances of the case, the Tribunal was justified in refusing to recognise continuation of registration to the assesses firm for the year 1963-64.
11. In the circumstances of the case, we make no order as to costs.
12. Question answered in the affirmative.