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Commissioner of Income-tax Vs. Sagar Talkies - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAndhra Pradesh High Court
Decided On
Case NumberReferred Case No. 114 of 1978
Judge
Reported in[1986]159ITR177(AP)
ActsIncome Tax Act, 1961 - Sections 184, 184(1), 184(4), 184(7) and 185; Income Tax Rules, 1962
AppellantCommissioner of Income-tax
RespondentSagar Talkies
Appellant AdvocateM. Suryanarayana Murthy, Adv.
Respondent AdvocateSreerama Rao, Adv.
Excerpt:
.....have been granted and registration allowed - delay in filing subsequent application beyond of firm - tribunal orders allowing registration upheld. - motor vehicles act (59 of 1988)section 149 (2): [v. gopala gowda & jawad rahim, jj] insurers entitlement to defend the action joint appeal by insured and insurer - held, the language employed in enacting sub-section (2) of section 149 appears to be plain and simple and there is no ambiguity in it. it shows that when an insurer is impleaded and has been given notice of the case, it is entitled to defend the action only on grounds enumerated in sub-section (2) of section 149 of the act, and no other grounds are available to it. the insurer is not allowed to contest the claim of the injured or heirs of the deceased on other grounds,..........firm the assessee took up the matter in appeal before the tribunal and contended that the assesseefirm is evidenced by an instrument of partnership as required under section 184(1) of the income-tax act and it was not necessary that it should be signed by all the partners for the purpose of getting registration undersection 185 of the act. reliance was placed on a decision of the punjab and haryana high court in jagan nath pyare lal v. cit . 4. it was also contended that the application for registration, though not signed by shri i. a. patel in the initial stages, was signed by him subse quently and on february 8, 1973, another application in form no. 11 duly signed by him and other partners was filed before the income-tax officer before the assessment was completed. the delay.....
Judgment:

K. Amareswari, J.

1. The following question is referred to us for our opinion under section 256(1) of the Income-tax Act, at the instance of the Revenue :

'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in directing the Income-tax Officer to admit the application for registration filed in Form No. 11 on February 8, 1973, and to condone the delay and grant registration to the assessee-firm on the basis of that application for the assessment year 1971-72 ?'

2. The assessee claiming to be a firm of seven partners constituted under a partnership deed dated May 11, 1966, applied for registration to the Income-tax Officer. The Income-tax Officer refused to recognise the existence of the firm. He observed that the partnership deed was not signed by one of the alleged partners, Sri I. A. Patel, and the application for registration was also not signed by all the partners. He further found that there were disputes among the partners, that Sri I. A. Patel had filed a suit against the other partners for settlement of accounts, that he was not accepted as a partner by others and that, therefore, there was no (genuine) partnership in the eye of law. He accordingly took the status of the assessee as association of persons and made the assessment.

3. In appeal, the Appellate Assistant Commissioner observed that for the preceding year the status of the assessee has been held to be that of an unregistered firm by the Appellate Assistant Commissioner which was confirmed in appeal by the Tribunal in its order dated October 31, 1974. He, however, held that the assessee was not entitled to registration since the partnership deed was not signed by Sri I. A. Patel as also the application for registration. He, therefore, directed the Income-tax Officer to take the status of the assessee as unregistered firm The assessee took up the matter in appeal before the Tribunal and contended that the assesseefirm is evidenced by an instrument of partnership as required under section 184(1) of the Income-tax Act and it was not necessary that it should be signed by all the partners for the purpose of getting registration undersection 185 of the Act. Reliance was placed on a decision of the Punjab and Haryana High Court in Jagan Nath Pyare Lal v. CIT .

4. It was also contended that the application for registration, though not signed by Shri I. A. Patel in the initial stages, was signed by him subse quently and on February 8, 1973, another application in Form No. 11 duly signed by him and other partners was filed before the Income-tax Officer before the assessment was completed. The delay in filing the application was due to disputes among the partners which resulted in a suit being filed by Shri I. A. Patel in court and settlement among the partners subsequently and, in the circumstances, the Income-tax Officer should have condoned the delay and granted registration on the basis of the belated application. In support of this contention, reliance was placed on the Gujarat High Court decision in CIT v. Dineshchandra Indstries : [1975]100ITR660(Guj) .

5. The Tribunal accepted these contentions and it observed that whether Shri I. A. Patel was a partner or not was considered by the Tribunal in the case of Ashok Theatres, a sistern concern of the assessee, in which the other partners were also partners. In that case, the Income-tax Officer held that the income of the assessee-firm belonged to the remaining six partners only and he clubbed the entire income in the total income of M/s. Ashok Theatres. The Tribunal, in its order dated September 30, 1974, held that Shri I. A. Patel was a partner in the firm during the period 1964 to 1972 and that he received his share of profits after a settlement with the other partners in March, 1972. The question, therefore, was whether the assessee had complied with the requirements of section 184 of the Income-tax Act and was entitled to registration under section 185. After considering the provisions of section 184, the Tribunal held that the ingredients of section 184 were satisfied. The Tribunal held that Shri I. A. Patel was a partner and he received his share of profits from the firm and that the instrument of partnership specified the individual shares of all the partners, and the mere fact that Shri I. A. Patel did not sign the partnership deed owing to diferences with the other partners would not be fatal to the assessee's claim for registration if the other requirements of law were complied with. In regard to section 184 of the Income-tax Act, the Tribunal held that it was sufficient if the partnership was evidenced by an instrument unlike under section 26 of the Indian Income-tax Act, 1922, and the rules framed thereunder as per which the partnership must be constituted under an instrument for the purpose of registration. The Tribunal was of the opinion that it is not stipulated unlike in the case of an application for registration that the partnership deed should be signed by all the partners.

6. As regards the second requirement, it was held that the application for registration, when it was initially filed, was not signed by Shri I. A. Patel and signed by other partners only, the omission being on account of diffrences between Shri I. A. Patel and other partners, but ultimately before the assessment was completed, a settlement was reached among the partners and an application in Form No. 11 duly signed by all the partners including Shri I. A. Patel was filed on February 8, 1973, before the Income-tax Officer. The Tribunal was, therefore, of the opinion that the Income-tax Officer should have accepted this application, condoned the delay in the circumstances of the case and granted registration to the firm, especially as there was no doubt or dispute regarding the genuineness of the firm. In this connection, reliance was placed on the decision of the Gujarat High Court in the case of CIT v. Dineshchandra Industries : [1975]100ITR660(Guj) . In this case, the assessee-firm filed its return of income on June 30, 1964, for the assessment year 1964-65, along with a declaration in Form No. 12 for renewal of the registration under section 184(7). The assessee filed an application for registration in Form No. 11 on July 7, 1968. It was contended that an application for registration was entrusted to the income-tax consultant for being filed for the assessment year 1963-64 and that the assessee was under the belief that declaration under section 184(7) was required to be filed by it. It later came to know that the application for registration for the assessment year 1963-64 had not been filed and thereafter the firm filed an application in Form No. 11 for the assessment year 1963-64. The Income-tax Officer refused to condone the delay in the submission of the application and made the assessment as an unregistered firm. On appeal before the Appellate Assistant Commissioner, the assessee failed to produce the affidavit of the income-tax consultant to substantiate its contention and the appeal was dismissed. On a further appeal to the Tribunal, it was contended on behalf of the Department that no appeal was provided against the refusal to condone the delay in the submission of application and, therefore, the appeal must be dismissed on the preliminary ground. This contention was rejected by the Tribunal which held that the Income-tax Officer should have given an opportunity to the assessee to file a proper application in consonance with the departmental instruction in this behalf and directed the Income-tax Officer to give such opportunity to the assessee and to consider the application for registration afresh. On a reference the High Court held that the Tribunal was right in holding that the appeal against the order refusing to condone the delay under section 184(4) and consequently refusing registration was competent. The Gujarat High Court further held that the Tribunal could have, on aconsideration of the facts before it, condoned the delay and consequently directed the Income-tax Officer to grant registration if it thought fit to do so, but it was not justified in directing the Income-tax Officer to give a proper opportunity to the assessee to file a proper application for registration and to consider it again and pass a legal order thereon.

7. In the present case, the Tribunal held that the delay in filing the application for registration was on account of disputes among the partners. The firm was a genuine one and a fresh application signed by all the partners was filed before the Income-tax Officer though belated, before the assessment was completed. In the circumstances, the Tribunal was of the opinion that it was a fit case where the Income-tax Officer should have condoned the delay and granted registration to the assessee, especially as the delay in filing the application duly signed by all the partners was due to circumstances beyond the control of the firm and that fact should have been given due consideration by the Income-tax Officer.

8. We do not see any flaw or fault in the order of the Tribunal. The Tribunal has undoubted discretion to appraise the material on record and come to a decision whether the delay should be condoned or not. The Tribunal has given valid reasons in support of its conclusions. The delay in filing the application for registration was on account of disputes among the partners. The firm was found to be a genuine one. A fresh application signed by all the partners was filed before the Income-tax Officer, though belated, before the assessment was completed.

9. In the circumstances, we are satisfied that the Tribunal was perfectly justified in observing that the delay should be condoned as the delay was due to circumstances beyond the control of the firm. The Income-tax Officer has now no option but to condone the delay and grant registration to the assessee-firm on the basis of the application filed on February 8, 1973.

10. We accordingly answer the reference in the affirmative and against the Revenue. No costs. Advocate's fee Rs. 250.


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