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Matreja and Co. Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberIncome-tax Reference No. 743 of 1973
Judge
Reported in[1977]106ITR378(All)
ActsIncome Tax Act, 1961 - Sections 185(3)
AppellantMatreja and Co.
RespondentCommissioner of Income-tax
Appellant AdvocateV.B. Upadhya, Adv.
Respondent AdvocateDeokinandan, Adv.
Excerpt:
- .....there is also nothing in the context of the act which impels us to come to the conclusion that the word defect as occurring in section 185(3) will cover cases of fraudulent submission of declarations in form no. 12. it is worthy of note that although the first part of section 185(3) contemplates declarations which are not in order, and may cover cases where fraudulent declarations are submitted, by the latter part of section 185(3) the income-tax officer is enjoined to intimate only 'the defect' in the declaration. if the intention of the legislature were to give an assessee an opportunity of remedying all disorderly declarations, whatever be the nature of the lacuna it would not have cut down the amplitude of the opportunity to remedying only defects in the declaration.11. there is.....
Judgment:

C.S.P. Singh, J.

1. The Income-tax Appellate Tribunal, Allahabad Bench, Allahabad, has under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'), referred the following question for our opinion:

'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee was not entitled to the benefit of the provisions of Section 185(3) of the Income-tax Act, 1961, and consequently the benefit of continuance of registration could not have effect for the assessment year 1971-72 ?'

2. The facts leading to this reference may be briefly stated, In the assessment year 1971-72, the assessee-firm which has been constituted under a deed of partnership dated August 1, 1967, consisted of the following partners:

1. Seth Suganchand,

2. Sri Tarachand s/o Sri Suganchand,

3. Smt. Mayadevi w/o Sri Jairamadass,

4. Smt. Poonam Devi w/o Sri Veerbhan Das.

3. The firm had been granted registration on the basis of this partnership for the first time in the year 1969-70 and the registration continued till 1970-71. For the assessment year 1971-72 the firm filed its return along with a declaration in accordance with Section 184(7) in Form No. 12 on the 30th June, 1971, This Form No. 12 was signed by the following three partners;

1. Seth Suganchand,

2. Shri Tarachand,

3. Smt. Poonam Devi,

4. It appears that the fourth partner, Shrimati Mayadevi, was out of Kanpur and one of the partners, Shri Tarachand, who was also the brother of Shrimati Mayadevi, wrote her name 'Mayadevi' at the place where the signatures should have been in Form No. 12. The Income-tax Officer refused to register the firm on the ground that the signatures of Shrimati Mayadevi have been forged by another partner. On appeal, the Appellate Assistant Commissioner held that inasmuch as one of the partners had forged the signatures of another partner, the provisions of Section 185(3), which enabled the assessee to remove defects in the application, could not be brought in aid and rejected the appeal. The Tribunal also took the same view.

5. To begin with, inasmuch as it was a case for renewal of registration it would be useful to extract the relevant statutory provisions. The relevant provisions in this behalf are Sections 184(7), 185(3) and Rules 22(5) and 24.

'184. (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, along with its return of income for the assessment year concerned, a declaration to that effect, in the prescribed form and verified in the prescribed manner.'

'185. (3) Where the Income-tax Officer considers that the declaration furnished by a firm in pursuance of Sub-section (7) of Section 184 is not in order, he shall intimate the defect to the firm and give it an opportunity to rectify the defect in the declaration within a period of one month from the date of such intimation ; and if the defect is not rectified within that period, the Income-tax Officer shall, by order in writing, declare that the registration granted to the firm shall not have effect for the relevant assessment year.'

'22. (5) The application shall be signed personally by all the partners (not being minors) in the firm as constituted at the date of the application and, in the case of a dissolved firm, personally by all the persons (not being minors) who were partners in the firm immediately before its dissolution and by the legal representative of any such partner who is deceased, so, however, that in the case of any partner who is absent from India or is a lunatic or an idiot, the application may be signed by any person duly authorised by him in this behalf, or, as the case may be, by a person entitled under law to represent him,'

'24. Declaration for continuation of registration.--The declaration to be furnished under Sub-section (7) of Section 184 shall be in Form No. 12 and shall be verified in the manner indicated therein and shall be signed by the person concerned in accordance with Sub-rule (5) of Rule 22.'

6. Before considering as to whether the assessee was entitled to registration we might state a few other facts. Form No. 12 was filed on 30th June, 1971, along with a declaration in terms of Section 184(7). On enquiry by the Income-tax Officer as to whether Shrimati Mayadevi had put her signature on Form No. 12 it was admitted by Sri Tarachand that the lady was out of station and that he had signed the declaration on her behalf. Shrimati Mayadevi, who appeared before the Income-tax Officer, also stated that she had not personally signed the declaration. It appears that on the 15th September, 1971, i.e., about 2 1/2 months later, an application was moved before the Income-tax Officer requesting that at the time of the submission of the application in Form No. 12, the lady partners were not present and, therefore, Form No. 12 had been signed by one of the partners. It was prayed that the lady partners be permitted to sign the application in Form No. 12. This request was refused and the Income-tax Officer held that inasmuch as it was a case of renewal of registration and not a case under Section 185(2) or (3) the assessee could not be permitted to remedy the defect. On appeal, the Appellate Assistant Commissioner found that Shri Tarachand had signed as Shrimati Maya Jairamdas and not for Shrimati Maya Jairamdas. In this view of the matter he held that although art opportunity could be given to the assessee to remove defects in the application for renewal, inasmuch as it was a case of forgery of the signature of one partner by the other, no opportunity for remedying the defect could be given. The Tribunal also upheld the findings of the Appellate Assistant Commissioner that Tarachand had signed as Maya Jairamdas and held that it was a clear case of forgery inasmuch as Shri Tarachand admitted that he had signed as Maya Jairamdas only after the Income-tax Officer had started enquiry. The Tribunal took the view that a false statement had been made by Shri Tarachand in Form No. 12 and he had committed an act of forgery and, as such, it was not a case of a defect in the form but a case of clear forgery and hence the assessee could not be permitted to remove the defect.

7. Now, as the firm has already been registered, in view of section 184(7) of the Act the registration was to be effective for every assessment year subject to a declaration being filed in the prescribed form and in the prescribed manner that there was no change in the constitution of the firm or in the shares of the partners. Rule 24 prescribes the form and the manner of verification of the declaration. Under this rule the declaration had to to be made in Form No. 12 and has to be verified in the manner indicated therein, and signed by all the partners concerned in accordance with sub-Rule (5) of Rule 22. There is no dispute that the declaration was made in Form No. 12, The only dispute is as to whether it was signed by the persons concerned in accordance with Sub-rule (5) of Rule 22. Rule 22(5) enjoins that it has to be signed personally by all the partners. In the present case, on the findings recorded, Mayadevi had not signed the declaration inasmuch as Tarachand had forged her signatures. The forged signatures of Mayadevi could not, in law, be treated to be the signature of Mayadevi. The argument raised on behalf of the assessee is that the non-signing of the application by Shrimati Mayadevi was a defect, which could be rectified under Section 185(3) of the Act. On behalf of the department, however, it has been urged that the case was not of a mere defect in the declaration but an act of forgery by one of the partners, and, as such, advantage of Section 185(3) could not be had by the assessee. Section 185(3) which has already been extracted above, applies where the declaration is not in order. This obviously postulates that the declaration is not in the prescribed form and not verified in the prescribed manner. Inasmuch as in law the declaration had not been signed personally by Shrimati Mayadevi, it was obviously not in order. The question arises as to whether under Section 185(3) all declarations, which are not in order, could be rectified. Section 185(3) contemplates intimation by the Income-tax Officer to the assessee of 'the defect to the firm and give it an opportunity to rectify the defect in the declaration'. The word 'defect' has not been defined in the Act. In the case of Brijendralal Gupta v. Jwala Prasad : [1960]3SCR650 the Supreme Court, while dealing with a case arising under the Representation of the People Act, had occasion to consider the meaning of the word 'defect' generally as also under that Act. At page 1053 of the report their Lordships observed as under :

'On the other hand the dictionary meaning of the word 'defect' is 'lack or absence of something essential to completeness', and in that sense omission to specify the age can and would be treated as a defect under Section 36(4). Defect also means ' a flaw or a fault or an imperfection'; but whether or not it includes an omission must necessarily depend upon the context in which the word is used. In our opinion, having regard to the context it would be unreasonable to hold that the word 'defect' under Section 36(4) excludes all cases of omission to specify the details prescribed by the statute in the nomination paper. We must, accordingly, reject the appellants' argument that the omission in question is not a defect under Section 36(4).'

8. The principle that emerges from this decision is that, where a particular word has not been denned in the statute the meaning attributable to it depends upon the context in which the word is used.

9. In Manmatha Nath Chakravarty v. Sachindra Kumar Chakravarty : AIR1956Cal59 a question arose as to the interpretation of the word 'defect' as occurring in proviso (ii) to Order 21, Rule 90, Civil Procedure Code. The second proviso of Order 21, Rule 90, Civil Procedure Code reads as under :

'That no sale shall be set aside on the ground of any defect in the proclamation of sale at the instance of any person who after notice did not attend at the drawing up of the proclamation or of any person in whose presence the proclamation was drawn up, unless objection was made by him at the time in respect of the defect relied upon.'

10. The question considered was as to whether the proviso would apply to cases where there has been initial misrepresentation and subsequent suppression of material facts by the parties. Referring to the decision of the Privy Council in Marudanayagam Pillai v. Manickavasakam Chettiar they held that it would not cover cases of fraud. It is settled rule of interpretation that where a word commonly occurs in various statutes, and has been the subject-matter of judicial interpretation, and the word is used in a new statute unless the context otherwise requires, the legislature would be deemed to have accepted the meaning ascribed to it by judicial pronouncements. The word 'defect' does not occur only in the Income-tax Act but is a word which is commonly used in various statutes, one amongst them being the Code of Civil Procedure. It has not been contended before us and in view of the catena of decisions on the point that the word 'defect' as occurring in the Code of Civil Procedure covers cases of fraud (sic). There is also nothing in the context of the Act which impels us to come to the conclusion that the word defect as occurring in Section 185(3) will cover cases of fraudulent submission of declarations in Form No. 12. It is worthy of note that although the first part of Section 185(3) contemplates declarations which are not in order, and may cover cases where fraudulent declarations are submitted, by the latter part of Section 185(3) the Income-tax Officer is enjoined to intimate only 'the defect' in the declaration. If the intention of the legislature were to give an assessee an opportunity of remedying all disorderly declarations, whatever be the nature of the lacuna it would not have cut down the amplitude of the opportunity to remedying only defects in the declaration.

11. There is another aspect of the matter. It is settled that fraud vitiates all proceedings and, if this is so, a fraudulent declaration of the type which we have in hand, would be no declaration in the eye of law and in such an eventuality the Income-tax Officer would have no occasion to intimate the assessee under Section 185(3) for, in law, the declaration furnished would be non est.

12. We, therefore, answer the question in the affirmative, in favour of the department and against the assessee. The department is entitled to its costs, which we assess at Rs. 200. Counsel's fee is assessed at the same figure.


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