R. M. Sahai, J. - The following three questions have been referred for our opinion :-
'1. Whether Rule 24 of the Income-tax Rules violates or transgresses the power given to the Rule making authority under section 184(7) ?
2. If the reply to question No. (1) is in the negative, whether the finding of the appellate Tribunal that the appellant was not entitled to continuation of registration under sec. 184(7) of the Income-tax Act, 1961 is based on a correct and sound interpretation of Rule 24 of Income-tax Rules ?
3. Whether in the case of a registered firm, sec. 75 acts as a bar against the carry forward of its losses according to section 72, 73 and 74 in the determination of tax in its own assessment ?'
The assessee a firm of four partners carried on money lending and cloth manufacturing business. It was assessed as a registered firm till the assessment year 1961-62. For the assessment year 1962-63 a declaration under section 184(7) was filed for continuation of registration. This was signed only by two out of four partners. The Income-tax Officer gave sufficient opportunity to the assessee to get the application regularised by getting the declaration signed by the other two partners but the assessee did not avail of this opportunity with the result that the application for continuation of registration was rejected and an order under section 185(2) of the Act was passed. The effect of this order was that the status of the firm was taken as that of an unregistered firm for the assessment year 1962-63. The assessee filed appeal against the order passed under section 185(2). A separate appeal was filed against the assessment order and an additional ground was taken to the effect that carry forward and set off in respect of loss assessed for the immediately preceding assessment year i.e. 1961-62, should have been allowed in the year 1962-63. Both the appeals were dismissed so far as the question of carry forward and set off was concerned. It was held that since the assessee was assessed as an unregistered firm for this year it was not possible to allow the benefit of set off of the earlier years loss. Aggrieved against the order passed by the Appellate Assistant Commissioner the assessee filed appeals before the Tribunal which were dismissed.
2. The first question raised on behalf of the assessee is regarding the validity of rule 24. It has been urged that it is violative of the power given to the rule making authority under section 184(7). We need not discuss this point as it has been held by their Lordships of the Supreme Court in a decision reported in K. S. Venkataraman & Co. (P) Ltd. vs. State of Madras (17 Sales Tax Cases 418) that the vires or validity of a provision cannot be challenged before an authority or Tribunal constituted under the Act itself. The High Court only exercise advisory jurisdiction and therefore it too cannot go into this question. In the circumstances the first question is returned unanswered. So far as the second question is concerned it is squarely covered by a Division Bench decision reported in K.T. Wire Products vs . Union of India & others : 92ITR459(All) . This has been followed by a decision reported in Commissioner of Income Tax, Gujarat IIII vs . Dhanji Shyamji : 97ITR173(Guj) and Commissioner of Income Tax vs . Garden Silk Wvg. Factory : 101ITR658(Guj) . We respectfully agree with the principle laid down and answer the second question referred to us in the affirmative. In view of our answer to the second question the third question does not arise and it is returned unanswered.
3. For the reasons given above the first and third questions are returned unanswered and the second question is answered in the affirmative against the assessee and in favour of the Department. The department shall be entitled to its costs which we assess at Rs. 200/-.