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Nawab and Brothers Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMadhya Pradesh High Court
Decided On
Case NumberM.C.C. No. 261 of 1976
Judge
Reported in[1980]124ITR307(MP)
ActsIncome Tax Act, 1961 - Sections 184(7) and 263
AppellantNawab and Brothers
RespondentCommissioner of Income-tax
Appellant AdvocateC.M. Mehta, Adv.
Respondent AdvocateS.C. Bagadiya, Adv.
Excerpt:
- .....with law. 5. as regards the second question, it is not disputed that notice to show cause was issued by the addl. commissioner before passing the final order. if the assessee did not appear on the date of hearing, it cannot be said that no reasonable opportunity of being heard was given to the assessee. no provision of law has been brought to our notice which obliged the addl.commissioner to grant the adjournment as prayed for by counsel for the assessee. under the circumstances, it must be held that the tribunal was justified in holding that reasonable opportunity of being heard was granted by the addl. commissioner to the assessee. 6. for all these reasons, both the questions are answered in the affirmative and against the assessee. in the circumstances of the case, the parties.....
Judgment:

Sohani, J.

1. By this reference under Section 256(1) of the Income-tax Act, 1961, hereinafter referred to as the Act, the Income-tax Appellate Tribunal, Indore Bench, has referred the following questions of law to this court for its opinion :

'1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that there was no effective deed in the year of account relevant to the year under appeal which would have the effect of continuance of registration under Section 184(7)

2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in law in holding that reasonable opportunity of being heard was granted by the Additional Commissioner of Income-tax to the assessee ?'

2. The material facts giving rise to this reference briefly are as follows: The assessee was assessed by the ITO for the assessment year 1969-70 in the status of a registered firm. The ITO completed the assessment on 20th September, 1969, and directed that the registration of the assessee-firm would continue. The Addl. Commissioner, however, found, on the examination of record and the proceedings of the case, that the order of the ITO allowing continuation of registration to the firm was erroneous in law and was prejudicial to the interests of the revenue. The Addl. Commissioner, therefore, issued a notice to the assessee calling upon the assessee to show cause why the order passed by the ITO on the point of continuation of registration should not be cancelled and why the ITO should not be directed to complete the assessment of the assessee in the status of an unregistered firm. None appeared on behalf of the assessee on the date of hearing. A telegram was, however, received from the counsel for the assessee seeking adjournment. The Addl. Commissioner refused the prayer for adjournment and decided the case on merits. The Addl. Commissioner held that one of the six partners of the assessee-firmretired on the 15th September, 1968, and hence on that date there was a change in the constitution of the firm and it was, therefore, necessary on the part of the assessee to draw up a fresh instrument of partnership. As , no such instrument of partnership was on record, the Addl. Commissioner held that the order of the ITO for the continuation of registration of the assessee-firm for the assessment year 1969-70 was not in accordance with law. The Addl. Commissioner, therefore, cancelled the registration and directed the ITO to complete the assessment of the assessee in the status of an unregistered firm. Aggrieved by this order, the assessee preferred an appeal before the Tribunal. The Tribunal held that reasonable opportunity was given to the assessee of being heard. The Tribunal further upheld the order of the learned Addl. Commissioner that the order passed by the ITO continuing registration of the firm was not in accordance with law. At the instance of the assessee, the Tribunal has referred the aforesaid questions of law to this court for its opinion.

3. Now, the answer to the first question is furnished by the first proviso to Section 184(7) of the Act which reads as follows :

'(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.....'

4. From the aforesaid provision, it is clear that if there is a 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 registration was granted, registration granted to any firm for any assessment year shall cease to be effective for subsequent years. In the instant case, it is admitted that one out of six partners of the assessee-firm had retired on 15th September, 1968. Thus, there was a change in the constitution of the firm and the shares of the partners as evidenced by the instrument of partnership on the basis of which registration was granted. In view of the first proviso to Sub-section (7) of Section 184 of the Act, it must, therefore, be held that, on the facts and in the circumstances of the case, the Tribunal was justified in holding that there was no effective deed in the year of account relevant to the year under appeal and hence the order passed by the ITO for continuance of registration was not in accordance with law.

5. As regards the second question, it is not disputed that notice to show cause was issued by the Addl. Commissioner before passing the final order. If the assessee did not appear on the date of hearing, it cannot be said that no reasonable opportunity of being heard was given to the assessee. No provision of law has been brought to our notice which obliged the Addl.Commissioner to grant the adjournment as prayed for by counsel for the assessee. Under the circumstances, it must be held that the Tribunal was justified in holding that reasonable opportunity of being heard was granted by the Addl. Commissioner to the assessee.

6. For all these reasons, both the questions are answered in the affirmative and against the assessee. In the circumstances of the case, the parties shall bear their own costs of this reference.


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