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Sir Hukamchand and Munnalal Co. Vs. Commissioner of Income-tax, M.P. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMadhya Pradesh High Court
Decided On
Case NumberMiscellaneous Civil Case No. 165 of 1961
Reported in[1962]46ITR794(MP)
AppellantSir Hukamchand and Munnalal Co.
RespondentCommissioner of Income-tax, M.P.
Cases ReferredAgarwal and Co. v. Income
Excerpt:
.....its failure to comply with the requirements of law, it had incurred the penalty of having its registration cancelled. that is the effect of the provisions of section 23(4). on the other hand, rule 6b deals with cases where the income-tax officer is satisfied that a certificate of registration has been granted under rule 4 or under rule 6a without there being genuine firm in existence;.....claims to be a partnership initially constituted under a deed dated july 16, 1948. the firm was granted registration under section 26a of the act for the year 1950-51. the registration was renewed for the years 1951-52, 1952-53 and 1953-54. it was, however, refused for the year 1954-55. the petitioner filed successive appeals against that order and ultimately the tribunal, by its order dated october 29, 1960, granted registration for the year 1953-54. in the meantime the income-tax officer had issued notice to the petitioner to show cause why the renewal of its registration for the year 1953-54 should not be cancelled on the ground that no genuine firm then existed. after hearing the petitioner, that officer, by his order dated march 6, 1959, cancelled the renewal granted for the year.....
Judgment:

PANDEY J. - This case has been stated to us under section 66(1) of the Indian Income-tax Act. The question of law for our consideration is :

'Whether, on the facts and circumstances of this case, the order passed by the Income-tax Officer under rule 6B of the Indian Income-tax Rules cancelling the certificate of renewal of registration granted to the assessee is appealable under section 30 of the Income-tax Act ?'

The facts of the case may be briefly stated. The petitioner claims to be a partnership initially constituted under a deed dated July 16, 1948. The firm was granted registration under section 26A of the Act for the year 1950-51. The registration was renewed for the years 1951-52, 1952-53 and 1953-54. It was, however, refused for the year 1954-55. The petitioner filed successive appeals against that order and ultimately the Tribunal, by its order dated October 29, 1960, granted registration for the year 1953-54. In the meantime the Income-tax Officer had issued notice to the petitioner to show cause why the renewal of its registration for the year 1953-54 should not be cancelled on the ground that no genuine firm then existed. After hearing the petitioner, that officer, by his order dated March 6, 1959, cancelled the renewal granted for the year 1953-54. The petitioner filed successive appeals to the Appellate Assistant Commissioner and to the Tribunal who concurred in rejecting the appeal on the ground that no appeal lay against an order cancelling registration under rule 6B of the Income-tax Rules. Thereupon, this reference was made at the instance of the petitioner.

It is urged before us, as it was argued before the Tribunal, (i) that rule 6B could not exist independently of section 26A of the Act; (ii) that it must be in consonance with that section; (iii) that an order under that rule should be read as one made under that section; and (iv) that an order of cancellation under the rule should, for the purposes of appeal, be construed as amounting to refusal within the meaning of section 30(1) of the Act.

We have no difficulty in accepting the first three submissions. In Commissioner of Income-tax v. Gopal Rice Mills the validity of the rule relating to renewal was challenged. A Division Bench of the court observed :

'The rules, therefore, in our opinion, are perfectly valid and, indeed, rule 6B, which is the consequential rule, was challenged before the Madras High Court and was upheld in Narayana Chetty v. Income-tax Officer, Nellore.'

The Supreme Court, in the appeals filed against the decision in the Madras case, observed in Narayan Chetty v. Income-tax Officer, at pages 397-398, as follows :

'The cancellation of registration under section 23(4) is in the nature of a penalty and the penalty can be imposed against a firm if it is guilty of any of the defaults mentioned in the said sub-section. It would be noticed that where registration is cancelled under section 23(4), there is no doubt that the application for registration had been properly granted. The basis of an order under section 23(4) is not that the firm which had been registered was a fictitious one, but that, though the registered firm was genuine, by its failure to comply with the requirements of law, it had incurred the penalty of having its registration cancelled. That is the effect of the provisions of section 23(4). On the other hand, rule 6B deals with cases where the Income-tax Officer is satisfied that a certificate of registration has been granted under rule 4 or under rule 6A without there being genuine firm in existence; that is to say, an application for registration had been made in the name of a firm which really did not exist; and on the at ground the Income-tax Officer proposes to set right the matter by cancelling the certificate which should never have been granted to the alleged firm. That being the effect of rule 6B it is impossible to accede to that argument that the provisions of this rule are inconsistent with the provisions of section 23(4) of the Act. If the Income-tax Officer is empowered under section 26A read with the relevant rules to grant or refuse the request of the firm for registration, it would normally be open to him to cancel such registration if the discovers that registration had been erroneously granted to firm which did not exist. Rule 6B has been made to clarify this position and to confer on the Income-tax Officer in express and specific terms such authority to review his won decision in the matter of the registration of the firm when he discovers that his earlier decision proceeded on a wrong assumption about the existence of the firm. In our opinion, there is no difficulty is holding that rule 6B is obviously intended to carry out the purpose of the Act and since it is not inconsistent with any of the provisions of the Act its validity is not open to doubt.'

We are unable to accept the fourth submission that, since an order of cancellation under rule 6B has to be treated as one passed under section 26A of the Act, it must also be construed as amounting to refusal and so appealable under section 30(1) of the Act. Section 26A itself does not specify the orders that may be passed thereunder. Applications made under the section are to be 'dealt with by the Income-tax Officer in such manner as may be prescribed'. The rules made prescribed the orders that may be passed under the section. Only one of these orders, namely, refusal to register a firm under section 26A, is appealable under section 30(1) of the Act. Since only this order, and no other order under section 26A, is appealable, any other order under the section cannot be constructively regarded as appealable. The reason is that there is no inherent right of appeal and that, since appeals are creatures of statutes, there can be no appeal apart from specific provisions expressly made therein. It is significant that cancellation of registration was present in the mind of the legislature and it expressly provided for appeal against such cancellation falling under section 23A of the Act. There is, however, no provision for appeal against an order of cancellation under rule 6B. In conclusion, we may refer to Agarwal and Co. v. Income-tax Officer in which it was observed that an order of cancellation of registration under rule 6B was not appealable.

In our opinion, in the absence of an express provision in the Income-tax Act, an order under rule 6B cancelling renewal of registration is not appealable under section 30(1) of the Income-tax Act. The petitioner shall pay all costs of this reference. Hearing fee Rs. 50.

Reference answered accordingly.


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