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Venkatesa Vilas Vs. Income-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Madras
Decided On
Judge
Reported in(1983)5ITD644(Mad.)
AppellantVenkatesa Vilas
Respondentincome-tax Officer
Excerpt:
.....of income for such subsequent assessment year, a declaration to that effect, in the prescribed form [see form no. 12 and rule 24] and verified in the prescribed manner, so, however, that where the income-tax officer is satisfied that the firm was prevented by sufficient cause from furnishing the declaration within the time so allowed, he may allow the firm to furnish the declaration at any time before the assessment is mads.10. it is an admitted position that there is no change in the constitution of the firm and the shares of the partners are the same, on the basis of which the registration was granted, which shows that the firm and its constitution are genuine. but for renewal of registration in the year under appeal the assessee has also to satisfy the condition of section.....
Judgment:
1. The assessee has preferred this appeal against the order of the AAC, dated 15-6-1982, who dismissed the appeal of the assessee, against the order dated 24-10-1980 of the ITO.2. The relevant facts, in brief, are that the assessee is an unregistered firm. The previous year relevant for the assessment year 1978-79 ended on 31-3-1978.

3. The assessee filed the return of income for the assessment year under consideration along with Form No. 12 and claimed that it should be assessed in the status of a registered firm. The ITO did not accept the claim of the assessee above and assessed it for the assessment year under consideration under Section 143(1) of the Income-tax Act, 1961 ('the Act') as he assessed the assessee, in the status of an unregistered firm. In so doing, he rejected the assessee's explanation that it failed to file Form No. 12 in time under sufficient cause or reason ; as one of its partners was not well. The ITO was of the view that the assessee has failed to substantiate the stand taken by it for the condonation of the delay for late filing of Form No. 12, and, therefore, he observed that in the circumstances, the continuation of registration sought for was refused under Section 184(7) of the Act as the time for filing the return expired on 31-7-1978 and the assessee should have furnished Form No. 12 before the expiry of the time allowed under the Act. Accordingly, he refused the continuation of registration and found that the original registration granted would not have effect for the assessment year under consideration and the status of the assessee was treated as that of unregistered firm.

4. The assessee, being aggrieved and dissatisfied with the order of the ITO, preferred an appeal before the AAC and thereby contended that the rejection made by the ITO of the application under Section 184(7) for the grant of renewal of registration for the assessment year under appeal, was unjustified ; that the rejection of Form No. 12 or denial of status of registered firm referred to above was part and parcel of the assessment order passed under Section 143(1) and as such the order passed under Section 143(1) was appealable, because the ITO in taking away the status of the assessee has not given an opportunity of being heard and also acted without jurisdiction.

5. The AAC rejected these contentions holding therein that no appeal lies against the order of the ITO under Section 143(1) and under Section 184(7).

6. The assessee being further aggrieved has preferred this appeal before us.

7. Shri C.H. Subramaniam, learned counsel for the assessee, contends that the AAC has erred in law and facts, in holding that no appeal lies against an order of the ITO under Section 143(1). He further contends that non-granting of renewal of registration in the assessee's case is an order under Section 185(3) of the Act and not under Section 184(7) and as such the AAC erred in holding that no appeal lies against the order of refusing renewal of registration to the assessee, being an order under Section 185(3) which is appealable according to Section 246 of the Act.

8. On the other hand, Shri S. Ranganathan, learned departmental representative, contends that if the ITO has refused the application of the assessee for condonation of delay in late filing the application or Form No. 12 for the registration or renewal of registration of the firm, then the order of the ITO is final ; as no appeal lies against such order. He relies upon the decision of the Madras High Court in the case of A.S.S.S.S. Chandrasekaran & Bros. v. CIT [1974] 96 ITR 711. He further contends that no appeal lies against an order under Section 143(1) also. He relied on Section 246.

9. We have heard the rival contentions and gone through the records. We are of the opinion that the contention of the assessee referred to above are well founded and must prevail. The reasons are that Section 184(7) says that where registration is granted to any firm for any assessment year, it shall have the 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, before the expiry of the time allowed under Sub-section (1) or Sub-section (2) of Section 139 (whether fixed originally or on extension) for furnishing the return of income for such subsequent assessment year, a declaration to that effect, in the prescribed form [see Form No. 12 and Rule 24] and verified in the prescribed manner, so, however, that where the Income-tax Officer is satisfied that the firm was prevented by sufficient cause from furnishing the declaration within the time so allowed, he may allow the firm to furnish the declaration at any time before the assessment is mads.

10. It is an admitted position that there is no change in the constitution of the firm and the shares of the partners are the same, on the basis of which the registration was granted, which shows that the firm and its constitution are genuine. But for renewal of registration in the year under appeal the assessee has also to satisfy the condition of Section 184(7)(ii), stated above.

11. No doubt the condition laid down under this section is not satisfied as it is an admitted position that Form No. 12 though filed along with the return of income, was belated. When this is so, then it is nothing else than that the declaration furnished by the firm in pursuance of Sub-section (7) of Section 184 is not in order and this defect can be removed, before the completion of assessment by filing the declaration in Form No. 12. Therefore, the provisions of Section 185(3) are applicable and the ITO is bound to serve one month's notice on the assessee to remove this defect and if the assessee failed to do so, within the period of one month, then and then only the ITO is empowered to declare that the registration granted to the firm shall not have the effect for the assessment year under consideration and that too if the assessee failed to file it before the completion of assessment, as is evident from Section 185(3) reproduced as under : 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 r gistration granted to the firm shall not have effect for the relevant assessment year.

12. Thus, from the aforesaid mandatory provisions it is manifest that the Legislature in its wisdom, in the case of renewal of registration of the firm has laid down the conditions to be satisfied by the assessee, which are there in Section 184(7)(i)/(ii) as stated above and if the ITO feels that either of these conditions are not satisfied, then he should follow the procedure laid down under Section 185(3) and to pass the order for non-granting of continuation of registration of the firm under this section only ; as no such order can be made under Section 184(7), which merely lays down two conditions referred above to claim continuation of registration of the firm and non-satisfaction or non-fulfilling of these or either of these is the basis for refusal to renew registration and, therefore, such action and order of the ITO falls under Section 185(3).

13. Since, the ITO has violated the mandatory provisions of Section 185(3), and, therefore, his order is illegal. Accordingly, we reject the contention of Shri S. Ranganathan, learned departmental representative, that the order for non-granting the renewal of registration is not appealable, in view of the fact that such an action falls under Section 185(3), which is appealable and reliance can be placed on Section 246(j) of Chapter XX of the Act.

14. Because, the AAC has confirmed the order of the ITO, holding that no appeal lies against the order of the ITO for non-granting the renewal of registration of the firm, being an order under Section 184(7) and, therefore, we hold that his order is also illegal, as the same is appealable as stated above.

15. Further, the case of the Hon'ble Madras High Court in the case of A.S.S.S.S. Chandrasekaran & Bros. (supra) is not applicable to the facts of this case, in view of the fact that their Lordships of the Madras High Court did not decide the case of renewal of registration of the firm ; rather that of registration, there they found that if the application for registration is not within time and the ITO did not condone the late filing of such application, then no appeal against his order lies, which purpose is per specific provisions of (sic) Section 184(1) to (4) reproduced as under : Application for registration.-(1) An application for registration of a firm for the purposes of this Act may be made to the Income-tax Officer on behalf of any firm if- (ii) (ii) the individual shares of the partners are specified in that instrument.

(2) Such application may, subject to the provisions of this section, be made either during the existence of the firm or after its dissolution.

(3) The application shall be made to the Income-tax Officer having jurisdiction to assess the firm and shall be signed- (b) in the case of a dissolved firm, by all 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.

Explanation : 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.

(4) The application shall be made before the end of the previous year for the assessment year in respect of which registration is sought : Provided that the Income-tax Officer may entertain an application made after the end of the previous year, if he is satisfied that the firm was prevented by sufficient cause from making the application before the end of the previous year.

16. Furthermore, the provision of Section 184(7)07), referred to above shows that Form No. 12 can be accepted by the ITO at any time before the assessment is made, which means that he should be liberal in using his discretion in granting the renewal of registration to the assessee in not filing Form No. 12, within prescribed time, as he is to be satisfied that the late filing of Form No. 12 is explained ; since the assessee has removed the defect in filing Form No. 12 in order before the completion of the assessment. Thus, the bare reading of Section 184(1)/(4) and that of Section 184(7)(i) and (ii) manifestly proves that both these provisions are distinguishable on the issue of condonation of delay in respect of the late filing of application and Form No. 12 for the purpose of registration of firm and renewal of registration and, therefore, the ratio laid down by their Lordships of the Hon'ble Madras High Court in the case of A.S.S.S.S. Chandrasekar an & Bros. (supra) on the issue regarding registration of firm cannot be extended to renewal of registration in such situation. Certainly, it cannot be extended on account of the specific provision of Sections 184(7) and 185(3) referred to above which lay down the specific procedure to be followed by the ITO to pass the order in the case where the declaration in Form No. 12 is not in order and, therefore, such order is under Section 185(3) vide which the ITO refused to renew the registration on the ground that the assessee failed to satisfy him that the assessee was prevented under the sufficient cause or reason to file the declaration as required under the provisions of Section 184(7) and that too, before the completion of the assessment.

17. Therefore, in view of our above discussion, we hold that the authorities below have erred in law and facts in arriving at their respective conclusions and, hence, we set aside their order ; holding further that non-granting of renewal of registration by the ITO is an appealable order and such order is an order under Section 185(3) and not under Section 184(7).

18. Moreover, if such an order is made by the ITO contrary to the provisions of Section 185(3) then the same is illegal and cannot stand in the eyes of law even if the same is confirmed by the first appellate authority on the ground that such order is not appealable.

19. Similarly we hold that the AAC is also not justified in holding that no appeal [against order] under Section 143(1) lies. The reason is that no doubt an assessment order under Section 143(1) is not shown as appealable under Section 246 ; but it does not mean that the Legislature has denied the assessee the right of appeal against orders passed under Section 143(1). Since, the right of appeal is vested right which can be taken away only by the Legislature, provided that the Legislature has made express or formal provision in the Act to the effect that no appeal lies against an order under the particular and specific section of the Act or under Section 143(1). It cannot be denied by implication, saying that there is no appeal provided under Section 246 and, therefore, against the order under Section 143(1), the Legislature has denied the right to the assessee to file an appeal against the order of the ITO under Section 143(1). Furthermore, the assessment order under Section 143(1) is summary assessment where the ITO is bound to accept it and if he feels not to do so, then he should give the assessee a reasonable opportunity of being heard, which in this case is not given ; in taking away the status of the assessee of registered firm, effecting the quantum of tax for the assessment year under consideration, which is nothing else than enhancement of the assessment, which the ITO is not empowered to do under Section 143(1).

And if he has acted otherwise, then the assessee is aggrieved against such order and being so his grievances should be remedied due to the system of justice, prevalent in our country, which is possible only if he has right to make an appeal. Therefore, the denial of it is unconstitutional and against the principles of natural justice. In view of the fact that in such situation the assessee is discriminated being given different treatment than that of another or other assessee or assessees in the same situation when in their cases the orders are under Sections 143(3) and 144 of the Act.

20. Besides, the assessee has right to appeal against the order under Section 143(1), if the ITO has not acted in making the assessment as desired by the provisions of Section 143(1) and thereby failed to accept the return of income as shown by the assessee and in so doing, he has assessed the assessee in the status different to or from that claimed by the assessee and that too without giving proper opportunity of being heard to the assessee, resulting in determination of the amount of tax greater than claimed or payable by the assessee under the provisions of the Act, as in such situation his order is an order which is the subject-matter of Section 246(c).

21. As it is manifest that the amount of tax determined under Section 143(1) in the status of non-registered firm is greater than the amount of tax to be paid by the assessee as per his return under Section 143(1) in the status of a registered firm and, therefore, the order of the ITO is prejudicial to the interest of the assessee, which too is passed by him without providing reasonable opportunity of being heard to the assessee then the order of the ITO is in violation of Section 143(1) ; hence, the assessee is aggrieved and the remedy to redress the grievance is an appeal under Section 246(c), as there is no other remedy to the assessee under the Act.

22. Apart from it in such situation the order cannot be said to be an order under Section 143(1) ; rather it is an order under Section 144, hence, it is to be treated like that for the purpose of appeal. Since, the appellate authority is within its powers to decide the issue that whether on the facts and circumstances of the case the impugned order is under the section as shown in the order or not and if the appellate authority comes to the conclusion that on the facts and circumstances of the case the order is under different section than that shown in the order, then the appellate authority is within its power to treat such order under the section other than that shown in the order for the purpose of appeal as the authority below omitted the right section under which the impugned order is made.

23. Therefore, in view of our above discussions and reasons, we hold that the appeal under Section 143(1) lies against the order under Section 143(1) (sic) and that under Section 184(7)(i) or (ii) on the facts and the circumstances of the case. Therefore, we set aside the orders of the authorities below and thereby direct the ITO to decide the case of the assessee afresh, in view of our aforesaid observations and on providing of proper opportunity of being heard to the assessee in accordance with law.

24. In the result, the appeal is treated as allowed for statistical purposes.


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