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income-tax Officer Vs. Deoki Nandan Om Prakash - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Delhi
Decided On
Judge
Reported in(1985)14ITD197(Delhi)
Appellantincome-tax Officer
RespondentDeoki Nandan Om Prakash
Excerpt:
.....of being heard and with the previous approval of the inspecting assistant commissioner, cancel the registration of the firm for that assessment year : i provided that no such cancellation shall be made after the expiry of eight years from the end of the assessment year in respect of which registration has been granted or has effect.10. while dismissing this revenue appeal, we should not be taken to have expressed any opinion in respect of the other years, for which the ito has passed order under section 186(1).
Judgment:
1. This revenue appeal is directed against the order dated 27-5-1983 passed by the AAC, Moradabad, in Appeal No. 25 (Chd.) of 1982-83 reversing the ITO's order passed under Section 186(1) of the Income-tax Act, 1961 ('the Act') in respect of the assessment year 1974-75.

2. The ITO in the respondent's case passed an order under Section 185(1) (b) of the Act rejecting the assessee's claim of registration in respect of 1974-75 on the ground that the respondent firm had not filed information about the formation of partnership to its principal and further that information was given to the State Bank of India as late as on 25-5-1975, though the instrument was executed on 26-12-1973 incorporating certain changes.

3. In the first appeal against the said order under Section 185(1)(6), the concerned AAC on 18-8-1978 reversed the ITO's order and directed registration by observing that the grounds on which the ITO's order was based was simply irrelevant to the question whether a genuine firm had come into existence and further all the formalities having been completed, the appellant was entitled to registration. To complete the picture, we like to reproduce para 5 of the AAC's order, because for the revenue, it was sought to be argued that the AAC while reversing the ITO's order under Section 185(1)(&) did not touch upon the genuineness aspect : In my opinion, the grounds on which the registration has been refused are simply irrelevant to the question whether a genuine firm came into existence in the year under consideration. There is a valid deed of partnership which was filed in time and which has been duly acted upon. The deed incorporate as the share of profits and loss of the partners. All the conditions required for registration under the Income-tax Act are, therefore, fully met in this case and there is no ground at all for refusal to registration to the appellant. Registration is, accordingly, granted to the appellant.

4. Later on, it seems that the ITO initiated proceedings under Section 186(1) in respect of the assessment years 1974-75 to 1978-79 and vide order dated 30-3-1982 cancelled the registration for all these years.

5. As far as the year under consideration is concerned, the assessee's short contention that after the order of the AAC reversing the ITO's order under Section 185(1)(b), Section 186(1) simply could not be invoked impressed the first appellate authority who by relying on the case of Rumeswar Goenka v. ITO [1970] 77 ITR 421 and 429 (Assam and Nagaland) accepted the appeal. In the said case, it has been held that once registration is directed by an appellate authority after refusal by the ITO, the order of cancellation of registration by the ITO, must be set aside as an inferior authority cannot set at naught an appellate order.

6. We have informed ourselves that the judgment in Rameswar Goenktfs case (supra) was brought to the notice of the ITO also in Section 186(1) proceedings. The ITO, however, bypassed the judgment by merely stating that he was outside the jurisdictional area of the Assam and Nagaland High Court, not a very correct approach.

7. After hearing the parties, we endorse and confirm the view taken by the ACC in the order appealed against that the ITO misdirected himself in cancelling the registration in as far as the assessment year 1974-75 is concerned because the ITO was not competent in embarking upon further enquiry regarding the genuineness of the firm.

8. While dismissing this revenue appeal, we reject Mrs. Kapila's argument that the provision of Section 186(1) is completely independent of Section 185(1)(b) and once the ITO takes upon himself to process the case under the former provision, he can completely ignore all orders passed in relation to the said related provision, whatever may be the authority passing such order. As a fact, we enquired of her, assuming that a question of genuineness of a firm travels up to the Tribunal and even goes further to the High Court or the Supreme Court whether under such circumstances also, it could be open to the ITO to proceed under Section 186(1) to withdraw registration benefit. Her answer was that it certainly would be within the powers of the ITO.9. Mrs. Kapila alternatively submitted that in any case the powers under Section 186(1) were exercised by the ITO after taking approval from the IAC and since his status is the same as that of the AAC it could not be said that an inferior authority processed and set at naught the earlier order of the AAC. This argument also we have rejected on the simple ground that an ITO can derive mandate from Section 186(1) only in respect of orders passed under Section 185(1)(a) by him or an officer of co-ordinate jurisdiction. According to us, once the provision of Section 185(1)(6) are invoked, Section 186(1) simply cannot be brought to play any role. This is clear from a bare reading of the following provision of Section 186(1), which is relevant for the present appeal: if where a firm has been registered, or its registration has effect under Sub-section (7) of Section 184 for an assessment year, the Income-tax Officer is of opinion that there was during the previous year no genuine firm in existence as registered, he may, after giving the firm a reasonable opportunity of being heard and with the previous approval of the Inspecting Assistant Commissioner, cancel the registration of the firm for that assessment year : I Provided that no such cancellation shall be made after the expiry of eight years from the end of the assessment year in respect of which registration has been granted or has effect.

10. While dismissing this revenue appeal, we should not be taken to have expressed any opinion in respect of the other years, for which the ITO has passed order under Section 186(1).


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