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Grafik India Vs. Commissioner of Income-tax, New Delhi - Court Judgment

LegalCrystal Citation
Subject Direct Taxation
CourtDelhi High Court
Decided On
Case NumberI.T.R. No. 179 of 1977
Judge
Reported in(1986)50CTR(Del)57; [1986]159ITR528(Delhi)
Acts Income Tax Act, 1961 - Sections 139, 139(1), 184, 184(7), 185, 185(3) and 246; Income Tax Rules, 1962 - Rule 24
AppellantGrafik India
RespondentCommissioner of Income-tax, New Delhi
Cases ReferredAshwani Kumar Maksudan Lal v. Addl.
Excerpt:
.....- any doubt about appealability should be resolved in favor of maintainability. - - the income-tax officer held that the assessed had failed to show cause why continuation of registration be not disallowed and, hence, the assessment was made in the status of an unregistered firm. 7. having examined these various judgments, we are of the view that an appeal clearly lies. how can a defect of limitation be rectified ? obviously, if the application is clearly belated, it can be urged that there was sufficient ground for extending the time under proviso (ii) to section 184(7) or, it can be urged that the application is not barred by time either because it was furnished within the period prescribed by section 139(1) or (2) as fixed by the act, or by the notice of the income-tax..........not disallowed and, hence, the assessment was made in the status of an unregistered firm. 3. the assessed appealed to the appellate assistant commissioner, who dismissed the appeal as not being maintainable on the ground that no appeal lay against an order under section 184(7). the judgment of the allahabad high court in ashwani kumar maksudan lal v. addl. cit : [1972]83itr854(all) , was referred to. on merits also, the appellate assistant commissioner held that there was no sufficient cause for furnishing the declaration beyond time. but, the dates, etc., are not stated in any detail by the appellate assistant commissioner. 4. an appeal was taken to the tribunal which also followed the aforementioned judgment of the allahabad high court and held that no appeal lay under section.....
Judgment:

D.K. Kapur, J.

1. The Income-tax Appellate Tribunal has referred to us the following question for the assessment year 1971-72 :

'Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that no appeal lies against an order under section 184(7) of the Income-tax Act, 1961 ?'

2. It may be mentioned that the facts given in the statement of the case are far from clear, but we think the referred question can be answered as it is without asking for any further statement. According to the Income-tax Officer's order dated December 31, 1973, the declaration under section 184(7) was filed in the office on January 5, 1972. According to the Income-tax Officer, this was belated as it was filed after the period allowed by proviso (ii) to section 184(7). The Income-tax Officer gave a show-cause notice as to why continuation of registration be not refused. In reply to this, the assessed claimed that the facts mentioned in the notice were wrong and it denied that Form No. 12 was filed late. The assessed's letter being vague about the actual filing of Form No. 12, the assessed was specifically asked to intimate the date of filing the form. The reply to this letter was also ambiguous, because it was claimed that Form No. 12 was on the record. The Income-tax Officer held that the assessed had failed to show cause why continuation of registration be not disallowed and, hence, the assessment was made in the status of an unregistered firm.

3. The assessed appealed to the Appellate Assistant Commissioner, who dismissed the appeal as not being maintainable on the ground that no appeal lay against an order under section 184(7). The judgment of the Allahabad High Court in Ashwani Kumar Maksudan Lal v. Addl. CIT : [1972]83ITR854(All) , was referred to. On merits also, the Appellate Assistant Commissioner held that there was no sufficient cause for furnishing the declaration beyond time. But, the dates, etc., are not stated in any detail by the Appellate Assistant Commissioner.

4. An appeal was taken to the Tribunal which also followed the aforementioned judgment of the Allahabad High Court and held that no appeal lay under section 184(7). This had led to the reference.

5. In support of the reference, the learned counsel for the assessed has pointed out that there was a statutory amendment in section 246(j) which became effective from April 1, 1971, and there was also a similar amendment in proviso (ii) to section 184(7). At the same time, there was an amendment to sub-sections (2) and (3) of section 185. He has urged that since then most of the High Courts have held that an order rejecting a declaration filed in Form No. 12 for extending the registration on the ground that it is belated is appealable to the Appellate Assistant Commissioner under section 246. He has pointed out that in some cases, it has been held to be appealable under section 246(c) and in some cases under section 246(j). The only exception is in the case of the Orissa High Court, which held that the appeal does not lie even after the amendment in 1971 under section 246(j). The judgment of the Orissa High Court is CIT v. Pohop Singh Rice Mill [1971] 132 ITR 390.

6. The judgments which have held that an appeal lies are numerous, but a reference need be made to Addl. CIT v. Chekka Ayyanna : [1977]106ITR313(AP) , decided by the Andhra Pradesh High Court, Madhur Jalpan v. CIT : [1983]143ITR351(Patna) , decided by the Patna High Court, CIT v. Jabalpur Transport Development Co. : [1983]143ITR964(MP) , decided by the Madhya Pradesh High Court, National Tractor Co. v. ITO , decided by the Punjab and Haryana High Court and CIT v. Mothooram Premchand , also decided by the Punjab and Haryana High Court. It is pointed out that the Madras High Court had in A.S.S.S.S. Chandrasekaran and Brothers v. CIT : [1974]96ITR711(Mad) , held that no appeal lay to the Appellate Assistant Commissioner. But, that was under the unamended provision.

7. Having examined these various judgments, we are of the view that an appeal clearly lies. The appeal lies not only because the preponderance of the courts have taken the view that it lies, but also on the ground that if there is any doubt about appealability, it should be resolved in favor of the appeal being maintainable as held by this court in CIT v. Mahabir Parshad & Sons : [1980]125ITR165(Delhi) .

8. An examination of the statutory provision also shows that an appeal lies. This is made clear from the fact that sub-section (7) of section 184 is a provision for continuing the registration already granted. If the declaration is within the time prescribed by the proviso, then the declaration is to be continued. Even if it is filed late, the Income-tax Officer has jurisdiction to extend the time. A refusal to extend the time amounts to a cancellation of the registration. The cancellation of the registration or a refusal to extend the registration means that the status under which the assessed is to be assessed is altered from that of a registered firm to that of an unregistered firm. Section 246(c) of the Act provides for an appeal to the Appellate Assistant Commissioner on various grounds, one of which is where the assessed objects to the status under which he is assessed. The objection of the assessed in the appeal was that it should be assessed in the status of a registered firm and not in that of an unregistered firm. Learned counsel for the Department has urged that this is not a question of status because the status is the same, i.e., a firm; the only question is of registration. But, we think, the word 'status' in section 246(c) has been rightly interpreted by the Andhra Pradesh High Court and the Allahabad High Court in Addl. CIT v. Chekka Ayyanna : [1977]106ITR313(AP) and ITO v. Vinod Krishna Som Prakash : [1979]117ITR594(All) , respectively, to include a case where the question is whether the assessment should be made in the status of a registered firm or an unregistered firm. The incidence of tax is quite different in the case of these two types of firms. So, section 246(c) gives a right of appeal to the Appellate Assistant Commissioner.

9. In addition, we agree with the view of most of the High Courts that an appeal also lies under section 246(j) because in effect the order is under section 185(3) of the Act as amended.

10. It is necessary to refer here to section 185(3) as it stands :

'(3) 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 registration granted to the firm shall not have effect for the relevant assessment year.'

11. It is to be noted that section 184 deals with an application for registration and section 185 deals with the procedure relating to such applications. Sub-sections (1) and (2) of section 185 deal with the procedure to be followed when an application for registration is to be dealt with. But sub-section (3) of section 185 deals with the procedure to be followed when a declaration is furnished under section 184(7).

12. What then does the Income-tax Officer have to do when he gets a declaration under section 184(7) He has either to place the same on record and extend the registration or he has to give a notice to the assessed under sub-section (3) stating that the application is not in order. He has to intimate the defect to the firm and give it an opportunity to rectify the same within a period of one month. How can a defect of limitation be rectified Obviously, if the application is clearly belated, it can be urged that there was sufficient ground for extending the time under proviso (ii) to section 184(7) or, it can be urged that the application is not barred by time either because it was furnished within the period prescribed by section 139(1) or (2) as fixed by the Act, or by the notice of the Income-tax Officer or, within the time granted by the Income-tax Officer under section 139. The record before us does not show when this period expired. It also does not show when the return was filed. We have, thereforee, to assume that different possibilities can exist of which we are not aware. In any event, in this case it appears that the assessed was claiming that the declaration was filed within time. In other words, there was a dispute as to the date on which the declaration was filed. The proviso to section 184(7) allows the declaration to be rejected if it is filed late and the period is not extended by the Income-tax Officer. There are, thereforee, two possibilities - either the application was filed within time or, there was sufficient cause for-extending the time. If the time is not extended, then it means that the defect in the application mentioned in section 185(3) has not been remedied and then the Income-tax Officer has to pass an order in writing that the registration granted to the firm shall not have effect in the relevant assessment year. The Income-tax Officer has passed an order in this case, but he has shown it as an order passed under section 184(7). In actual effect, it is an order passed under section 185(3) on a defective application. The formal requirements are contained in section 184, but the procedure to be followed on receipt of the application is contained in section 185. When an order is passed under section 185(3) refusing to extend the registration of the firm in the relevant assessment year on the ground that the declaration is not in order, then the order becomes appealable under section 246(j). We do not see any reason why in this particular case the appeal should not lie.

13. In this connection, it has been urged by learned counsel for the Department that there was no defect in the declaration as such and the only defect was in the late filing of the declaration. It is urged that this is not a defect in the application, but a failure to file the declaration within the correct time. As we see it, the wording of the section is such that the Income-tax Officer has to examine whether the declaration is in order. A declaration is in order because of its contents and also because it is properly filed. Suppose it is filed to the wrong authority, suppose it is incomplete, suppose it relates to the wrong year or is filed beyond time. Any of these defects will make the application out of order requiring communication of the defect to give an opportunity to rectify the defect. The contents of Form No. 12 show that it has to be verified as provided by rule 24 of the Income-tax Rules, 1962, personally by all the partners. For some reasons, there may be delay in getting the signatures of one of the partners; he may be outside station or, he may be out of the country or, he may be ill. These will all lead to the declaration being filed late. Nevertheless, this will be a defect making the decision order'. The purpose of sub-section (3) is to permit the assessed to correct the form. If the form can be corrected by making the necessary correction in the form, it is a simple matter. If the contents of the form are alright leading to its being filed late, then the defect can be remedied by showing either that it is actually within time or by showing sufficient cause that the time should be extended. The question whether it is actually filed within time or whether the time should be extended raises questions relating to the form being in order or not in order. As observed already, if the form is not in order according to the Income-tax Officer and the time is also not extended, he can say that the firm is to be treated as an unregistered firm. This order becomes appealable under section 246(j) or 246(c). We do not think that the words 'considers that the declaration furnished by a firm in pursuance of sub-section (7) of section 184 is not in order' should be limited only to the case where there is a defect in the form, and are not to apply when the form is filed late.

14. We can draw a parallel where appeals are filed before civil courts. If the appeal is filed beyond time, the court will reject the appeal under the provisions of the Limitation Act. Before rejecting the appeal on the ground of its being barred by time, the court has the power to return it under Order 41, rule 3 of the Code of Civil Procedure for amendment. The new provisions of Order 41, rule 3A, provide that an application for condoning the delay is to be filed along with the appeal. So, if the appeal is returned on the ground that it is barred by time, the appellant can file an application for extension of limitation under section 5 of the Limitation Act or any other provision that may be applicable. If no such application for extension is filed, then the court may reject the appeal.

15. There is a similarity, we think, in regard to the procedure to be followed by the Income-tax Officer under section 184(7). If the declaration is rejected on the ground that it is barred by time, then a further appeal will certainly lie on the ground that the declaration has been wrongly rejected, either under section 246(c) or section 246(j).

16. We accordingly answer the question referred to us in the negative, in favor of the assessed and against the Department.

17. The conclusion will be that the Tribunal will now examine the appeal on merits. We make no order as to costs.


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