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Commissioner of Income-tax Vs. K. Damodaran Nair - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKerala High Court
Decided On
Case NumberIncome-tax Reference No. 98 of 1978
Judge
Reported in[1981]130ITR682(Ker)
ActsIncome Tax Act, 1961 - Sections 184, 184(4), 185, 185(1) and 246; Income Tax Rules, 1962
AppellantCommissioner of Income-tax
RespondentK. Damodaran Nair
Appellant Advocate P.K. Ravindranatha Menon, Adv.
Respondent Advocate V. Rama Shenoi, Adv.
Excerpt:
.....under section 246(j). hence, this is a case where the order is in purport as well as in fact one passed by the ito only under section 185(l)(b) of the act. the conclusion recorded by the tribunal that the appeal filed by the assessee against the said order before the aac was maintainable in law, is perfectly correct......objection was taken on behalf of the department that the second appeal did not lie, since the appeal filed by the assessee before the aac was incompetent inasmuch as the act does not provide for any appeal being filed against an order passed by the ito under sub-section (4) of section 184 of the act refusing to accept a declaration filed under the proviso to the said sub-section beyond the time limit prescribed therein. the tribunal overruled this objection following an earlier decision rendered by it in i.t.a. no. 162 (coch)/76-77, wherein it had been held that an order passed by the ito refusing to condone the delay in furnishing a declaration under section 184(4) was appealable, it being in substance an order refusing registration. the correctness of the said view taken by the.....
Judgment:

Balakrishna Eradi, C.J.

1. The Income-tax Appellate Tribunal, Cochin Bench (hereinafter called 'the Tribunal') has referred to this court under Section 256(1) of the I.T. Act, 1961--for short, ' the Act '--the following question of law as arising out of the order dated December 12, 1977, passed by it in I.T.A. No. 588/Coch/76-77:

'Whether, on the facts and in the circumstances of the case, an appeal would lie before the Appellate Assistant Commissioner and a further appeal before the Appellate Tribunal as against the refusal by the Income-tax Officer to entertain the application for registration ?'

2. The assessee is a firm and the assessment year with which we are concerned is 1973-74. Registration had been given to the firm for the accounting year which ended on December 31, 1969 (assessment year 1970-71), and continuance of that registration was allowed till the assessment year 1972-73. On November 4, 1972, a deed of dissolution was executed by the four partners of the firm, the accounts of the firm were closed and a profit and loss account and balance-sheet were drawn up. On December 2, 1972, three of the erstwhile partners constituted themselves into another firm by a deed executed on that day and the said firm took over the business of the dissolved firm with effect from November 5, 1972. The result was that though the business continued, there was a change in the constitution of the firm during the accounting period relevant to the assessment year 1973-74.

3. On July 23, 1973, a return was filed showing the profits of the dissolved firm for the period from January 1, 1972, to November 4, 1972, for the purposes of its assessment for the year 1973-74. An application in Form No. 12 for continuation of the benefit of registration had been filed on June 14, 1973.

4. The assessment proceedings of the firm for the year 1973-74 were taken up by the ITO only some time in November-December, 1975. The ITO was of the opinion that, in view of the change in the constitution of the firm that had come about during the course of the relevant accounting period, the assessee ought to have filed an application for registration in Form No. 11A and this was communicated to the assessee by a letter dated December 30, 1975. Thereupon the assessee filed an application for registration in Form No. MA on January 26, 1976, and requested for condonation of the delay. The ITO rejected that application as per an order dated 19th March, 1976 (annex. 'C'), the ground of rejection stated therein being that there had been inordinate delay on the part of the assessee in filing the said application for registration in Form No. 11A. The heading given to the order shows that it was one passed underSection 185(1)(b) read with Section 184(4) of the Act and the order concludes with the operative words 'In the result, the application for registration is dismissed', thereby clearly indicating that it was an order passed in exercise of the powers conferred on the ITO bySection 185 of the Act. The assessee preferred an appeal before the AAC complaining against the rejection of his prayer for the grant of registration. That appeal having been dismissed by the AAC, the assessee carried the matter in second appeal before the Tribunal. In that appeal a preliminary objection was taken on behalf of the department that the second appeal did not lie, since the appeal filed by the assessee before the AAC was incompetent inasmuch as the Act does not provide for any appeal being filed against an order passed by the ITO under Sub-section (4) of Section 184 of the Act refusing to accept a declaration filed under the proviso to the said sub-section beyond the time limit prescribed therein. The Tribunal overruled this objection following an earlier decision rendered by it in I.T.A. No. 162 (Coch)/76-77, wherein it had been held that an order passed by the ITO refusing to condone the delay in furnishing a declaration under Section 184(4) was appealable, it being in substance an order refusing registration. The correctness of the said view taken by the Tribunal forms the subject-matter of the present reference made to this court.

5. The correctness of the view taken by the Tribunal in the order passed by it in I.T.A. No. 162 (Coch)/1976-77 came up for examination by this court in I.T.R. No. 129 of 1978 [CIT v. Tirur Medical Hall : [1980]126ITR395(Ker) ], wherein the following question of law had been referred by the Tribunal to this court at the instance of the Commissioner as arising out of the aforesaid order of the Tribunal in I.T.A. No. 162 (Coch)/1976-77 :

'Whether, on the facts and circumstances of the case, the appeal preferred by the assessee to the Appellate Assistant Commissioner against the order passed by the Income-tax Officer declining to condone the delay in the filing of the application for registration and, consequently, refusing registration for the assessment year 1974-75 was competent?'

6. In that case, as in the present one, the order passed by the ITO was specifically expressed as one made in exercise of the power conferred by Section 185(1)(b) of the Act. This court in its judgment dated 16th June, 1980, pointed out that there is a well-established principle that where a court or Tribunal acts under an appealable provision of law and passes an order, a party is not deprived of the right of appeal, though, on facts, that order should not have been passed under that provision and that the right to appeal depends on what the court or Tribunal actually does, and not what it should have been done. Accordingly, it was held that inasmuch as the ITO had passed the order, the appealability of which was in question in that case, specifically in the exercise of his powers under Section 185(1)(b), the appeal filed by the assessee before the AAC was maintainable under Section 246(j) of the Act.

7. The present case is fully governed by the aforesaid dictum. The facts of this case are even stronger than those which were present before this court in ITR No. 129 of 1978 [CIT v. Tirur Medical Flail : [1980]126ITR395(Ker) ], because, in the present case, the order in question was passed not on the application filed by the assessee for acceptance of the declaration referred to in the proviso to Sub-section (4) of Section 184 beyond the time-limit prescribed therein, but on a separate application filed by the assessee in Form No. 11A for the grant of fresh registration in compliance with the instruction issued to the assessee by the ITO as per his letter dated December 30, 1975. An order rejecting an application filed in Form No. 11A for the grant of fresh registration can be passed by the ITO only underSection 185 of the Act and such an order is clearly appealable under Section 246(j). Hence, this is a case where the order is in purport as well as in fact one passed by the ITO only under Section 185(l)(b) of the Act. The conclusion recorded by the Tribunal that the appeal filed by the assessee against the said order before the AAC was maintainable in law, is perfectly correct. We, accordingly, answer the question referred in the affirmative, i.e., in favour of the assessee and against the department. The parties will bear their respective costs.

8. A copy of this judgment, under the seal of this court and the signature of the Registrar, will be forwarded to the Tribunal, as required by law.


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