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Commissioner of Income-tax Vs. Pushpaka Travels - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKerala High Court
Decided On
Case NumberIncome-tax Reference No. 50 of 1979
Judge
Reported in[1985]152ITR717(Ker)
ActsIncome Tax Act, 1961 - Sections 184(7), 185(3), 185(3) and 246
AppellantCommissioner of Income-tax
RespondentPushpaka Travels
Appellant Advocate P.K.R. Menon, Adv.
Respondent Advocate P.S. Narayanan, Adv.
Cases ReferredAshwani Kumar Maksudan Lal v. Addl.
Excerpt:
.....originally or on extension) for furnishing the return of income for such subsequent assessment year, a declaration to that effect, in the prescribed form 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 made. (ii) enables the ito to allow the assessee to furnish the declaration even after the prescribed time, but before the assessment is made, if he is satisfied that the firm was prevented by sufficient cause from furnishing the declaration within the time prescribed. however, the ito has power to receive a declaration furnished beyond that..........originally or on extension) for furnishing the return of income for such subsequent assessment year, a declaration to that effect, in the prescribed form 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 made. 185. procedure on receipt of application.--...(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.....
Judgment:

George Vadakkel, J.

1. This a reference at the instance of the Revenue. The assessee is a firm of five partners carrying on the business of passenger transport. The firm was constituted under a partnership deed dated September 15, 1971. For the assessment year 1974-75, the assessee filed the return on October 22, 1974, along with a declaration in Form No. 12. The ITO held that there is no satisfactory explanation for condoning the delay in furnishing the declaration in Form No. 12. Therefore, by annexure A order dated September 5, 1975, the ITO informed the assessee that continuation of registration is not granted to the assessee for the assessment year 1974-75. The assessee took up the said order in appeal before the AAC. By the said appeal (grounds of appeal is annexure B), the assessee prayed that 'the order refusing continuation of registration may be set aside and the appeal allowed'. The AAC by annexure C order took the view that there was no delay in filing the declaration in Form No. 12 and directed the ITO to allow continuation of registration for the appellant-firm. The Revenue preferred a second appeal before the Appellate Tribunal contending that annexure A order of the ITO is not an appealable order. The Income-tax Appellate Tribunal by annexure A order held that the said order is appealable. Holding so, the Tribunal dismissed the Departmental appeal. The Revenue sought for a reference of the matter to this court under Section 256(1) of the I.T. Act, 1961. Accordingly, the Income-tax Appellate Tribunal, Cochin Bench, has referred the following question to this court :

'Whether the appeal to the Appellate Assistant Commissioner against the order of the Income-tax Officer dated September 5, 1975, declining to grant continuation of registration to the assessee for the assessment year 1974-75 was competent?'

2. The relevant provisions governing the case on hand are Sections 184(7), 185(3), 185(4) and 246(j). We may read these sections:

'184. Application for registration.--...(7) Where registration is granted to any firm for any assessment year, it shall have 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 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 made.

185. Procedure on receipt of application.--...(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; arid 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,

246. Appealable orders.--Any assessee aggrieved by any of the following orders of an Income-tax Officer may appeal to the Appellate Assistant Commissioner against such order--... (j) an order under Clause (b) of Sub-section (1) or under Sub-section (2) or Sub-section (3) or Sub-section (5) of Section 185.'

3. The question for consideration is as to whether the order passed by the IXO holding that there is no satisfactory explanation for condoning the delay in filing the declaration in Form No. 12 and that, therefore, continuation of registration is not granted to the assessee for the assessment year 1974-75, is an order falling under Section 246(j). The contention on behalf of the assessee is that the said order is an order falling under Sub-section (3) of Section 185 and that, therefore, the same is an appealable order.

4. Under Sub-section (7) of Section 184, the registration granted to any firm for any assessment year shall have effect for every subsequent assessment year provided the conditions specified in Clauses (i) and (ii) of the proviso thereto are obtained. Condition No. (ii) is that the assessee should furnish before the prescribed period a declaration to the effect that there is no change inthe 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. Condition No. (ii) enables the ITO to allow the assessee to furnish the declaration even after the prescribed time, but before the assessment is made, if he is satisfied that the firm was prevented by sufficient cause from furnishing the declaration within the time prescribed. In the instant case, no declaration was furnished within time. It is on that account and for that reason, the ITO said that continuation of registration is not granted to the assessee for the assessment year 1974-75. Is this an order contemplated by Sub-section (3) of Section 185 is the question that falls to be decided.

5. Sub-s. (7) of Section 184 does not in fact provide for the passing of any order by the ITO. That section says that registration to the firm once granted shall have effect for every subsequent assessment year provided the conditions mentioned in the proviso thereto are obtained. One of the conditions as mentioned earlier is furnishing of the declaration in Form No. 12. There is a time-limit for furnishing of that declaration. However, the ITO has power to receive a declaration furnished beyond that time, but at any time before the assessment is made provided he is satisfied that the firm was prevented by sufficient cause from furnishing the declaration within the time allowed. Section 185 provides for the procedure on receipt of an application for registration of the firm and on receipt of the declaration furnished by the firm as envisaged by Section 184(7) of the Act. Sub-section (3) of Section 185 says that if the ITO is of the view that the declaration furnished by a firm under Sub-section (7) of Section 184 is not in order, he shall intimate the defect to the firm giving the firm an opportunity to rectify the defect in the declaration within a period of one month from the date of such intimation. Sub-section (3) further says that if the defect is not rectified within the period of one month from the date of such intimation, the ITO shall in writing declare that the registration granted to the firm shall not have effect for the relevant assessment year. The submission on behalf of the assessee is that annexure A order passed by the ITO is one falling under Sub-section (3) of Section 185 of the Act. The Revenue contends that in so far as annexure A order has been passed declaring that the registration granted to the firm shall not have effect for the relevant assessment year (1974-75) for the reason that a declaration in Form No. 12 was not furnished within the time allowed, and consequent upon the fact that the ITO was not satisfied that the firm was prevented by sufficient cause from furnishing the declaration within the time allowed, the said order cannot be said to be an order passed by the ITO on account of the fact that the assessee failed to rectify 'the defect' within the period of one month from the date of such intimation. In other words, the submission is that the delay in furnishing the declaration in Form No. 12 is not 'a defect'falling under Sub-section (3) of Section 185 ; that furnishing of a belated declaration after the time allowed in that behalf does not call for giving an opportunity to the assessee to rectify the same; and that there is no question of the assessee rectifying the delay in furnishing the declaration in Form No. 12. In short, the submission is that ' the defect' mentioned in Sub-section (3) of Section 185 is a defect that can be rectified by the assessee and is not such a defect which could be rectified depending upon the satisfaction or otherwise of the ITO on the question as to whether the firm was prevented by sufficient cause from furnishing the declaration within the time allowed. The learned counsel for the Revenue argues that where the exercise of the ITO's discretion to allow the assessee or not to allow the assessee to furnish the declaration is called for, the same would not be a defect which the ITO should intimate to the assessee giving him an opportunity to rectify the same and on default of which, the ITO could pass the order contemplated by Sub-section (3) to Section 185 declaring that the registration granted to the firm shall not have effect for the relevant assessment year.

6. It appears to us that there is force in the argument advanced on behalf of the Revenue as aforesaid. 'The defect' mentioned in Sub-section (3) of Section 185 is a defect that can be rectified by the assessee without invoking the discretionary jurisdiction of the ITO. So viewed, it cannot be said that the delay in furnishing the declaration in Form No. 12 as required by condition No. (ii) to attract Section 184(7) is a defect coming under Section 185(3) of the Act. If that be so, there is no question of the ITO giving the assessee an opportunity to rectify the defect in the declaration within a period of one month from the date of such intimation. Consequently, there is also no question of the ITO declaring that the registration granted to the firm shall not have effect for the relevant assessment year for the reason that the defect has not been rectified by the assessee within the period of one month from the date of such intimation.

7. In this connection, we may refer to Sub-section (4) of Section 185. That provision as is follows :

'185. Procedure on receipt of application.--(4) Where a firm is registered for any assessment year, the Income-tax Officer shall record a certificate on the instrument of partnership or on the certified copy submitted in lieu of the original instrument, as the case may be, to the effect that the firm has been registered under this Act, for that assessment year ; and where a declaration under Sub-section (7) of Section 184 is furnished by the firm, for the relevant subsequent assessment year.'

8. Under this provision where a declaration under Sub-section (7) of Section 184 is furnished by the firm and the same is in order, or where the same is defective and the defect has been rectified by the assessee, the ITO has to record a certificate on the instrument of partnership or on the certified copy submitted in lieu of the original instrument, as the case may be, to the effect that the firm has been registered under the I.T. Act 'for the relevant subsequent assessment year'. Where no such declaration has been furnished, or where such a declaration furnished is out of time and, therefore, such a declaration is not acted upon, no order by the ITO is contemplated to the effect that 'the registration granted to the firm shall not have effect for the relevant assessment year'. The scheme of the Act is such, that, in such a case, Sub-section (7) of Section 184 shall not be attracted, even though no specific or express order to that effect is passed in that behalf.

9. The view we have taken that the delay in furnishing the declaration is not a defect falling under Section 185(3) is supported by the decision of the Madras High Court in A. S. S. 5. S. Chandrasekaran & Bros. v. CIT : [1974]96ITR711(Mad) . Discussing the question as to whether the ITO's order rejecting the assessee's application for registration as time-barred is an appealable order, that court said that the defects contemplated under Sub-sections (2) and (3) of Section 185 relate to formal defects when the application is filed in time and do not relate to the application being out of time. We are in full agreement with the view expressed by the Madras High Court as aforesaid. The Allahabad High Court in Ashwani Kumar Maksudan Lot v. Addl. CIT : [1972]83ITR854(All) , has held that there is no right of appeal from the refusal of the ITO to record a certificate on the declaration filed by an assessee under Section 184(7) of the Act for the continuance of the registration of the firm though the matter may be taken to the Commissioner by way of a revision petition. In New Orissa Traders v. CIT : [1977]107ITR553(Orissa) , the Orissa High Court also has taken the same view with reference to the rejection of an application for registration by the ITO.

10. The assessee's learned counsel relied on the decision of the Gujarat High Court in CIT v. Dineshchandra Industries : [1975]100ITR660(Guj) , of the Andhra Pradesh High Court in Addl CIT v. Chekka Ayyanna : [1977]106ITR313(AP) , of the Allahabad High Court in ITO v. Vinod Krishna Som Prakash : [1979]117ITR594(All) and of the Punjab and Haryana High Court in CIT v. Beri Chemical Industries .

11. In CIT v. Dineshchandra Industries : [1975]100ITR660(Guj) , the Gujarat High Court answered the question as to whether an appeal would lie against the order of the ITO under Section 184(4) of the Act to the AAC. Noticing that the scheme of the 1922 Act was such that 'any order refusing to grant registration under Section 26A, which may be for the reasonof dissatisfaction of the Income-tax Officer as to the existence of the partnership firm, or its constitution, or due to the application being not in order, or properly made, was appealable under Section 30' of that Act, the said High Court took the view that there was no 'justifiable reason for Parliament to make a departure from that scheme as contained in the 1922 Act and adopt a scheme where, as contended by the Revenue, the only competent appeal would be against the order of the Income-tax Officer refusing registration on the ground of genuineness of the firm or its constitution'. In so far as an appeal is a creature of statute and unless the statute provides for an appeal, one would have no right of appeal, we are not prepared to go into the question as to whether there was any 'justifiable reason for Parliament to make a departure from the scheme contained in the 1922 Act'. We have already discussed the several provisions in the 1961 Act governing the question arising for consideration. Section 246(j) is clear on the point and does not provide for any appeal from an order falling under Section 184(4) of the Act.

12. The Andhra Pradesh High Court in Addl. CIT v. Chekka Ayyanna : [1977]106ITR313(AP) proceeds on the basis that the expression 'defect' occurring in Section 185(3) of the Act would take in a defect such as bar of limitation. We have already adverted to this aspect and taken the view that that word in Section 185(3) of the Act would not be attracted to a case where the declaration under Sub-section (7) of s, 184 is not furnished by the firm within time. In so doing, we followed the view taken by the Madras High Court in S. Chandrasekaran and Bros. v. CIT : [1974]96ITR711(Mad) . Therein that court with reference to Section 184(4) said as follows (p. 712) :

'It is seen from this provision that, in order to entertain an application for registration, it should have been presented before the end of the previous year for the assessment year in respect of which registration was sought. If there was any delay in filing the application and the delay is explained to the satisfaction of the Income-tax Officer, he could entertain the application even after the end of the previous year. Only after the application is entertained as being in time and requires to be considered on merits, it can be dealt with under Section 185. Section 185 deals with disposal of an application on entertainment of the same on merits while Section 184(4) has no concern with the merits of the application for registration. If the application was not in time and the delay in filing the same has not been excused by the Income-tax Officer, there is no application in the eye of law to be dealt with under Section 185.'

13. The same is the position where the declaration submitted under Section 184(7) is belated and the ITO is not satisfied that the firm was prevented by sufficient cause from furnishing the declaration within the time allowed.

14. Therefore, he does not allow the firm to furnish the declaration at all. In such a case Sub-section (7) of Section 184 would not be attracted and the registration granted for the previous year shall have no effect in the relevant subsequent year.

15. It is not clear from the decision of the Allahabad High Court in ITO v. Vinod Krishna Som Prakash [1919] 117 ITR 594 as to whether the appeal was preferred from the assessment order itself, which had assigned to the firm the status of an unregistered firm for the reason that the ITO refused to condone the delay in the matter of filing the declaration in Form No. 12. The decision proceeds as if Section 246(c) of the Act governs and says (p. 597) :

'If the assessee claims that it was not liable to be assessed as an unregistered firm but was entitled to be assessed as a registered firm, the claim relates to the status under which the assessee is assessed within the meaning of Clause (c) aforesaid. The assessment order itself could be appealed against on the ground that the assessee was assessed in a wrong status. Since the main reason was the refusal to condone the delay which led to the assessment as an unregistered firm, the same could be questioned in an appeal under Clause (c). The order refusing to condone the delay was hence appealable to the AAC under Clause (c) as well.'

16. As regards the proposition that the refusal to condone the delay which led to the assessment as an unregistered firm could be questioned in an appeal against the assessment order under Clause (c), there can be no dispute. But we do not see how an order refusing to condone the delay falls under that clause. The said decision only follows the decision in Addl. CIT v. Chekka Ayyanna : [1977]106ITR313(AP) and does not refer to the earlier decision of that court in Ashwani Kumar Maksudan Lal v. Addl. CIT : [1972]83ITR854(All) . The decision of the Punjab and Haryana High Court in CIT v. Beri Chemical Industries holds that the order passed by the ITO refusing to entertain the belated application of the assessee under the proviso to Sub-section (4) of Section 184 tantamounted to an order under Section 185(1)(b) and that, therefore, an appeal is maintainable against such an order. As earlier pointed out, the provision for appeal in Section 246(j) of the Act does not provide for an appeal from an order under Section 184(4) refusing to condone the delay in filing that application. We may, in this connection, point out that the word used in the proviso to Section 184(4) is 'entertain', that proviso enables the ITO to entertain an application made after the end of the previous year on his being satisfied that the firm was prevented by sufficient cause from making an application before the end of the previous year. The word 'entertain' means to admit for consideration. So viewed, it cannot be said that where an application forcondoning the delay is dismissed, the main application under Section 184(4) has been 'entertained' by the ITO.

17. Now, it is necessary to advert to the decisions of this court in CIT v. Tirur Medical Hall : [1980]126ITR395(Ker) , CIT v. Kepeecee Trading Co. : [1981]129ITR124(Ker) and CIT v. Damodaran Nair : [1981]130ITR682(Ker) . These decisions take the view that the concerned order passed by the ITO proceeded on the basis that they were purported to have been passed by the concerned ITO only under Section 185(1)(b) and that, therefore, an appeal from such an order lay to the AAC. This court in these decisions proceeded on the basis of the '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'. Applying the aforesaid principle, this court in all the three cases said that since the ITO has passed the order specifically in exercise of his powers under Section 185(1)(b) of the Act, the appeal filed by the assessee before the AAC was maintainable under Section 246(j) of the Act.

18. We have already adverted to annexure A order. It does not purport to have been passed under Section 185(1)(b) of the Act. It does not refer to any provision in the Act at all. Therefore, the principles applied by this court in the three decisions mentioned above in the preceding paragraph are not attracted to the case on hand.

19. In the result, we answer the question referred to us in the negative, that is to say, in favour of the Revenue and against the assessee. There will be no order as regards costs.

20. 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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