B.K. Mehta, J.
1. The following two questions have been referred to us for our opinion :
'1. Whether, on the facts and in the circumstances of the case, the Tribunal erred in law in rejecting the preliminary objection raised on behalf of the revenue that no appeal lay against the order of the Income-tax Officer under section 184(4) of the Act to the Appellate Assistant Commissioner
2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in setting aside the Income-tax Officer's order declining to grant registration and in directing the Income-tax Officer that he should give a proper opportunity to the assessee to file a correct application for registration and consider it and then pass a respond and legal order ?'
2. These two questions arise in the following circumstances :
The assessee is a firm consisting of four partners. It made a return of its total income of 30th June, 1964, along with a declaration in Form No. 12 for renewal of the registration under section 184(7). It appears that the assessee further filed an application for registration in Form No. 11 on July 7, 1968, along with a copy of the a partnership deed. The Income-tax Officer concerned considered only the application made in Form No. 11 which was filed for purposes of obtaining registration. Since the original partnership deed was not annexed with the said form, the Income-tax Officer called upon the assessee to show cause why registration should not be refused. On behalf of the assessee, it was contended before the Income-tax Officer that the assessee had filed registration application in time through its income-tax practitioner to whom the work was entrusted : but as the assessee was not aware of the technicalities since the partners had migrated to India from Aden, the assessee had made an application for obtaining the registration in Form No. 11. The Income-tax Officer, however, in the absence of any evidence, refused to condone delay in filing the application and treated the firm as unregistered firm. The assessee, therefore, carried the matter in appeal before the Appellate Assistant Commissioner. The appeal was described as one under section 143 (3) read with section 184(4) of the Income-tax Act, 1961. In the course of hearing of the appeal, it was clarified before the Appellate Assistant Commissioner that the assessee had filed an application for registration for the earlier assessment year 1963-64 and, therefore, a declaration for continuation of registration under section 184(7) was filed along with the return for the assessment year under reference. The assessee came to know subsequently that its tax consultant had not filed application for registration for the earlier year, and, therefore, the assessee filed fresh application for registration. The Appellate Assistant Commissioner asked the assessee to substantiate its application by producing an affidavit from the tax consultant concerned. No affidavit was filed by the tax consultant with the result that the Appellate Assistant Commissioner confirmed the order of the Income-tax Officer.
3. The assessee, therefore, took the matter before the Tribunal. A preliminary objection was raised on behalf of the revenue that no appeal was competent against an order of the Income-tax Officer refusing to condone delay under section 184(4) of the Income-tax Act, 1961. The Tribunal however, held from the facts before it that the preliminary objection of the revenue was not sustainable. The Tribunal was also of the opinion that the Income-tax Officer concerned should have given an opportunity to the assessee to file a proper application in consonance with the departmental instructions in this behalf. The Tribunal, therefore, directed the Income-tax Officer to give a proper opportunity to the assessee to file a correct application for registration and to consider it a fresh and pass a reasoned and legal order thereon. At the instance of the revenue, the questions set hereinabove have been referred to us for our opinion.
4. A short contention which has been urged by Mr. Kaji, the learned advocate appearing on behalf of the revenue, is that no appeal is competent against the order of the Income-tax Officer refusing to condone delay under section 184(4) of the Income-tax Act, 1961, and, therefore, the Tribunal was not justified in reaching the conclusion that such an appeal was a competent appeal. In any case, it was urged on behalf of the revenue by Mr. Kaji that the Circular bearing No. 3-P (XXV-22) of 1964, dated the 29th July, 1964, by the Central Board of Direct Taxes, New Delhi, on which the Tribunal relied for purposes of its finding that the Income-tax Officer did not give an opportunity to the assessee concerned for purposes of making a proper application according to the departmental practice indicated in the aforesaid circular was also not justified, inasmuch as the circular applied only those cases where application for registration by a firm for any assessment year was pending and a declaration for continuation of such registration under section 184(7) of the Income-tax Act, 1961, was sought for. Since it is an admitted position here that there was no registration application made on behalf of the assessee-firm in the previous assessment years, there was no question of application of the circular in question.
5. The only question to which we have, therefore, to address ourselves is, whether an appeal is competent against the order of the Income-tax Officer refusing to condone delay under section 184(4) The provisions as to the registration of a firm and the procedure to be adopted by the taxing authorities on the application for registration are contained in section 184 and 185 of the Income-tax Act, 1961. For purposes of obtaining a registration under section 184, the assessee-firm has to make application to the Income-tax Officer if the partnership is evidenced by an instrument in writing and the individual shares of the partners are specified in the instrument. Such an application should be made either during the existence of the firm or after its dissolution. The application for registration is to be made to the Income-tax Officer having jurisdiction to assess the firm which applies for registration. It is to be signed by all the partners personally or in case of a dissolved firm by all persons who were partners of the firm immediately before its dissolution, and by the legal representative of any deceased partner. Such an application should be signed by a person duly authorised by a partner if he is absent from India or is a lunatic or an idiot. Sub-section (4) of section 184 thereafter prescribes the time during which such an application for registration is to be made. It reads :
'(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.'
6. It is also required by sub-section (5) of section 184 that such application should be accompanied by original instrument evidencing the partnership together with a copy thereof. Such application is to be made in a prescribed form and is required to contain the prescribed particulars. If the partnership firm in question is granted registration for any assessment year, it is provided by sub-section (7) of section 184 that such registration shall have effect for every assessment year, provided that there is no change in the constitution of the firm or change in the shares of the partners in the firm; and the firm furnished along with its return of income for the assessment year concerned a declaration to that effect in the prescribed form and verified in the prescribed manner. If any change takes place in the previous year, the firm has to apply for fresh registration for the assessment year concerned.
7. The procedure, which the Income-tax Officer has to follow on receipt of the application, is prescribed in section 185. On receipt of an application, the Income-tax Officer has to inquire about the two fact, namely, (1) genuineness of the firm, and (2) its constitution, as may be specified in the instrument. If on such inquiry he is satisfied that there is or was during the previous year in existence a genuine firm with the constitution so specified, he will grant registration; if he is not satisfied, he will pass an order refusing to grant registration. By sub-section (2) of section 185, it has been made obligatory on the Income-tax Officer that he would not reject an application for registration merely on the ground that such application is not in order, but he is required to indicate the defect to the assessee and give an opportunity to rectify such defect. In spite of this opportunity, if the assessee does not rectify the defect, the Income-tax Officer may reject the application for registration. If the Income-tax Officer grants registration, he is required 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, for the assessment year or for the relevant subsequent assessment year. The Income-tax Officer has a discretion to refuse to register the firm for the assessment year if there is any failure as mentioned in section 144 on the part of the assessee. These are in short the provisions about the procedure for making an application for registration and the procedure of inquiry into the said matter by the Income-tax Officer.
8. Section 246 of the Income-tax Act, 1961, prescribes different types of orders against which an appeal is provided. The relevant clause for purposes of this reference in clause (j) of section 246, where an appeal is provided against the order refusing to register a firm under clause (b) of sub-section (1), or sub-section (5) of section 185. The short contention of the revenue, therefore, is that since no appeal is provided against an order of the Income-tax Officer refusing to condone delay under the proviso to section 184(4), the Tribunal was not justified in holding that such an appeal was competent.
9. It appears that the Tribunal was of the opinion that the Income-tax Officer should have given an opportunity to the assessee to file a proper application in consonance with the departmental instruction, because the assessee had filed an application under section 184(7) in time. Mr. Kaji on behalf of the revenue was right to the extent to which he contended that the Tribunal was not justified in observing that the Income-tax Officer was bound to give an opportunity to the assessee to file a proper application according to the departmental practice indicated in the circular referred to hereinabove. Mr. Kaji was right that this circular provides for the contingency which arises in a case where a firm has filed an application for registration for the first time and such an application has not been disposed of by the Income-tax Officer, and the question is whether such a firm has to file a fresh application for registration or should merely annex a declaration for continuation of registration for the subsequent assessment years. The aforesaid circular, therefore, would not apply in the facts of this case, where, admittedly, the position was that no application at all was made by the assessee in the preceding years. It was clarified in the course of the hearing before the Appellate Assistant Commissioner that no application for registration was made by the tax consultant in that preceding assessment years on behalf of the assessee-firm. Clearly, therefore, the Tribunal was not justified for purposes of finding out what is the departmental practice in this connection to rely on the aforesaid circular. None the - less the question remains, whether an appeal against the order refusing to condone delay is competent or not. In this connection, we have to read the provisions contained in section 185(1) (a) and (b) which prescribe the procedure to be followed by the Income-tax Office has to scrutinise the application for purposes of satisfying himself as to the fact of genuinensess of the firm and its constitution. He may satisfy himself by considering the original instrument and the application filed for registration containing the prescribed particulars. The result of his inquiry may be that he may be satisfied about the genuineness of the firm and its constitution, or he may not be satisfied about these two points. If he is satisfied, he grants the registration. If he is not satisfied that there is or was during the previous year in existence a genuine firm with the constitution so specified, he may pass an order in writing refusing to register the firm. This satisfaction or dissatisfaction may arise out of different circumstances in different cases. He may not find himself satisfied if the original instrument is not produced; he may not be satisfied because there are circumstances which may indicate, in a given case, that there was or is no existence of a genuine firm; and he may not be satisfied from the fact of the application being not there at all or not there within the prescribed time or not. The causes of dissatisfaction vary from case to case. Ultimately, his satisfaction or dissatisfaction is as regards the fact of genuineness of the firm and/or its constitution. The contention on behalf of the revenue that the only firm of inquiry open to the Income-tax Officer is about the genuineness of the firm and its constitution, and if he is satisfied about the genuineness of the firm and its constitution, he may grant registration, or in case of his dissatisfaction, he may refuse registration. There is no disagreement on this point that it is ultimately with an object to find out whether the firm is genuine or not, and whether its constitution is as specified in the instrument or not, that the Income-tax Officer makes inquiry. But the ultimate result of satisfaction or dissatisfaction may arise out of different causes. The satisfaction or dissatisfaction is the result of the inquiry into these different causes. If that is the correct reading of section 185(1) (a) and (b) and we are of the opinion that it is so, then the order passed by the Income-tax Officer under section 185(1) (b) refusing to register the firm would be clearly appealable under section 246(j). We have also considered as to what was the scheme of the section providing for appeal under the 1922 Act. The position under the 1922 Act was that, under section 30 of the said Act, an appeal was provided against an order refusing to register the firm under section 26A. Now section 26A of the said Act was a section in general terms where the procedure for registration of firm was prescribed. Under section 26A, applications were to be made to the Income-tax Officer on behalf of any firm constituted under an instrument of partnership specifying the individual shares of the partners for registrations for purposes of the Act and of any enactment for the time being in force relating to income-tax or super-tax. Under sub-section (2) of section 26A of the 1922, Act, such application was to be made by such person or persons and at such time or times and containing such particulars and in such form and verified in such manner as may be prescribed, and was to be dealt with by the Income-tax Officer in such manner as prescribed. Rule 3 of the Indian Income-tax Rules, 1922, prescribed the particulars which were to be furnished in the application for registration and the time within which such application was to be made. A proviso similar to the one contained in section 184(4) is also to be found in rule 2 of the Indian Income-tax Rules, 1922, where the Income-tax Officer was empowered to entertain in application made after expiry of time limits specified in the rule if he was satisfied that the firm was preceded by sufficient cause from making the application within the specified time. Rule 4 of the said rules prescribed the procedure which the Income-tax Officer had to follow on receipt of such an application. If the Income-tax Officer was satisfied that there was a firm in existence constituted as shown in the instrument of partnership and that the application had been properly made, he would enter in writing at the foot of the instrument or certified copy a certificate of registration. If the Income-tax Officer was not so satisfied, he would pass an order in writing refusing to recognise the instrument of the partnership firm and refusing to grant certificate of registration. We are, therefore, of the opinion that having regard to the scheme of appeals under the 1922 Act, any order refusing to grant registration under section 26A, which may be for the reason of 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.
10. According to section 31 of the 1922 Act, the Appellate Assistant Commissioner may in an appeal against an order refusing to register a firm under sub-section (4) of section 23 or section 26A confirm such an order or cancel it and direct the Income-tax Officer to register the firm. It is, therefore, clear to us that the scheme under the Act of 1922 was that an appeal was competent against the order refusing to register a firm. The procedure prescribed for purposes of making an application for registration and the procedure for making an inquiry in matters of registration, were contained in the rules prescribed in that behalf under the said Act. By and large, those very provisions contained in the rules have now been incorporated in sections 184 and 185 of the 1961 Act. We do not see any 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 genuinenss of the firm or its constitution. In this connection, reliance was placed by the Tribunal and also by the learned advocate on behalf of the revenue here on the decision of the Allahabad High Court in Ashwani Kumar Maksudan Lal v. Additional Commissioner of Income-tax, Where the court was concerned with a question as to whether an appeal was competent against the order made by the Income-tax Officer under section 184(7) of the 1961 Act. We have not been able to appreciate how this decision can be of any assistance to the cause of the revenue. Section 184(7) provides for effectiveness of the registration granted to any firm for any assessment year for every subsequent year on the satisfaction of the conditions mentioned in the proviso to the said sub-section (7). The registration granted in any assessment year is effective for that assessment year only and it would have been so but for the provision contained in sub-section (7) of section 184. In order that a registration once granted to the firm may continue to be effective for the subsequent year, a provision is made in sub-section (7) where for effective continuance of the registration two condition have been prescribed as to absence of change in the constitution of the firm or shares of the partners and a declaration to that effect accompanying the return. The order granting a declaration that registration continues to be effective is not the same as an order refusing registration. The decision of the Allahabad High Court, therefore, in our opinion, cannot be of much assistance to the cause of the revenue before us in this reference. Our attention has been drawn by the learned advocate, Mr. K. C. Patel, who assisted us on behalf of the assessee who was unrepresented, that the amendments made in section 246 by the Taxation Laws (Amendment) Act, 1970, with effect from April 1, 1971, made the orders passed by the Income-tax Officer under section 185(2) or (3) as well as orders passed under section 184(7) appealable, Mr. Patel for the assessee has drawn our attention to the Commentary in Iyengar's Income-tax, sixth addition, volume iii, under caption 'Appeal against non-registration', at page 1943, which reads :
'Against non-registration. Clauses (j) and (k). - (a) section 30 of the pre - 1961 Act granted a right of appeal against an order of 'refusal to register a firm under section 26A'. This language was construed to cover cases where registration was refused on the ground of, (1) delay in the presentation of the application for registration, or (2) failure to file the original instrument of partnership, or (3) any other defect in the application. The present Act, however, originally granted a right of appeal against 'an order refusing to register a firm under clause (b) of sub-section (1) of section 185'. Such order is an order on the merits of the application as to whether there is a genius firm with the constitution as specified in the instrument of partnership. So, it seemed that the right of appeal has been withdrawn in cases where registration has been refused on founds unconnected with the merits (see Commentary under section 185)
Examples of such situation would be -
(1) Where the Income-tax Officer rejects an application for registration on failure of the assessee to rectify any defect in the application within a period of one month as mentioned in sub-section (2) and (3) of section 185;
(2) Where the Income-tax Officer declines to record for any subsequent year that the firm has been registered for that year, on the ground, say, that the declaration made by the assessee under proviso (ii) to section 184(7) is defective for some reason or the other (see sub-section (4) of section 185);
(3) Where the Income-tax Officer refuses to register the firm on the ground of its delay in making application (See proviso to section 184(4)(d));
(4) Where the firm does not produce the original instrument of partnership and produces only copies thereof and the Income-tax Officer is not satisfied with the reasons for non-production of the original or with the correctness of the copies produced (section 184 (5)).
Clause (j) has, however, been amended with effect from April 1, 1971, to make it clear that in cases (1) and (2) above, there is a right of appeal. In other cases also, a liberal construction of section 185(1)(b) should be taken and the view preferred that there is a right of appeal also in such cases....'
11. It, therefore, appears clear to us that there were no justifying reasons for Parliament to depart materially from the scheme which was available under the Act of 1922 and when some doubt have been raised as to whether appeals are competent against orders under section 184(7) or section 185 (2) or (3), Parliament has by clarificatory legislation made those orders appealable.
12. In that view of the matter, therefore, on the plain reading of section 185 (1) (b), we are of the opinion that the Tribunal was right in holding that appeal against the order refusing to condone delay under section 184(4) and consequently refusing registration was competent. The result, therefore, is that for the reasons stated in this judgment, the first question is answered in the negative and against the revenue.
13. As to the second question referred to us, Mt, Kaji was right when he contended that the Tribunal was not justified in directing the Income-tax Officer to give a proper opportunity to the assessee to file a correct application for registration and consider it again and pass a reasoned and legal order. Mr Kaji submitted that the Tribunal could have, on consideration of the facts before it, condoned the delay and consequently directed the Income-tax Officer to grant registration. We think that Mr. Kaji was right because there was no scope for application of the aforesaid circular or any opportunity being given to the assessee under section 185(2). The application for registration was filed by the assessee and it was for the Tribunal to consider whether there were any justifying reason which prevented the assessee to make an application within time and if, on appreciation of the facts and the evidence in that behalf, the Tribunal thought fit, it could have condoned the delay. The second question, therefore, requires to be answered in the negative and against the assessee.
14. Before we part with this reference, we must put on records our appreciation for the assistance rendered by Mr. K. C. Patel appointed as amicus curiae so that the other point of view may be placed before the court. Having regard to the facts of this case, there should be no order as to costs.