RANAWAT, J. - This is a reference under section 66(1) of the Indian Income-tax Act by the Income-tax Appellate Tribunal, Delhi Bench. The following question has been referred :
'Whether on the facts and in the circumstances of this case it was incumbent on the Income-tax Officer of give 14 days notice of his intention to refuse the claim for renewal of registration in accordance with the proviso to section 23(4) of the Indian Income-tax Act ?'
The facts and circumstances of this case have been described in detail in the statement of this case have been described in detail in the statement of the case and we need not reproduce them. It may be mentioned that Sahdeo Vijay Kumar, Kesrisinghpur, is a partnership firm constituted under an instrument of partnership dated the 5th of January, 1953. The firm started functioning on the 2nd of March, 1951. It was registered under section 26A of the Indian Income-tax Act for the assessment year 1953-54 and 1954-55. The assessee firm made an application for renewal of registration for the assessment year 1955-56 on the 30th of June, 1955. The assessee failed to file a return of income in response to a notice under section 22(2) of the Income-tax Act which was served upon it on the 4th of July, 1955. Income-tax was assessed under section 23(4) for the reason that the assessee failed to make a return of its income and also to appear and produce its books of account before the Income-tax Officer. While assessing income-tax to the best of his judgment, the Income-tax Officer also refused to renew the registration of the assessee firm. The firm went in appeal but did not succeed. It filed a second appeal to the Income-tax Appellate Tribunal which was also dismissed on the 8th of October, 1957. On an application for referring the case to this court, the Tribunal has made a reference as mentioned above.
The counsel for the assessee firm has contended that before the application for renewal of registration was dismissed, a notice should have been given to the firm and in the absence of such notice, the order of refusal to register was bad in law. He has relied upon the decision in Agarwal and Co. v. Income-tax Officer.
An application for registration of a partnership firm has to be made under the provisions of section 26A of the Income-tax Act and is under the Act. Under rule 6A an Income-tax Officer has been authorised to refuse to register or to refuse to renew registration in case he is not satisfied that such a partnership firm did or does exist. Such officer has also been further authorised to refuse to register or the cancel registration if it is already registered in a case falling under the proviso to section 23(4), but if he contemplates to cancel the registration, he shall serve 14 days notice. In the instant case, registration was not canceled and no notice under the proviso to section 23(4) was, therefore, necessary. The learned counsel has contended that because the order is adverse to the firm a notice should have been given on the ordinary principles of natural justice. It may be noted that by making an application for registration, a firm cannot be regarded to have acquired a right in its favour, and refusal to register or renew registration cannot, therefore, be considered to affect its rights. In such a case principles of natural justice do not call for the issue of a notice before refusing to register under section 26A. The decision in Agarwal & Co. which has been referred to by the learned counsel cannot be considered to be of any help to the petitioner for the reason that in that case an order canceling the registration retrospectively was passed without issue of a notice and it was in that context that the court observed that a notice was necessary in the interest of justice. It was also observed that cancellation of registration amounted to deprivation of property and under the principles of natural justice, a notice was necessary. In that case renewal of registration was refused for the reason that previous registration was also thereby cancelled. It was in that context that certain observations regarding issue of notice were made in a case of refusal or renewal of registration. In our opinion, mere refusal to register or renew registration cannot be regarded to involve deprivation of property, and no notice is necessary like the one contemplated in a case of cancellation of registration. The application for renewal of registration, in the instant case, has been refused under section 23(4) for the reason that the firm made default in filing a return and in producing its books of account and also in putting appearance before the Income-tax Officer. Under these circumstances, no further notice was necessary. The Income-tax Officer was well within his rights to refuse to renew registration under section 23(4) without issue of a further notice. Answer to the reference is in the negative. It was not incumbent on the Income-tax Officer to give 14 days notice of his intention to refuse the claim for renewal of registration under the proviso to section 22(4) of the Indian Income-tax Act. The reference is answered accordingly.
Reference answered accordingly.