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Commissioner of Income-tax Vs. Swaroop Chand Kojuram Barmer - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtRajasthan High Court
Decided On
Case NumberD.B. Income-tax Case No. 26 of 1985
Judge
Reported in(1986)54CTR(Raj)104; [1985]154ITR660(Raj)
ActsIncome Tax Act, 1961 - Sections 186(1) and 256
AppellantCommissioner of Income-tax
RespondentSwaroop Chand Kojuram Barmer
Advocates: J.P. Joshi, Adv.
Excerpt:
..... - as such, accused has to be treated as juvenile under the said act. - as regards the first question, sub-section (5) of section 185 clearly speaks of refusal to register the firm for the assessment year......the learned counsel appearing for the commissioner of income-tax, jodhpur.2. the assessee-firm was granted registration and was assessed under the status of a registered firm. the registration granted to the assessee-firm was continued for the subsequent year under section 184(7) of the i.t. act. a duplicate set of account books was discovered during survey proceedings under section 133a, which prima facie showed concealed income. after giving notice to the assessee and after referring the matter to the iac, the ito passed an order under section 186(1) withdrawing the benefit of continuation of registration already granted to the assessee-firm. another order was passed by the ito under sub-section (5) of section 185 refusing to register the firm for the assessment year in question,.....
Judgment:

1. We have heard the learned counsel appearing for the Commissioner of Income-tax, Jodhpur.

2. The assessee-firm was granted registration and was assessed under the status of a registered firm. The registration granted to the assessee-firm was continued for the subsequent year under Section 184(7) of the I.T. Act. A duplicate set of account books was discovered during survey proceedings under Section 133A, which prima facie showed concealed income. After giving notice to the assessee and after referring the matter to the IAC, the ITO passed an order under Section 186(1) withdrawing the benefit of continuation of registration already granted to the assessee-firm. Another order was passed by the ITO under Sub-section (5) of Section 185 refusing to register the firm for the assessment year in question, namely, 1976-77.

3. In the appeal against the order passed under Section 186(1), it was held that the conditions prescribed in that section were not fulfilled and as such the order of cancellation of registration was set aside. As regards the otherorder, it was held that since the registration was continued for the assessment year in question under Section 184(7), the question of refusing to register the firm within the meaning of Sub-section (5) of Section 185 did not arise. The Commissioner of Income-tax (Appeals) held that the partners should be presumed to have divided the profits earned outside the books as per their respective shares according to the partnership deed. It was also held that non-disclosure of profits did not disentitle the firm from continuation of registration and that once the order of continuation of registration under Section 184(7) was passed, the question of its withdrawal does not arise in the absence of circumstances specified in Section 186(1).

4. Learned counsel for the Commissioner submits that the two questions of law arising out of the order passed by the Income-tax Appellate Tribunal dated December 15, 1983, should have been referred by the Tribunal to this court. The first question relates to the application of the provisions of Section 185(5) and the second question relates to the distribution of concealed income amongst the partners. As regards the first question, Sub-section (5) of Section 185 clearly speaks of refusal to register the firm for the assessment year. Thus, if registration has already been granted by the ITO to the firm or it has been continued in accordance with the provisions of Section 184(7) for the assessment year in question, then there could be no question of refusal to register the firm, but the registration already granted or continued could have been cancelled or withdrawn under the provisions of Section 186(1), if the circumstances mentioned therein were complied with. It is not the case of the learned counsel that the conditions mentioned in Section 186(1), namely, that there was no genuine firm in existence as registered was present but the ground on account of which the cancellation of registration is sought is that a part of the income of the firm was not disclosed. As the non-disclosure of the income is not one of the grounds for cancellation of registration under Section 186(1), the registration could not have been cancelled. In any view of the matter, there was no question of application of the provisions of Section 185(5) relating to refusal to register the firm, after the firm had already been registered and the registration has been continued under Section 184(7).

5. As regards the second question, if the firm was in existence then it would be fair to presume that undisclosed income would have been distributed in the same manner as the disclosed income has been divided amongst the partners, as mentioned in the partnership deed. The Tribunal was justified in refusing to refer the questions to this court as no substantial question of law appears to arise from the order of the Tribunal dated December 15, 1983.

6. In the result, the application for making a reference is dismissed.


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