Skip to content


A. Krishnaswami Mudaliar and ors. Vs. the Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Reported in(1956)2MLJ366
AppellantA. Krishnaswami Mudaliar and ors.
RespondentThe Commissioner of Income-tax
Cases ReferredChiranji Lal & Sons v. Commissioner of Income
Excerpt:
- - commissioner of income-tax [1956]29itr607(sc) :there is thus abundant authority for the position that section 31 should be liberally construed so as to include not only orders passed on a consideration of the merits of the assessment but also orders which dispose of the appeal on preliminary issues, such as limitation and the like. as the assessee has failed, he shall pay the costs of this reference......the firm, however, applied under rule 2(c) of the indian income-tax rules, 1922, to the appellate assistant commissioner, before whom the appeal preferred by the assessee against the order of assessment was then pending. the assistant commissioner eventually rejected that application. the reasons for rejection and the order of rejection formed part of the order, the assistant commissioner passed on the appeal. the refusal of the assistant commissioner to accord permission to the assessee under rule 2(c) was one of the points raised by the assessee in the further appeal it preferred to the appellate tribunal against the order of the assistant commissioner. on that issue, the order of the appellate tribunal was:a second contention has been raised about registration of the firm......
Judgment:

1. The assessee firm consisted of three partners in its first year of assessment 1949-1950, the account period having ended on 2nd August, 1948. The firm did not apply for registration under Section 26-A of the Income-tax Act at any time before the Income-tax Officer completed the assessment. The firm, however, applied under Rule 2(c) of the Indian Income-tax Rules, 1922, to the Appellate Assistant Commissioner, before whom the appeal preferred by the assessee against the order of assessment was then pending. The Assistant Commissioner eventually rejected that application. The reasons for rejection and the order of rejection formed part of the order, the Assistant Commissioner passed on the appeal. The refusal of the Assistant Commissioner to accord permission to the assessee under Rule 2(c) was one of the points raised by the assessee in the further appeal it preferred to the Appellate Tribunal against the order of the Assistant Commissioner. On that issue, the order of the Appellate Tribunal was:

A second contention has been raised about registration of the firm. We are unable to entertain this contention in this appeal as the question of registration can only be canvassed in a separate appeal.

2. It was on that portion of its order the Tribunal referred to this Court under Section 66(1) of the Act the following question:

Whether the assessee can agitate the question of registration of the firm under Section 26-A, before the Tribunal in the absence of a separate order of the Appellate Assistant Commissioner in the matter?

3. The question as framed by the Tribunal does not bring out the read question for determination by us. The ground on which the Tribunal refused to consider the correctness of the order of the Appellate Assistant Commissioner, who rejected the application preferred by the assessee under Rule 2(c) was that the assessee had not preferred an appeal to the Tribunal, independent of the appeal against the order of the Assistant Commissioner confirming the order of assessment. What was stressed in the question as framed by the Tribunal was the absence of an order of the Assistant Commissioner, independent of his order on the appeal preferred to him against the Income-tax Officer's order of assessment. Neither of them is relevant in deciding the real' question at issue, which, as Mr. Rama Rao Saheb, the learned Counsel for the department, pointed out was:

Whether an assessee had a right to appeal to the Appellate Tribunal against an order passed by the Assistant Commissioner on an application preferred to him under Rule 2(c)?

4. Rule 2(c) of the Indian Income-tax Rules, as it stood when the assessee preferred his application under that provision, ran:

Any firm constituted under an Instrument of Partnership specifying the individual shares of the partners may, under the provisions of Section 26-A of the Indian Income-tax Act, 1922...register with the Income-tax Officer the particulars contained in the said instrument on application made in this behalf.

* * * * * *(c) with the permission of the Appellate Assistant Commissioner hearing an appeal under Section 30 of the Act, before the assessment is confirmed, reduced, enhanced or annulled....

5. All that an Appellate Assistant Commissioner, was in effect, empowered to do under Rule 2(c) was either to condone the delay or to refuse to condone the delay in preferring an application for registration under Section 26-A of the Act to the Income-tax Officer. If the Assistant Commissioner condoned the delay the application had still to be made only to the Income-tax Officer. Rule 2 itself made that clear, and that was what was pointed out by the Supreme Court in Pratapmal Luxmichand v. Commissioner of Income-tax : [1956]29ITR489(SC) at page 494:.the only power which the Appellate Assistant Commissioner had under Rule 2(c) was to accord permission to the appellant to make the application in proper form to the Income-tax Officer.... The Appellate Assistant Commissioner had, under the rue, no power to direct the Income-tax Officer to register the firm....

6. If, on a proper application presented under Rule 2(c) to the Appellate Assistant Commissioner, he condoned the delay in the presentation of the application for registration under Section 26-A, the Income-lax Officer would have to receive the application for registration under Section 26-A and dispose it. If the Income-tax Officer rejected that application, the assessee could prefer an appeal to the Assistant Commissioner against that order of rejection under Section 30 of the Act. If the Assistant Commissioner refused to accord permission, that is, if he refused to condone the delay, there could thereafter be no application under Section 26-A and therefore no order under Section 26-A. An application under Rule 2(c) is not itself an application for registration, for which registration Section 26-A of the Act provided The Assistant Commissioner, to whom alone an application could be preferred under Rule 2(c), has himself no authority to order registration, except, of course, on an appeal against an order of the Income-tax Officer refusing registration. An appeal is a creature of statute, and the Act itself did not specifically provide for any appeal against an order passed by an Appellate Assistant Commissioner on an application preferred to him under Rule 2(c). There was provision made in the Act only for an appeal against an order passed on an application for registration under Section 26-A of the Act.

7. Proceedings for registration of a firm under Section 26-A of the Act are really independent of the proceedings to assess the firm, though of course, grant of registration or refusal to register has a considerable bearing on the basis of the liability and the ultimate quantum of the tax, both of which are features of the order of assessment.

8. That distinction is kept in view in Section 30 of the Act which provides separately for an appeal against the refusal of registration under Section 26-A and for an appeal against the order of assessment, both of which the Income-tax Officer has to pass. Rule 2(c) is a rule of procedure to regulate further the period within which an application could be made for registration of a firm under Section 26-A. It is true that if an application under Rule 2(c) is rejected, that would largely affect the order the Assistant Commissioner eventually passes under Section 31(3)(i) of the Act, 'to confirm, reduce, enhance, amend or set aside the assessment', but nonetheless the proceedings on an application under Rule 2(c) are really distinct from the proceedings in an appeal against the order of assessment. Rule 2(c) is not a rule of procedure to regulate the disposal of the appeal itself. If the application under Rule 2(c) is granted, obviously the Assistant Commissioner has to await the disposal of the application permitted by him to be preferred to the Income-tax Officer under Section 26-A, before the Assistant Commissioner disposed of the appeal. If the Assistant Commissioner rejects the application, he can proceed with the disposal of the appeal. Rejection of the application preferred under Rule 2(c) would, not amount to an order under Section 31(3)(i) of the Act; nor could it be brought within the scope of any of the other orders for which Section 31 provides. In other words, Rule 2(c) merely specifies one of the stages at which an assessee could prefer an application for which Section 26-A provides. That does not make such an application a part of the appeal itself, the appeal against the order of assessment.

9. If as the Appellate Commissioner should have done in this case, he had passed a separate order on the application preferred to him by the assessee under Rule 2(c), without disposing of the appeal at that stage, could such an order be brought within the scope of Section 31 of the Act? The answer to that question should obviously be only in the negative. Unless there is an order under Section 31, no right of appeal to the Appellate Tribunal could be claimed by the assessee under Section 33(1) of the Act.

10. Learned Counsel for the assessee pointed out that factually in this case, the Assistant Commissioner made the rejection of the application perferred to him under Rule 2(c) part of his order confirming the order of assessment. Learned Counsel urged that the order, which, in fact, the Assistant Commissioner did pass, was one which came within the scope of Section 31(3)(i) of the Act. We are unable to accept that contention. A composite order of that kind will still have to stand the test of Section 31(3)(i). A refusal to accord permission under Rule 2(c) is not itself an order confirming the assessment.

11. Learned Counsel for the assessee referred to the observations of Venkatarama Ayyar, J., in Mela Ram & Sons v. Commissioner of Income-Tax : [1956]29ITR607(SC) :

There is thus abundant authority for the position that Section 31 should be liberally construed so as to include not only orders passed on a consideration of the merits of the assessment but also orders which dispose of the appeal on preliminary issues, such as limitation and the like.

Even a liberal construction cannot warrant an addition to the list of orders specificed in Section 31 of the Act. An order passed on an application preferred under Rule 2(c) is not one of the orders, for an appeal against which the Act provided. As we have already pointed out, an application under Rule 2(c) has to be treated really as incidental to proceedings under Section 26-A of the Act, which are distinct from the order of assessment and the appeal against that order of assessment.

12. Mote Shah & Co. v. Commissioner of Income-Tax : [1952]22ITR39(Bom) , was the next case on which learned Counsel for the assessee relied. In that case the assessee firm preferred an application under Rule 2(c) but the Appellate Assistant Commissioner disposed of the appeal against the order of the assessment, without passing any orders on the application preferred to him under Rule 2(c). The learned Judges held:

As the grievance with regard to the non-disposal of the application by the Appellate Assistant Commissioner affect the merits of the assessment order, it would be quite competent to the Appellate Tribunal to direct that the assessment order should be set aside and the matter should go back to the Appellate Assistant Commissioner to dispose of the application before he passes the final assessment order.

The main feature of that case was that the Assistant Commissioner did not pass any orders on the application preferred to him under Rule 2(c). This was stressed by the learned Judges at page 43:

We are not concerned in this reference with what would be the position if permission had been refused by the Appellate Assistant Commissioner. We are concerned with the narrow question as to whether the Appellate Tribunal has any power given to it under the statute judicially to correct the Appellate Assistant Commissioner when he refuses to make an order on an application made to him under Rule 3(c).

At page 44 again the learned Judges pointed out:

It is not the contention of the assessee that an appeal lies from a refusal on the part of the Appellate Assistant Commissioner to pass an order on an application under Rule 2(c). What the assessee contends is that he is entitled to make a grievance of this fact when he has made a proper appeal under Section 33 against the assessment order passed by the Appellate Tribunal.

What we have to consider in this case is a rejection of an application preferred under Rule 2(c), which class of cases was specifically excluded from consideration by the learned Judges who disposed of Mote Shah & Co. v. Commissioner of Income-Tax : [1952]22ITR39(Bom) it is riot an authority for the position, that, if the order of rejection is part of the order of the Appellate Assistant Commissioner who confirmed the order of assessment, the correctness of the rejection could be canvassed in the appeal preferred against the order of the Assistant Commissioner confirming the order of assessment.

13. Learned Counsel for the Department drew our attention to the observations of Bhagwati, J., in Pratapmal Luxmichand v. Commissioner of Income-Tax : [1956]29ITR489(SC) at page 494, where the learned Judge pointed out:

As matter of fact the appellant did not ask for such permission from the Appellate Assistant Commissioner nor was any revision taken by the appellant before the Commissioner under Section 33-A of the Act against the said order of the Appellate Assistant Commissioner.

Learned Counsel contended that the only remedy open to an assessee whose application under Rule 2(c) was rejected by the Appellate Assistant Commissioner, was to move the Commissioner to exercise his revisional powers under Section 33-A of the Act. Learned Counsel for the assessee referred to Chiranji Lal & Sons v. Commissioner of Income-Tax, Punjab . That case, however, was before the Income-Tax Act was amended and Section 33 was enacted providing for appeals to an Appellate Tribunal. In that case the learned Judges of the Lahore High Court held:

On general principles, however, we are disposed to think that we are competent to determine whether the jurisdiction which vested in the Assistant Commissioner had been perversely refused.

14. We are not really called upon to decide in this case what is the remedy of an assessee firm, whose application under Rule 2(c) is rejected by the Appellate Assistant Commissioner. The narrow question before us is, whether such an assessee has a right to appeal to the Appellate Tribunal, against the order of the Assistant Commissioner rejecting the application made to him under Rule 2(c). That question has to be answered only with reference to the provisions of Section 31(3)(i) and Section 33(1) of the Act. The answer, in our opinion, must be in the negative.

15. We answer the question as re-formulated by us in the negative and against the assessee. As the assessee has failed, he shall pay the costs of this reference. Counsel's fee Rs. 250.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //