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Sewaram Ridhkaran Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberIncome-Tax Reference No. 363 of 1970
Judge
Reported in[1978]114ITR612(Cal)
ActsIncome Tax Act, 1961 - Sections 184(7), 185 and 185(3)
AppellantSewaram Ridhkaran
RespondentCommissioner of Income-tax
Appellant AdvocateS. Pal, Adv.
Respondent AdvocateA. Sengupta, Adv.
Cases ReferredRamkumar and Co. v. Income
Excerpt:
- .....in the prescribed form giving the registered firm right to continue the registeredstatus from year to year should be treated really as an application for continuance of the registered status of the firm and as such should be given the parity of treatment under sub-section (2) of section 185 of the act. in the alternative, counsel for the assessee submitted that on a proper reading of the different sub-sections notice was required to be given. lastly, counsel for the assessee submitted that even if the notice was not required to be given by the express provisions of the statute, on the grounds of fair play and natural justice in the scheme of things in view of the consequence of non-filing of the declaration form, an assessee should have been given an opportunity. in this connection,.....
Judgment:

Sabyasachi Mukharji, J.

1. In this reference under Section 256(1) of the Income-tax Act, 1961, the following question has been referred to this court:

'Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the Income-tax Officer was not required to give a notice to the assessee under Section 185(2) of the Income-tax Act, 1961, to remove the defect in the declaration in Form No. 12 dated December 29, 1965, made under Section 184(7) of the Act ?'

2. The reference arises out of the assessment for the assessment year 1964-65. It appears that the assessee-firm was constituted under a deed of partnership dated August 28, 1962. For the assessment year 1963-64, the very first year when the firm became eligible for registration under the Income-tax Act, 1961, the registration was granted to it. One of the partners died on March 21, 1963, and a new deed of partnership was executed on June 18, 1963, and there was a fresh application for registration of the firm for the assessment year 1964-65. The registration was allowed by the Income-tax Officer by his order dated May 22, 1968. For the next year, that is to say, assessment year 1965-66, the assessee filed a declaration in Form No. 12 along with the return of income on December 29, 1965. This declaration form was signed only by five out of eight major partners. The Income-tax Officer was of the opinion that the conditions as laid down in Section 184(7) of the Act had not been complied with and, therefore, refused the renewal of registration and treated the firm as an Hindu undivided family. The assessee preferred an appeal against this order to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner upheld the view of the Income-tax Officer. The assessee preferred a further appeal before the Tribunal. It is not in dispute that the declaration form filed under Section 184(7) of the Act did not conform to the requirements of the law. It was, however, submitted that the assessee was entitled to a notice to rectify the defect as provided under Section 185(2) of the Act. It was contended that on coming to know that the Income-tax Officer was intending to make an order, the assessee had filed a fresh declaration duly signed by all the partners on May 27, 1968, and hence, in those circumstances, renewal of registration should have been granted.

3. On behalf of the revenue it was urged that no notice was contemplated under Section 185(2) of the Act. The Tribunal rejected the assessee's contention. In the premises, the reference has been made to this court on the aforesaid question mentioned hereinbefore.

4. In order to determine this contention it is necessary to refer to the relevant provisions of the Act. Section 184 of the Act deals with the registration of a firm and Sub-section (4) of Section 184 provides that the application for registration of a firm has to be made before the end of the previous year for the assessment year in respect of which registration is sought. The proviso to the said sub-section stipulates that the Income-tax Officer might entertain an application made after the end of the previous year if he was satisfied that the firm was prevented by sufficient cause from making the application before the end of the previous year. The section deals with certain conditions required for making an application for registration and certain conditions to be fulfilled before the firm could merit registration by the Income-tax Officer. Sub-section (7) of Section 184 is in the following terms :

'184. (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, 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.'

4. Sub-section (8) of Section 184 provides that whenever a change takes place in the previous year, the firm shall apply for a fresh registration for the assessment year concerned in accordance with the provisions of the section.

5. Sub-section (2) of Section 185 is in the following terms :

'185. (2) The Income-tax Officer shall not reject an application for registration merely on the ground that the application' is not in order, but shall intimate the defect to the firm and give it an opportunity to rectify the defect in the application within a period of one month from the date of such intimation.'

6. Counsel for the assessee contended before us that under Section 185 the application that had been dealt with and in respect of which notice under Sub-section (2) of Section 185 was required to be given was the same thing as the declaration form given under Clause (ii) of the proviso to Sub-section (7) of Section 184 of the Act. It was urged that the expression 'application' should be liberally construed and the declaration in the prescribed form giving the registered firm right to continue the registeredstatus from year to year should be treated really as an application for continuance of the registered status of the firm and as such should be given the parity of treatment under Sub-section (2) of Section 185 of the Act. In the alternative, counsel for the assessee submitted that on a proper reading of the different sub-sections notice was required to be given. Lastly, counsel for the assessee submitted that even if the notice was not required to be given by the express provisions of the statute, on the grounds of fair play and natural justice in the scheme of things in view of the consequence of non-filing of the declaration form, an assessee should have been given an opportunity. In this connection, reliance was placed on the decision of the Supreme Court in the case of Board of High School and Intermediate Education v. Ghanshyam Das Gupta, : AIR1962SC1110 . We are unable to accept the contention that on a construction of the section the assessee was entitled to a notice in this case. Under the scheme of the different sub-sections a firm which has already been registered is entitled to the continuation of the registered status on fulfilment of certain conditions and one of the conditions is that the firm furnishes along with the return a declaration in the prescribed form as contemplated under Clause (ii) of the proviso to Subsection (7) of Section 184. The right of registered status is given by the previous sub-section. This is not an application to obtain the registered status of the assessee-firm. That has been obtained by the order of the previous year. The liability to lose the registered status is also not on this ground depending on any action taken by the revenue, of which notice has to be given to the assessee because the assessee has no notice. Certain consequences flow from the assessee's own action, of which the assessee is aware. Therefore, neither the provisions of the section nor any principles of natural justice can have any application in this case requiring the assessee to be provided with a notice. It is clear that Section 185 specifically deals with an application and not with any declaration form or the consequence of non-submission of declaration form. A declaration form which is required to be given under Clause (ii) of the proviso to Sub-section (7) of Section 184 is not an application spoken of in section 185(2) of the Act. In this connection, we may notice incidentally that the view we are taking in this case is in consonance with the decisions in the case of Harnandrai Badridas v. Commissioner of Income-tax [1969] 71 ITR 339 , Pannal af Ramkumar and Co. v. Income-tax Officer : [1970]75ITR309(Mad) ; and Commissioner of Income-tax v. Ice Suppliers Corporation . Though the decisions were on the provisions of the old section, these dealt with similar facts.

7. In the view we have taken, the question referred will have to be answered in the affirmative and in favour of the revenue.

8. In the facts and circumstances of the case, each party will pay andbear its own costs.


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