Sabyasachi Mukharji, J.
1. In this reference under Section 256(1) of the I.T. Act, 1961, the assessment year involved is 1969-70. The assessee-firm filed a declaration in Form No. 12 of the I.T. Rules, 1962, for a continuation of registration up to August 4, 1968, and also an application in Form No. 11A for a fresh registration. According to Form No. 12, there were six partners up to August 4, 1968. Form No. 11A showed that there was a change in the constitution of the firm with effect from August 5, 1968, by a fresh deed of partnership dated August 5, 1968, between two partners, Shri Ramlal Daga and Sri Srinarain Daga, the remaining four partners having retired earlier. It was stated before the ITO that one of the partners, Sri Srinarain Daga had retired on March 30, 1968, and that a division of profits had been made proportionate to the periods of the different constitutions of the firm. There was no deed of partnership of the five partners after the retirement of Shri Srinarain Daga. The ITO, however, did not accept that there was a change in the constitution of the firm on March 31, 1968, on account of the retirement of Sri Srinarain Daga. He held that the four partners retired on August 4, 1968. The ITO, further, held that there was no proper ascertainment of profits of the firm for the two different periods and that the shares were not allocated between the partners of the originally constituted firm according to their shares in the deed of April 23, 1966. The ITO, accordingly, refused registration under Section 185(1)(b) of the. I.T. Act, 1961.
2. Aggrieved by the aforesaid decision, the assessee went up in appeal before the AAC. It was submitted on behalf of the assessee before him that the profit sharing ratio could not be in accordance with the original partnership deed of April 23, 1966, as Sri Srinarain Daga had retired, according to the assessee, on March 30, 1968. The assessee also filed a copy of the notice of Sri Srinarain Daga dated February 5, 1968, by which hehad purported to retire from April 1, 1968. The AAC was of the view that these facts were inconsistent with the declaration in Form No. 12 and that if the return was true, the declaration form was untrue and no registration could be allowed on the basis of the declaration Form. In respect of the period from August 5, 1968, he also took the view that the profits of the two periods were not correctly ascertained and the allocation of profits between the partners was not in accordance with the partnership deed dated August 5, 1968. It was urged before the AAC that the firm had not been held to be not genuine and that the profits according to time basis had been properly allocated between the partners. So the registration should have been allowed. The AAC was of the view that profits of different periods should have been ascertained according to the mercantile systemand not on time basis and there was no correct ascertainment of profits for the period from August 5, 1968, to August 21, 1968, due to the confusion of the date of retirement of the partner, Sri Srinarain Daga and, accordingly, there was no correct allocation of profits as per the deed of August 5, 1968. He, therefore, upheld the order of the ITO.
3. Aggrieved the assessee went up in further appeal before the Tribunal. It was submitted before the Tribunal, on behalf of the assessee, that the ITO did not accept that Sri Srinarain Daga retired on March 30, 1968, and the ITO held that all the four partners retired on August 4, 1968. It was urged that this is a mistake in understanding the real position about the retirement of Sri Srinarain Daga and in fact he had retired on August 4, 1968, and the error in accounts about the allocation of profit between the partners up to August 4, 1968, should have been allowed to be rectified. Reliance was placed on certain decisions of the Supreme Court to which we shall also refer. It was submitted that the registration should have been allowed at least for the period from August 5, 1968, to the end of the accounting period as there was a proper deed of partnership for that period. The Tribunal was of the view that the ITO had held that four partners retired on August 4, 1968, and Sri Srinarain Daga did not retire on March 30, 1968. The ITO, according to the Tribunal, found that profits for the period up to August 4, 1968, had not been allocated between the partners according to their shares as per the deed of April 23, 1966. The assessee did not plead before the Revenue authorities that there was any mistake in allocating the shares between the parties up to August 4, 1968. Rather, the assessee's case, according to the Tribunal, before the AAC was that Sri Srinarain Daga had retired on March 30, 1968, in pursuance of the notice dated February 5, 1968. The assessee did not correctly ascertain the profits for the last period according to the mercantile system which it followed and, consequently, for this period also there was no proper allocation of profits between the partners as per the deed of August 5, 1968. For the reasons aforesaid, the Tribunal was of the view that there was no case for interference with the order of the AAC. The appeal by the assessee was, accordingly, dismissed.
4. Out of the aforesaid facts, the following question has been referred to this court under Section 256(1) of the I.T. Act, 1961 :
'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee's claim for registration was rightly refused ?'
5. In order to appreciate this question it is necessary to bear in mind certain facts. There was a deed of partnership dated April 23, 1966, comprising of six partners. It is alleged that with effect from March 30, 1968, Sri Srinarain Daga, by a letter dated February 5, 1968, had retired. OnAugust 5, 1968, the other three partners retired and, as a result, a fresh deed comprising of two partners was made and filed. The application in Form No. 12 was filed on December 30, 1969, i.e., after the end of the relevant previous year while the application in Form No. 11A was filed on August 12, 1968, before the end of the previous year. The accounting year of the assessee for the year in question covered the period from November 2, 1967, to October 21, 1968. In this connection, it is important to refer to the provisions of Section 184 of the I.T. Act, 1961. The said section deals with the registration of firms and we are concerned mainly with Sub-sections (7) and (8) of Section 184 of the said Act. The said provisions provide as follows :
'(7) Where registration is granted to any firm for any assessment year, it shall have effect for every subsequent assessment year:
(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, before the expiry of the time allowed under Sub-section (1) or Sub-section (2) of Section 139 (whether fixed originally or on extension) for furnishing the return of income for such subsequent assessment year, a declaration to that effect, in the prescribed form and verified in the prescribed manner, so, however, that where the Income-tax Officer is satisfied that the firm was prevented by sufficient cause from furnishing the declaration within the time so allowed, he may allow the firm to furnish the declaration at any time before the assessment is made.
(8) Where any such change has taken place in the previous year, the firm shall apply for fresh registration for the assessment year concerned in accordance with the provisions of this section.'
6. In this connection, reference may also be made to the relevant rules, viz., to Rules 22 to 25 of the I.T. Rules, 1962. Rule 22 provides that an application for registration of a firm for the purpose of the Act should be made in accordance with the provisions of Sub-rules (2) to (5) of the said Rules. Sub-rule (2) deals with a case where an application is made before the end of the relevant previous year. Sub-rule (4) deals with a situation when an application is made after the end of the relevant previous year. Rule 24 enjoins that where there was no change, there should be a declaration furnished under Sub-section (7) of Section 184 in the prescribed form and shall be verified in the manner indicated therein and shall be signed in a certain manner. It is not necessary for us to set out in extenso the provisions of the said application form, viz., Form No. IIA. We may refer to Clauses (2) & (3) of Form No. 11A as well as to Clause (4) of the said application which read as follows :
'Form No. 11A
(2) The original/certified copy of the instrument or instruments evidencing the partnership in existence from time to time during the previous year up to the date of this application/during the previous year and up to the date of this application, together with a copy/duplicate copy of each is enclosed. The prescribed particulars are given in the Schedule on the reverse.
(3) We hereby declare that none of the partners of the firm was, at any time, during the previous year, up to the date of this application, in relation to the whole or any part of his share in the income or property of the firm, a benamidar of any other partner to whom he is not related as spouse or minor or child.
(4) We do hereby certify that the profits (or loss, if any) of the previous year were/will be/period up to the date of dissolution were/will bedivided or credited as shown in the schedule and that the informationgiven above and in the schedule is correct.
Attested Signature Address22.214.171.124.Note : Where the application is made after the end of the previous year, the words 'up to the date of this application' must be deleted.'
7. The relevant portion of the Schedule indicates two Schedules, one is Schedule A and the other is Schedule B. Schedule A is applicable where the application for a condonation of the delay in registration is made before the end of the previous year and Schedule B would be applicable where the applications were made after the end of the relevant previous year. Form No. 12 deals with the declaration under Section 184(7) of the I.T. Act, 1961, for a continuation of the registration. In the instant case, indisputably, there was a change in the constitution of the firm, in the previous year, on either basis as the assessee had contended for. The assessee had contended first that Sri Sri Narain Daga had retired with effect from March 30, 1968. It had, in any event, contended that there was a fresh deed of partnership, comprising of two partners, which was made on August 5, 1968. The Revenue authorities were unable to accept the view that there was a retirement of Sri Sri Narain Daga with effect from March 30, 1968. There is no finding that either the document of partnership dated April 23, 1966, or the new document dated August 5, 1968, was not a genuine document or suffered from any other lacuna under the Act. It, however, appears that the assessee's books of account were adjusted on the basis, after August 5, 1968, as if Sri Srinarain Daga had continued to be a partner of the firm up to thatdate, a position which the Revenue was unable to accept as a fact and on that basis we must proceed. The question is even if Sri Srinarain Daga had not retired on March 30, 1968, as contended for by the assessee, and even if the accounts of the assessee-firm had been maintained on the basis, as if he had retired on March 30, 1968, in view of the fact that the assessee had made two declarations, one in Form No. 11A and another in Form No. 12, was the assessee entitled to registration and, if so, on what terms Under Sub-section (8) of Section 184, if there is any change in the previous year, the firm shall apply for a fresh registration for the assessment year concerned in accordance with the provisions of that section. That undoubtedly has been done in accordance with the provisions of Form No. 11 A. Form No. 12 was inapplicable because that can only be used in case Sub-section (7) of Section 184 applied and that is, where, as provided, there was no change in the constitution of the firm. On either view, the retirement of Sri Srinarain Daga, on March 30, 1968, is the claim of the assessee and this was not accepted by the Revenue and on the basis that the new partnership deed was executed on August 5, 1968, there was a change during the relevant previous year in the constitution of the firm. Therefore, Sub-section (7) of Section 184 could not have any application. Sub-section (7) of Section 184 would be the proper section. It is true that the adjustment in the books of account was not in accordance with the partnership deed dated April 23, 1966, which was prevailing up to August 4, 1968. It was, on that basis, the assessee was contending that Srinarain Daga had retired, in fact, with effect from March 30, 1968, a contention which did not find favour with the Revenue authorities. So far as that finding is concerned that is conclusive. Section 185 provides that if there is any defect in the application, then the assessee should be given an opportunity to rectify the defect. Therefore, when there has been a change in the constitution of the firm and there is authority for recording the change on the basis of the finding made by the Revenue authorities, that is to say, on the basis of the deed dated August 5, 1968, where the genuineness of the deed is not disputed on the ground that there was an improper adjustment of the books in accordance with the previous partnership deed up to a particular date, would it disentitle the assessee to claim registration if it is otherwise entitled to, that is the question that requires consideration in this case basically. In our opinion, the position is clear that this firm was entitled to registration in view of its compliance with the form, as it is, by filing Form No. 11 A, specially and having regard to the fact, it was filed before the end of the previous year, as we have mentioned, on August 12, 1968.
8. In this connection, we may first refer to the decision of the Punjab and Haryana High Court in the case of CIT v. Mothooram Prem Chand , where the Division Bench of the Punjab and HaryanaHigh Court had categorised the conditions which were required to be complied with in order that a firm would be entitled to registration. Those conditions arc : (1) the partnership should be evidenced by an instrument, (2) the individual shares of the partners should be specified in the instrument, (3) the partnership should be genuine, (4) the application for registration should be made before the end of the previous year for the assessment year in which registration was sought, (5) the application should lie made before the ITO who had jurisdiction to assess the firm, (6) the application should be accompanied by a registered partnership deed together with a copy thereof, (7) the application should be signed by the partners personally, (8) the application should be made in the prescribed form, and (9) if any change had taken place in the previous year the firm should apply for a fresh registration for the assessment year in question. The court further observed that Section 185(5) of the I.T. Act, 1961, provided that where, on the part of a firm, there had been such a failure, as mentioned in Section 184, the ITO might refuse to register the firm for the assessment year. Para. 3 of Form No. 11A prescribes for applying for registration. It is clear from the said clause of the para, that the partners have to certify that the profits of the previous year were or will be divided, The form did not prescribe that the profits of the previous year had been already or should have been divided. It is also evident from the provisions of Section 184(4) that it was not necessary to divide the profits before making the application. The I.T. authorities, according to the Division Bench of the Punjab & Haryana High Court, could not refuse to register a firm if the application was made in accordance with the provisions of Sections 184 and 185 read with Rules 22 and 25 on the ground that the profits of the firm had not been divided by the partners. We are in respectful agreement with this conclusion of the Division Bench of the Punjab and Haryana High Court. Incidentally, we may mention that more or less the same view was reiterated by the Division Bench of the Kerala High Court in the case of V.K. Kurien & K.P. George v. CIT : 63ITR675(Ker) . Relying on the observations of the Supreme Court in the case of CIT v. Shiwkasi Match Exporting Co. : 53ITR204(SC) , the Andhra Pradesh High Court also took the same view in the case of Variety Hall and Ramakrishna Textiles v. CIT : 84ITR202(AP) and the Patna High Court also took the same view in the case of C.I.O. Full Mould Tyre Retreaders (India) v. CIT : 116ITR505(Patna) . An identical view has also been expressed by another Division Bench of the Punjab and Haryana High Court in the case of CIT v. Sat Ram Gian Chand . In the case of P.P. Kuriakose & P.P. Varghese v. CIT : 71ITR109(Ker) , the assessee, a firm of two partners with equal shares, had various businesses including a wholesale ration shop with a licence in the name of partner, K, and aretail ration shop with licence in the name of partner, V. For the assessment year 1959-60, the Appellate Tribunal held that the firm was not entitled to renewal of registration for the reason that though the profits from other businesses were credited in the separate accounts of the two partners equally, the profits from the wholesale ration shop was credited in the name of K and the, profits from the retail ration shop was credited in the name of V only. It was held by the Kerala High Court that the firm was entitled to a renewal of registration under s, 26A of the Indian I. T. Act, 1922. All the profits of the firm including the two ration shops were brought into the accounts and equally divided and credited in the names of the two partners in all the prior years. In the relevant accounting year also all the profits of the partnership business including the two ration shops were brought into the accounts of the firm. AH that happened was that the profits from the two ration shops were not divided equally between the partners. It was only a case of error which could be rectified and would not render the application for a renewal of the registration invalid. Reliance was also placed on a decision of the Supreme Court on behalf of the Revenue before us in the case of Sher-E-Punjab Silk Stores v. CIT : 88ITR421(SC) . There, from a reading of Section 26A of the Indian I.T. Act, 1922, and Rules 2, 3 and 6 of the Indian I.T. Rules, 1922, it was clear that in the case of an application for the renewal of registration of a firm, it was incumbent on the part of the assessee-firm to have divided the previous year's profits before it made its application for renewal. This decision was considered by the Punjab & Haryana High Court in the case of CIT v. Mothooram Premchand , where at page 288, the Division Bench of the Punjab & Haryana High Court rightly pointed out that that decision of the Supreme Court did not deal with the registration of a firm but it was a case of renewal. There, the facts were entirely different and specially in this case one has to bear in mind that the application in Form No. 11A had been made before the end of the relevant previous year. Our attention was also drawn to the observations of the Supreme Court in the case of Sri Ramamohan Motor Services v. CIT : 89ITR274(SC) , and reliance was placed on the observations of the Supreme Court in the case of Rao Bahadur Ravulu Subba Rao v. CIT : 30ITR163(SC) , where the Supreme Court reiterated the same principles. But the said observations do not, in our view, militate against the view that we are taking in this case. The Supreme Court, we are in respectful agreement, rightly pointed out that the statute must be construed with regard to the conditions under which registration could be claimed and the conditions required to be fulfilled must be strictly complied with. Reliance was also placed on certain observations in the case of Matreja & Co. v. CIT : 106ITR378(All) , where their Lordships of the Allahabad HighCourt dealt with the meaning of the expression 'defect' but the context in which their Lordships had dealt with the expression 'defect' was somewhat different. There, in respect of a partnership, an application for the declaration of the partnership firm was signed by one partner forging the signature of another. With respect, the Division Bench rightly came to the conclusion that such a conduct could not be condoned or coma within the purview of the expression 'defect' in the declaration form. Reliance was also placed on the decision of the Orissa High Court in the case of CIT v. Panda & Co. : 121ITR342(Orissa) , where the court observed to the same effect. On behalf of the Revenue, it was sought to be urged that this contention is no longer open for the assessee that it should be allowed to adjust its books of account on the basis of the application made in Form No. 11A, allowing it the registration on the basis of the new partnership deed which came into existence on August 5, 1968. It appears to us from the amplitude of the question as well as the contention raised before the Tribunal, which we have set out hereinbefore, that this contention in actual and identical terms was raised before the Tribunal.
9. Therefore, the question would be answered in the negative provided the assessee adjusts the accounts, taking into consideration that the new partnership came into existence on August 5, 1969, and for this purpose the Tribunal will allow the necessary opportunities.
10. The question is, therefore, answered in the negative and in favour of the assessee with the aforesaid directions.
11. The parties will pay and bear their own costs.
Sudhindra Mohan Guha, J.
12. I agree.