: Sabyasachi Mukharji, J. - In this reference for the three years, i.e., asst. yrs. 1959-60, 1960-61 and 1961-62, u/s 256(1) of the IT Act, 1961, the following questions have been referred to this Court :
'1. Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the ITOs orders cancelling registration of the assessee-firm for the asst. yrs. 1959-60, 1960-61 and 1961-62 u/s 186(1) of the IT Act, 1961 were not valid in law ?
2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the ITOs orders u/s 154 r/w s. 186(3) of the IT Act, 1961 for the asst. yrs. 1959-60, 1960-61 and 1961-62 were not valid in law ?'
It appears that the registration of the firm was granted to the assessee for the asst. yr. 1959-60 on or about 5-8-1961 u/s 26A of the Indian IT Act, 1922 and renewal of registration was granted for the asst. yr. 1960-61 on 5-8-1961 and for the asst. yr. 1961-62 on 4-11-61. The assessments for all these three years were completed u/s. 23(3) of the IT Act, 1922. The question arose was whether the ITO was justified in invoking the provisions of s. 186(1) of the New Act for this purpose particularly when the provisions of r. 63 of the IT Rules, 122 and s. 35 of the Indian IT Act, 1922 for cancellation of registration once granted and the provisions of s. 186 of the New Act were materially different. The ITO, it must be noted, issued show cause notice u/s 186(1) of the new Act on 14-4-1967 for all these three years and after hearing the assessee and after obtaining the approval of the IAC cancelled registration u/s 186(1) of the New Act. As a natural corollary, the ITO passed order u/s 186(3), (4)/154 in respect of all the three years demanding tax on the basis of unregistered firm and directing adjustment of taxes if paid in the case of the partners.
The Tribunal has held that the order of the ITO for cancellation of the registration u/s 186(1) of the New Act was not valid. The Tribunal was right in so holding. But the Tribunal observed that this could be sustained u/r 68 which would have been the follow-up action u/r 68 of the IT Rules, 1922. But the problem in this case is that u/s 297(2)(a) r/w IT (Removal of Difficulties) Order, 1962 cl. (2) - the proceedings for cancellation of the registration for these years must be governed by the old Act. But under the old Act u/s 35(5), in view of the dates in this case, the action would be barred by limitation. In that view of the matter, the adjudication of both these questions would become academic. The Tribunals finding must continue.
So far as the Question 1 is concerned, the order of the ITO cancelling the registration of the firm u/s 186(1) of the New Act was not valid in law. But the follow up action u/r 68 of the IT Rules, 1922 could have been taken, if those provisions could be attracted. But the said provisions could not be attracted because the action under that r. 68 has become barred, as there being no corresponding power in the IT Act, 1922 similar to s. 186(3) of the New Act.
So far as the Question No. 2 is concerned, as we have held that the provisions of the old Act would be applicable, s. 154 of the New Act could not be attracted because it would be guided by s. 35 of the old Act and action u/s. 35 was barred when the action was taken.
In the premises, we decline to answer these two questions.
Each party will pay and bear its own costs.
Sudhindra Mohan Guha, J. - I agree.