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PETITIONER: COMMISSIONER OF INCOME TAX, BIHAR, PATNA

       Vs.

RESPONDENT: AMAR SINGH GOWAMAL & SONS, JHARIA, DHANBAD

DATE OF JUDGMENT17/07/1986

BENCH: MUKHARJI, SABYASACHI (J) BENCH: MUKHARJI, SABYASACHI (J) PATHAK, R.S.

CITATION:  1986 AIR 1724            1986 SCR  (3) 308  1986 SCC  (3) 685        JT 1986   171  1986 SCALE  (2)38

ACT:      Income Tax  Act 1961,  s.184/26A-Registration of  firm- Registration-Whether ensures for every subsequent year.

HEADNOTE:      The respondent-assessee  firm was  registered  in  1945 under the  Indian Income  Tax, 1922. The registration was up to the  assessment year  1961-62. On 8th November, 1961, the last day  of the  previous year  relevant to  the assessment year 1962-63,  there was a change in the constitution of the firm. From November 9, 1961, a new instrument of partnership came into  existence. On  September 29, 1962 the respondent- assessee firm applied for registration in Form 11A under the Income  Tax  Act,  1961.  The  Income  Tax  officer  refused registration on  the ground that the case fell under section 184(7) of  the Act.  The Tribunal  upheld the  order of  the Income Tax officer.      The High  Court in  a reference  made by  the  Tribunal under Section  256(1) of  the Act.  held that on the date of application, the  constitution  of  the  assessee  firm  had changed and that the application was for registration of the firm which  was in  existence throughout  the length  of the previous year  in relation to the first assessment under the Act of  1961 and  that being  so, in  accordance  with  Rule 22(4)(ii) of  the Income Tax Rules, the application filed in Form 11-A was a good and valid application.      Dismissing the appeal by the revenue, this Court, ^      HELD: 1.  The High  Court was right in holding that the application filed   in  Form  11-A  was  a  good  and  valid application. [313C-D]      2.1  Section  26A  of  the  1922  Act  dealt  with  the procedure in  registration of the firm. Under the provision, application might  be made  to  the  Income-tax  Officer  on behalf of  any  firm  constituted  under  an  instrument  of partnership specifying the individual shares of the partners 309 for registration  for the  purpose of  that Act  and of  any enactment for  the A  time being in force either relating to income-tax or  super-tax. The application was required to be made by  such person  or persons and was required to contain

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such particulars and had to be in such form and was required to be verified in such manner as had been prescribed. It was thereafter required  to be  dealt  with  by  the  Income-tax Officer, in the manner prescribed. [311G-H; 312A-B]      The Act  of 1922  contained power for the Central Board to make rules under the said Act. Rule 2(a)(i) of said Rules required the  filing  of  an  application  for  registration within a  period of  six months  of the  constitution of the firm whichever  was earlier  or in any other case before the end of the previous year, as was required by clause (ii). Application for  renewal of registration under rule 6 had to be filed  before the  30th  day  of  June  of  a  particular assessment year. [312B-C]      2.2 There were two types of forms given in form I which was the  form of  application for  registration of  the firm under section  26A of  1922 Act.  One was an application for registration simpliciter where there was no registration but when the  firm as constituted on the date of the application was different from the one whose income was under assessment then  in  schedule  (B)  of  the  form  particulars  of  the apportionment of  income, profits  or gains  or loss  of the business in the previous year, between the partners who were entitled to  shares in such income, profits or gains or loss had to  be given.  The form  of the  renewal application was appended to rule (6). [312C-E]      2.3 Under  the 1922  Act both  the forms were meant for the purpose  of first  registration  of  the  firm  and  not renewal, but  the form  of renewal  appended to  rule 6  was different. Essentially,  similar is  the position  under the 1961 Act.  Chapter XVI  of the  1961  Act  deals  with  that position. Section  182 of  the Act  deals with assessment of registered firms,  and section  184 of  the Act  deals  with application for  registration of  firm. Sub-section  (4)  of Section 184  stipulates that  the application should be made before the  end of  the previous  year for the assessment in respect of  which registration  was sought.  The  Income-tax Officer had  power to  entertain application  even after the end of the previous year.[312G-H; 313A-B]      2.4 The scheme for renewal under 1961 Act was different from the  one under  the 1922 Act in one significant aspect, while under  1922 Act the application for registration meant application for registration 310 for  every  year  and  if  granted  it  was  valid  for  one asesessment year  but under  1961 Act  once registration  is granted, such  registration  ensures  for  every  subsequent year,  if   certain   requirements   are   fulfilled.   Such requirements are  provided in sub-section (7) of section 184 of the Act. [313B-C]      2.5 It  is apparent from relevant provisions of the two Acts that  registration granted  under 1922  Act cannot have effect of  continuing the  registration for  the  assessment year 1962-63  where 1961  Act would  apply. For that year an application for  registration of  the firm  has to  be  made under section  184(1) of  the 1961 Act, and the fact of such registration noted  under sub-section  (4) of section 185 of the Act.  Sub-section (7) would not come into effect at that time.  It   would  come   into  effect  for  the  subsequent assessment year 1963-64. [313D-F]

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil  Appeal  No.  1912

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(NT) of 1974      From the  Judgment and  order dated 23rd November. 1973 of the Patna High Court in Tax Case No. 46 of 1969.      S.C. Manchanda,  K.P. Bhatnagar  and Miss A. Subhashini for the Appellant.      The Judgment of the Court was delivered by      SABYASACHl MUKHARJl,  J. This  is an  appeal  from  the decision and  judgment of the High Court of Patna dated 23rd November, 1973.  The appeal  is by certificate from the High Court under  section  261  of  the  Income  Tax  Act,  1961, hereinafter  called   the  ’Act’.   The  assessee  firm  was registered in  1945 under  the Indian  Income Tax Act, 1922. The registration was upto the assessment year 1961-62. There was a change in the constitution of the firm on the last day of the previous year relevant to the assessment year 1962-63 on  8th  November.  1961.  From  November  9,  1961,  a  new instrument of  partnership came into existence. On September 29, 1962, the firm applied for registration under the Act in Form 11A. The Income-tax officer refused registration on the ground that  the case  fell under section 184(7) of the Act. The Tribunal,  thereafter upheld the order of the Income-tax officer. There  was a  reference to  the High  Court. It was held by  the High  Court that  the application  was filed in September, 1962.  On that  date the constitution of the firm had changed. The 311 application for  registration under  the 1961  Act  was  for registration of  the firm  which was in existence throughout the length  of the  previous year  in relation  to the first assessment year  under the  Act of  1961. That  being so, in accordance  with  rule  22(4)(ii),  Income  Tax  Rules,  the application filed  in  Form  1  IA  was  a  good  and  valid application.      The High  Court, further,  observed that  the scheme of renewal of  registration under the Act of 1961 was different from the  one that obtained under 1922 Act. Under the Act of 1922,  application   for  renewal   of  registration   meant application for  registration every  year and had the effect of registering  the firm  every year.  Under the Act of 1961 when once  registration was granted under the Act of 1922 to any firm  for any  assessment year  it enured for subsequent years also  unless there was a change in the constitution of the firm. A registration granted under the Act of 1922 would not have  the effect  of continuing the registration for the assessment year  1962-63 to  which the  Act of  1961  became applicable. For  that year  an application  for registration had to  be made  for the  purposes of  the Act  of  1961  in accordance  with  section  184(1)  and  the  fact  that  the registration under  the Act  had got  to be noted under sub- section (4)  of  section  185  of  the  Act.  A  renewal  of registration  granted  under  the  Act  of  1922  is  not  a "recognition granted"  or "order  issued" within the meaning of section 297(2)(k) of the 1961 Act and was, therefore, not saved by the provisions of that section.      The question  that was  referred by the Tribunal to the High Court under section 256(1) of the Act was as follows:           "Was the application for registration made in Form           No. 11A on 29th September, 1962 validly refused?"      The question  of registration  of the  firm  under  the relevant Income Tax Acts was dealt with under section 26A of 1922 Act.  Section 26  of the 1922 Act dealt with the change in the  constitution of  a  firm,  as  neither  the  revenue authorities nor the High Court has proceeded on any question of the constitution of the firm, it is not necessary for the present purpose  to deal  with that. Section 26A of the 1922

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Act dealt  with the  procedure in  registration of the firm. Under the  provision,  application  might  be  made  to  the Income-tax officer  on behalf  of any firm constituted under an  instrument  of  partnership  specifying  the  individual shares of  the partners  for registration for the purpose of that 312 Act and  of any enactment for the time being in force either relating to  income-tax or  super-tax. The  application  was required to  be made  by such  person  or  persons  and  was required to  contain such  particulars and had to be in such form and  was required  to be verified in such manner as had been prescribed. It was thereafter required to be dealt with by the  Income-tax officer in the manner prescribed. The Act of 1922  contained power for the Central Board to make rules under the  said Act. Rule 2(a)(i) of said Rules required the filing of an application for registration within a period of six months of the constitution of the firm or before the end of the previous year of the firm whichever was earlier or in any other  case before  the end of the previous year, as was required  by   clause  (ii).   Application  for  renewal  of registration under  rule 6  had to  be filed before the 30th day of  June of a particular assessment year. There were two types of  forms given  in form  I  which  was  the  form  of application for  registration of  the firm under section 26A of  1922  Act.  One  was  an  application  for  registration simpliciter where  there was  no registration  but when  the firm as  constituted on  the date  of  the  application  was different from  the one  whose income  was under  assessment then  in  schedule  (B)  of  the  form  particulars  of  the apportionment of  income, profits  or gains  or loss  of the business in  the previous  years, between  the partners  who were entitled  to shares in such income, profits or gains or loss had  to be  given. The  form of the renewal application was appended to rule (6). It might be noted that the Central Board of Direct Taxes had extended the time for registration during the  transitional period  after coming into operation of the Act of 1961, upto 30th September, 1962. It would thus be seen  that when the application was filed it was in time, it was not necessary to fill up the two schedules but if the application was  filed for  the first  registration  of  the firm, which was in existence in the previous year at a point of time when the firm was reconstituted then the particulars of both  kinds had  to be  given. But  the assessment on the newly constituted  firm on the date as it was constituted at the time  of assessment could be made when it was found that the firm as constituted was different from the one which had earned the profit in the previous year.      It is apparent, therefore, that under the 1922 Act both the forms  were meant  for the purpose of first registration of the  firm and  not  renewal,  but  the  form  of  renewal appended to  rule 6  was different.  Essentially, similar is the position  under the  1961 Act.  Chapter XVI  of the  Act deals with  that position. Section 182 of the Act deals with assessment of  registered firms,  and section 184 of the Act deals with application for registration of firm. Sub-section (4) of section 184 313 stipulates that  the application  should be  made before the end of  the previous  year for  the assessment in respect of which registration  was sought.  The Income-tax  officer had power to  entertain application  even after  the end  of the previous year.  The basic point that has to be borne in mind in this  case is  that the scheme for renewal under 1961 Act was different from one under the two Acts in one significant

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aspect,  while   under  1922   Act   the   application   for registration meant  application for  registration for  every year-and if granted it was valid for one assessment year but under  1961   Act,  once   registration  is   granted,  such registration enures  for every  subsequent year,  if certain requirements  are   fulfilled.  Such   requirements  are  as provided in  sub-section (7) of section 184 of the Act. Such procedure, it  seems to  us. has been substantially complied with. The  question which the High Court posed before it was whether the  application filed  on 29th  September, 1961  in Form 11A  was a good application in accordance with 1961 Act and the  rules framed thereunder or whether ii was a case of continuance of  the  registration  granted  under  1922  Act within the  meaning of sub-section (7) of section 184 of the Act. It is apparent from relevant provisions of the two Acts that registration  granted under 1922 Act cannot have effect of continuing the registration for the assessment year 1962- 63 where  1961 Act would apply. For that year an application for registration  of the  firm has  to be made under section 184 (1) of 1961 Act, and the fact of such registration noted under sub-section (4) of section 185 of the Act. Sub-section (7) would  not come  into effect at that time, it would come into effect  for the  subsequent assessment year 1963-64. In the instant  case, the  application was  filed in September, 1962-on that  date the constitution of the firm had changed- the application  for registration  under 1961  Act  was  for registration of  the firm  which was in existence throughout the length  of the  previous year  in relation  to the first assessment under  1961 Act. That was in accordance with rule 22(4)(ii) of the Rules and the application filed in Form 11A was a good and valid application. The High Court so held. We agree. The  other aspect-whether  section 297(2)(k)  of 1961 Act was applicable, was also discussed by the High Court but it is  not necessary  to refer  to it  in the  view we  have taken.      In any view of the matter in the facts of this case and in view  of so-called  alleged detects  in  the  application according to  the Income-tax officer, the Income-tax officer under sub-section  (2) of section 185 of the Act should have given an opportunity to the firm, and in not having done so, did not act validly and the rejection of the application 314 was invalid.  The question  referred to  the High  Court was rightly answered  in the  negative. The  appeal fails and is dismissed. Since  the other  side was  not represented here, there will be no order as to costs. M.L.A.                                     Appeal dismissed. 315