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PETITIONER: SIR HUKUMCHAND & MANNALAL CO.

       Vs.

RESPONDENT: COMMISSIONER OF INCOME-TAX, MADHYA PRADESH

DATE OF JUDGMENT: 04/01/1966

BENCH: SUBBARAO, K. BENCH: SUBBARAO, K. SHAH, J.C. SIKRI, S.M.

CITATION:  1966 AIR 1552            1966 SCR  (3) 193

ACT: Income-tax  Act (11 of 1922), s. 26A and  Income-tax  Rules, rr.  6A  and  6B--Order  of  cancellation  under  r.   6B-If appealable.

HEADNOTE: The Income,-tax Officer cancelled the certificate of renewal of  registration of the appellant-firm, under r. 6B  of  the Income-tax  Rules,  on the ground that the firm  was  not  a genuine  one.   The Appellate  Assistant  Commissioner,  the Tribunal  and  the  High Court on reference,  held  that  no appeal  lay against the order of the Income-tax  Officer  to the  Appellate Assistant Commissioner under s. 30(1) of  the Income-tax Act, 1922. In appeal to this Court, HELD  :The words "refusal to register a firm" in s.  30  are wide  enough to take in the orders made under rr. 6A and  6B refusing  to  renew  registration and  also  cancelling  the certificate so renewed, and such an order directly  attracts the  appellate  jurisdiction  conferred  on  the   Appellate Assistant Commissioner under the section. [196 E; 197 F] The  fact  that  s. 30 provides  for  an  appeal  separately against  the  orders  under s. 23  (4)  either  refusing  to register  a firm or cancelling the registration of  a  firm, but  provides in the context of s. 26A, for an  appeal  only against  an  order refusing to register the firm,  does  not affect  this  construction  of s. 30, because,  when  s.  30 provides for an appeal against the orders under s. 23(4), it has merely incorporated the two forms of orders embodied  in s.  23(4), and, when it provides for an appeal  against  the order  under  s. 26A, it has used a general  word,  for  the nature  of  the order under s. 26A is not described  but  is left  to  be prescribed under the  Rules.   The  application under  s. 26A made to the Income-tax Officer on behalf of  a firm  for registration for the purposes of the Act, will  be disposed  of  in  the manner prescribed by rr.  6A  and  6B. Under  these Rules, the Income-tax Officer is authorised  to make  three  kinds of orders, namely, (i) he can  refuse  to renew  the registration; (ii) he can register; and (iii)  he can cancel the renewal if he is satisfied that a renewal was obtained  without there being a genuine firm  in  existence.

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But  the  three  kinds  of  orders,  having  regard  to  the circumstances  of  each  case,  will  be  made  only  on  an application for renewal of registration, because, the  Rules do   not   provide  for  independent  proceedings   to   the cancellation  of the renewed certificate.  When the  Income- tax Officer cancels a renewed certificate, he sets aside his earlier  order and refuses a renewal, with the result  that, an  order  of refusal to renew a certificate and  the  order cancelling  the  renewed  certificate  are  given  the  same effect, namely, refusal of the application to register.   It follows  that the order cancelling registration  is  nothing more than refusing to renew the certificate of registration. [196 A-E: 197 C-E]

JUDGMENT: CIVIL APPELLATE JURISDICTION:Civil Appeal No. 223 of 1965. Appeal  from the judgment and order dated February 23,  1962 of  the Madhya Pradesh High Court in Misc.  Civil  Case  No. 165 of 1961. 194 N. A. Palkhivala, S. T. Desai, T.A. Ramachandran, J. B. Dadachanji, for the appellant. A.   V. Viswanatha Sastri, R. H. Dhebar, N. D. Karkhanis and R.   N. Sachthey, for the respondent. The judgment of the Court was delivered by Subba  Rao,  J.  This appeal, on a  certificate  granted  by the  Madhya Pradesh High Court, raises the question  whether an appeal lies under s. 30(1) of the Indian Income-tax  Act, 1922, hereinafter called the Act, to the Appellate Assistant Commissioner  against  the order of  an  Income-tax  Officer cancelling an order granting registration of a firm under S. 26-A of the Act. The  facts  material for the said question  may  be  briefly stated.  The appellant is a firm constituted under a deed of partnership  dated  July 16, 1948.  The  Income-tax  Officer registered  the said firm under s. 26-A of the Act  for  the year  1950-51.  The registration was renewed for  the  years 1951-52  and 1952-53.  On November 30, 1957, the  Income-tax Officer  renewed  the registration for the  assessment  year 1953-54.  On March 6, 1959, on the ground that the firm  was not   a  genuine  one,  the  said  officer   cancelled   the registration  under Rule 6-B of the Income-tax  Rules.   The appellant  preferred  an appeal against that  order  to  the Appellate Assistant Commissioner, Indore.  On July 15, 1959, the said Assistant Commissioner rejected the appeal for  the reason  that no appeal lay against the order of the  Income- tax  Officer cancelling the registration.  The appeal  filed by  the  appellant  against that  order  to  the  Income-tax Appellate Tribunal, Bombay, was dismissed.  At the  instance of the appellant, the following question was referred to the High Court under s. 66(1) of the Act :               "Whether on the facts and circumstances of the               case,  the  order  passed  by  the  Income-tax               Officer  under Rule 6-B of the Indian  Income-               tax   Rules  cancelling  the  certificate   of               renewal   of  registration  granted   to   the               assessee is appealable under section 30 of the               Income-tax Act.,, A Division Bench of the High Court of Madhya Pradesh answer- ed  the  reference against the appellant.  It held  that  no appeal  lay under s. 30 of the Act against the order of  the Income-tax Officer cancelling registration to the  Appellate Assistant Commissioner.  Hence the appeal.

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195 The  only  question  in this appeal  is,  whether  an  order cancelling  the certificate of renewal of registration  made under s. 26-A of the Act by an Income-tax Officer is subject to  an  appeal  under s. 30(1) to  the  Appellate  Assistant Commissioner.  At the outset, the relevant provisions may be usefully read               Section  26-A. (1) Application may 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 purposes of               this  Act and of any other enactment  for  the               time being in force relating to income-tax  or               super-tax.               (2)   The  application shall be made  by  such               person or persons, and at such times and shall               contain such particulars and shall be in  such               form,  and be verified in such manner, as  may               be  prescribed and it shall be dealt  with  by               the  Income-tax Officer in such manner as  may               be prescribed.               Rule  6.  Any firm to, whom a  certificate  of               registration has been granted under Rule 4 may               apply  to the Income-tax Officer to  have  the               certificate  of  registration  renewed  for  a               subsequent year               Rule 6-A.  On receipt of an application  under               Rule  6 the Income-tax Officer may, if  he  is               satisfied that the application is in order and               that  there,  is or was a  firm  in  existence               constituted  as  shown in  the  Instrument  of               Partnership,   grant   to   the   assessee   a               certificate  signed  and dated by him  in  the               following form:-               Rule  6-B.   In the event  of  the  Income-tax               Officer  being satisfied that the  certificate               granted  under Rule 4, or under Rule 6-A,  has               been  obtained without there being  a  genuine               firm in existence, he may cancel the               Section 30. (1) Any assessee objecting to  the               cancellation  by an Income-tax Officer of  the               registration  of a firm under sub-section  (4)               of  section 23 or to a refusal to  register  a               firm  under sub-section (4) of section  23  or               section  26-A  may  appeal  to  the  Appellate               Assistant Commissioner against the  assessment               or against such refusal or order." 196 The  gist  of the said provisions relevant  to  the  present enquiry  may  be stated thus : Under s. 26-A of the  Act  an application may be made to the Income-tax Officer on  behalf of  a  firm for registration for the purposes  of  the  Act. Such  an application has to be filed and disposed of in  the manner   prescribed  in  the  Act.   Under  the  Rules,   an application for the renewal of registration of a firm  which has already been registered in the previous years has to  be filed before the Income-tax Officer.  That application  will be disposed of in the manner prescribed by Rules 6-A and  6- B.  Under those rules, the Income-tax Officer is  authorized to  make three kinds of orders, viz., (i) he can  refuse  to renew the registration of the firm; (ii) he can register the firm; and (iii) he can cancel the renewal of registration if he  is satisfied that the renewal has been obtained  without there being a genuine firm in existence.  The crucial  point

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to be noticed is that the said three kinds of orders, having regard to the circumstances of each case, will be made  only in  the application for renewal of registration.  The  Rules do  not provide for independent proceedings for the  cancel- lation  of the renewed certificate.  In effect, the  Income- tax  Officer,  after setting aside his earlier  wrong  order made  under  a  misapprehension,  refuses  renewal  of   the certificate  of  registration.  If so, it follows  that  the order cancelling registration is nothing more than  refusing to  renew the certificate of registration.  If that  be  the construction of an order made cancelling the certificate re- newed,  such  an  order  directly  attracts  the   appellate jurisdiction   conferred   on   the   Appellate    Assistant Commissioner under s. 30 of the Act. But  Mr.  Viswanatha Sastry for the Revenue  contended  that there  was internal evidence in s. 30 of the Act  itself  to show that such a construction was not possible.  He  further argued that under the Income-tax law there was no scope  for equitable  considerations, and under the express  provisions of  s. 30 no appeal Jay against the order of the  Income-tax Officer  cancelling  the certificate  of  registration.   In support of his contention he relied upon that part of s.  30 of  the  Act which we have extracted earlier  and  contended that when the Legislature in the context of the orders  made under  s.  23  (4) spoke separately of  the  order  of  can- cellation of registration of a firm and an order refusing to register  a firm and in the same section, in the context  of s.  26-A, it mentioned only refusal to register a  firm,  it clearly expressed its mind that in the former case an appeal would  lie  against both the orders, whereas in  the  latter case  an  appeal would lie only against one of  the  orders. There is some force in this argument.  But a 197 careful  reading of the provisions of s. 23 (4) and s.  26-A brings  out the difference in the phraseology used in s.  30 in the matter of appeals against orders made under the  said two  sections.  The relevant parts of s. 23 (4) and s.  26-A (2) may be placed in juxtaposition : Section 23(4)                          Section 26-A(2) be...... dealt the case of a firm, may refuse to with by the Income-tax  Officer  in  register  it  or  may  cancel   its registration such manner as may be prescribed. ration if  it is already registered. A  comparative  study  of the relevant parts  of  these  two provisions  at once shows the distinction between  the  two. Under  s.  23(4) while the Income-tax Officer  can  make  an order  refusing  to  register  a  firm  or  may  cancel  the registration  if it is already registered, under s.  26-A(2) he  can  only  make  an  order in  such  manner  as  may  be prescribed.   The  manner  prescribed, as  we  have  already indicated  earlier,  provides for three different  kinds  of orders  to be made in the same application with  the  result that  an  order of refusal to renew a  certificate  and  the order cancelling the certificate renewed are given the  same effect,  namely,  refusal of the  application  to  register. That  apart, when s. 30 provides for an appeal  against  the orders under s. 23(4) and also against orders under s. 26-A, it  has    incorporated the two forms of orders embodied  in s.    23(4)  and used a general word in providing an  appeal against  an order under s. 26-A, for the nature of order  is not described but left to be prescribed under the Rules. If  so,  it follows that the words "refusal  to  register  a firm!’  in s. 30 of the Act are wide enough to take  in  the orders  made  under rr. 6-A and 6-B refusing  to  renew  the registration and also cancelling the certificate so renewed.

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By  so holding we are not unaware that equity has no  place, in construing the provisions of the Income-tax Act.  Indeed, we  have not introduced any equitable consideration  in  the matter of construction.  We have come to the conclusion on a fair  reading of the relevant provisions of the Act and  the Rules made thereunder. In  the  result, we answer the question propounded  for  the High Court’s decision in the affirmative.  The order of  the High  Court  is  set aside and the appeal  is  allowed  with costs. Appeal allowed. 198