Decided on April 05,1982



George Cheriyan, Accountant Member - (1.) THESE two appeals are by the revenue and relate to the assessment years 1976-77 and 1977-78. The appeals are against the orders of the AAC directing grant of registration to the assessee-firm.
(2.) The orders which were passed by the ITO under Section 185(1)(b) of the Income-tax Act, 1961 ('the Act') which are subject of appeal, were dated 27-3-1979 for the assessment year 1976-77 and 14-3-1980 for the assessment year 1977-78. For the assessment year 1976-77, the ITO merely wrote that the assessee-firm had entered into business for maintenance of the administration of Parvati Combines, Visakhapatnam, and as a matter of fact the firm had entered into a sham transaction and there was no real business. As it was a firm without real business activity, the ITO held that registration could not be granted. For the assessment year 1977-78, on the same basis registration was refused. The matter went up in appeal. the AAC stated that the firm came into existence under a deed dated 1-4-1975 with four partners and it was stated that the nature of the business was to organise managerial service to two theatres--Geet and Sangeet--owned by another firm Parvati Combines. There were 4 partners there also who were the relations of the partners in the assessee-firm. The AAC came to the conclusion that the firm did carry on a business and on merits it was entitled to registration.
(3.) BEFORE the AAC- however, a point was urged by the assessee that the ITO had promised to send the assessee the order of registration. The AAC stated that he found some sort of a draft order dated 27-2-1979 made by the ITO granting registration to the firm but that order was never communicated to the assessee and it was cancelled by the ITO on 27-3-1979, when another order refusing registration was passed by him. According to the AAC, the expression 'order' in the Act meant an order of which the party affected has actual or constructive notice and since the assessee had not received the order in question, he could not accept the assessee's contention that the ITO's action by refusing registration was only a change in opinion. According to the AAC, the only order passed by the ITO was that communicated to the assessee and dated 27-3-1979. (This was the date of the order for 1976-77 for 1977-78 the date should have been 14-3-1980).;

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