Decided on March 05,1993

JEWEL CINEMA Respondents


B.A. Khan, J. - (1.)WHETHER the Income-tax Officer's order refusing o condone the delay in filing a declaration in Form No. 12 under Section 184(7) of the Income-tax Act, 1961, is appealable under Section 246. This is the all important question posed for our opinion by the Appellate Tribunal. To answer this, it has to be seen whether the crucial order has been passed under Section 184(7) or under Section 185(1)(b) or under Section 185(3). No appeal will lie in the former case as any order passed under Section 184(7) is not appealable under Section 246 but it would certainly lie if it is concluded that the order falls under Section 185.
(2.)WE are conscious that we are not traversing any virgin field. Most of the High Courts, barring our court, have already pronounced on the point in issue and held in favour of maintainability of the appeal. All the same it becomes necessary to deal with the matter and answer the reference, though for different reasons, but in a repeat exercise.
The facts leading to the controversy are that in respect of the assessment year 1974-75, the respondent (assessee) filed a declaration for continuation of registration beyond the prescribed time. He submitted it on January 6, 1975, when he should have done it by June 30, 1974. The Income-tax Officer refused to condone the delay and vide order dated January 8, 1976, treated the assessee as an unregistered firm. The assessee went in appeal to the Appellate Assistant Commissioner and challenged before him only one part of the order, i.e., refusal of condonation of delay. The appeal was allowed and the Income-tax Officer was directed to condone the delay and grant registration to the firm. The Revenue felt aggrieved and took an appeal to the Tribunal taking the plea that the Income-tax Officer's order passed under Section 184(7) was not appealable before the Appellate Assistant Commissioner. The Tribunal, relying upon Addl. CIT v. Chekka Ayyanna [1977] 106 ITR 313 (AP), rejected the contention holding that as the order refusing condonation of delay amounted to refusal to continue registration, it was thus appealable under Section 246(j). The Revenue felt dissatisfied and sought reference under Section 256(1) to this court. Consequently, the Tribunal has drawn up a statement of the case and referred the following question for our opinion :

"Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the Income-tax Officer's order refusing to condone the delay in filing the declaration in Form No. 12 is an order passed under Section 185(1)(b) of the Act of 1961 and is appealable under Section 246(j) of the Act of 1961 ?"

Mr. Thakur, learned counsel for the Revenue, urged before us that the Income-tax Officer's order should be held to have been passed under proviso (ii) to Section 184(7) which empowered him to condone, the delay or to refuse it in a case where the declaration is filed beyond the prescribed time. Since the Income-tax Officer had exercised his discretion against the assessee in the present case, his order should be construed to be one passed under the aforesaid proviso and as Section 246 provided no appeal against such order, it was obviously not appealable. According to him, it would consequently neither fall under Section 185(1)(b) nor under Section 185(3). Analysing the two provisions, he contended that the former dealt with the application seeking registration of the firm for the first time and the latter envisaged rectification of defects in the declaration under Form No. 12 other than the one related to period of limitation. He submitted that the bar of limitation could not be termed a defect capable of rectification by the assessee and, as such, Section 185(5) had no application in the case.

(3.)MR. Gupta, representing the assessee, on the contrary argued that niceties of interpretation of the provisions apart, the net effect of the Income-tax Officer's order amounted to refusal of registration to the assessee and increase in its tax liability. That being so, the order fell under Section 185(1)(b) and was appealable. He invited our attention to the relevant order which concludes thus :
"I treat the assessee as an unregistered firm."

It is in this scenario that examination of the relevant statutory provisions becomes necessary to appreciate the respective contentions. Section 184 deals with applications for registration and declaration for continuation of such registration and Section 185 with the procedure to be followed in dealing with such matters. The provisions so far as necessary for our purpose read thus :

"184. Application for registration.-

(7) Where registration is granted or is deemed to have been granted to any firm for any assessment year, it shall have effect for every subsequent assessment year :

Provided that :

(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) of Section 139 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 Assessing 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."

"185. Procedure on receipt of application.--(1) On receipt of an application for the registration of a firm, the Assessing Officer shall inquire into the genuineness of the firm and its constitution as specified in the instrument of partnership, and-

(a) if he is satisfied that there is or was during the previous year in existence a genuine firm with the constitution so specified, he shall pass an order in writing registering the firm for the assessment year ;

(b) if he is not so satisfied, he shall pass an order in writing refusing to register the firm . . .

(3) Where the Assessing Officer considers that the declaration furnished by a firm in pursuance of Sub-section (7) of Section 184 is not in order, he shall intimate the defect to the firm and give it an opportunity to rectify the defect in the declaration within a period of one month from the date of such intimation ; and if the defect is not rectified within that period, the Assessing Officer shall, by order in writing, declare that the registration granted to the firm shall not have effect for the relevant assessment year ..."

246. Appealable orders.--(1) Subject to the provisions of Sub-section (2), any assessee aggrieved by any of the following orders of an Assessing Officer (other than the Deputy Commissioner) may appeal to the Deputy Commissioner (Appeals) against such order ...

(c) an order under Section 154 or Section 155 having the effect of enhancing the assessment or reducing a refund or an order refusing to allow the claim made by the assessee under either of the said sections ;...

(j) an order under Clause (b) of Sub-section (1) or under Sub-section (2) or Sub-section (3) or Sub-section (5) of Section 185."

Click here to view full judgement.
Copyright © Regent Computronics Pvt.Ltd.