Dwarka Prasad, J. -
(1.)THIS reference under Section 256(1) of the I.T. Act, 1961 (hereinafter referred to as "the Act"), has been made by the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, for the opinion to this court on the following question of law :
"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the order passed by the ITO was really an order under Section 185(1)(b) of the I.T. Act, 1961, and, as such, the appeal was maintainable before the Appellate Assistant Commissioner ?"
(2.)THE facts which have given rise to this reference briefly are : THE assessee, M/s. Chaturbhuj Radhakishan Binote (hereinafter referred to as "the assessee"), filed a return of its income in the status of a registered firm. THE assessee also filed on October 23, 1967, an application for registration along with a partnership deed. THE relevant accounting period of the assessee ended on May 11, 1967. As such the application for registration was submitted beyond the time prescribed under Section 184(4). THE assessee was asked by the ITO, "A" Ward, Chittorgarh, who was the assessing authority, to explain the delay. THE reason given by the assessee, in his reply for the delay which took place in filing the application for registration, was that one of the partners of the assessee-firm, Shri Roop Narain, was reluctant to sign the partnership deed and as he signed the said deed very late, the delay was caused in filing the application for registration. THE ITO, by his order dated December 13, 1971, held that the reason furnished by the assessee for the delay in filing the application for registration was not convincing and as such he refused to condone the said delay. THE assessing authority also held that the firm was not genuinely constituted during the accounting period. He, therefore, refused to register the firm and rejected the application for registration and directed that the assessee be assessed to tax in the status of an unregistered firm.
The assessee filed an appeal before the AAC, Udaipur Range, Udaipur. The appellate authority, by its order dated August 30, 1972, held that the finding of the ITO that the firm was not genuinely constituted could not be sustained. He, however, held that the order passed by the ITO refusing to condone the delay in filing the application for registration was not appealable and, as such, the same would continue to operate against the assessee. The result was that the appeal was partly allowed.
The assessee, thereafter, filed further appeal which was heard by the Tribunal, Amritsar Bench, at its camp at Udaipur. The Tribunal was of the view that an order refusing to condone the delay and refusing to register the assessee-firm should be deemed to have been passed under Section 185(1)(b) of the Act and, as such, the order refusing registration of the assessee-firm was appealable. The Appellate Tribunal held that the AAC was in error in holding that the order refusing to condone the delay was one passed under the proviso to Sub-section (4) of Section 184, which merely provides the period of limitation during which an application for registration has to be filed. The Tribunal by its order dated December 21, 1973, set aside the order passed by the AAC and sent the case back to him for deciding the question whether the assessee-firm was prevented by sufficient cause from making the application for registration before the end of the previous year.
The Commissioner filed an application before the Tribunal, Jaipur Bench, Jaipur, with a prayer to draw up a statement of the case and to refer the aforesaid question of law arising out of the order of the Appellate Tribunal dated December 21, 1973, to this court for its opinion. The Tribunal, by its order dated September 24, 1974, held that in its opinion, a question of law did arise out of the order of the Appellate Tribunal dated December 21, 1973, and, as such, the aforesaid question was referred to this court for its opinion.
Thus, the only question which we are required to decide in the present case is as to whether an appeal was maintainable before the AAC against an order passed by the ITO refusing to condone the delay in filing an application for registration of the firm and on that ground refusing to register the firm. The provisions relating to the registration of a firm and the procedure to be adopted by the income-tax authorities on receiving an application for registration are contained in Sections 184 and 185 of the Act, which are as under ;
"184. (1) An application for registration of a firm for the purposes of this Act may be made to the Income-tax Officer on behalf of any firm, if-
(i) the partnership is evidenced by an instrument ; and (ii) the individual shares of the partners are specified in that instrument.
(2) Such application may, subject to the provisions of this section, be made either during the existence of the firm or after its dissolution.
(3) The application shall be made to the Income-tax Officer having jurisdiction to assess the firm, and shall be signed-
(a) by all the partners (not being minors) personally; or
(b) in the case of a dissolved firm, by all persons (not being minors) who were partners in the firm immediately before its dissolution and by the legal representative of any such partner who is deceased.
Explanation.--In the case of any partner who is absent from India or is a lunatic or an idiot, the application may be signed by any person duly authorised by him in this behalf, or, as the case may be, by a person entitled under law to represent him.
(4) The application shall be made before the end of the previous year for the assessment year in respect of which registration is sought :
Provided that the Income-tax Officer may entertain an application made after the end of the previous year, if he is satisfied that the firm was prevented by sufficient cause from making the application before the end of the previous year.
(5) The application shall be accompanied by the original instrument evidencing the partnership, together with a copy thereof :
Provided that if the Income-tax Officer is satisfied that for sufficient reason the original instrument cannot conveniently be produced, he may accept a copy of it certified in writing by all the partners (not being minors), or, where the application is made after the dissolution of the firm by all the persons referred to in Clause (b) of Sub-section (3), to be a correct copy or a certified copy of the instrument; and in such cases the application shall be accompanied by a duplicate copy of the original instrument.
(6) The application shall be made in the prescribed form and shall contain the prescribed particulars.
(7) Where registration is granted to any firm for any assessment year, it shall have effect for every subsequent assessment year I
(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) or Sub-section (2) of Section 139 (whether fixed originally or on extension) 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 Income-tax 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,
(8) Where any such change has taken place in the previous year, the firm shall apply for fresh registration for the assessment year concerned in accordance with the provisions of this section.
185. (1) On receipt of an application for the registration of a firm, the Income-tax 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.
Explanation.--For the purposes of this section and Section 186, a firm shall not be regarded as a genuine firm if any partner of the firm was, in relation to the whole or any part of his share in the income or property of the firm, at any time during the previous year, a benamidar-
(a) of any other partner to whom the first-mentioned partner does not stand in the relationship of a spouse or minor child, or
(b) of any person, not being a partner of the firm, and any of the other partners knew or had reason to believe that the first-mentioned partner was such benamidar and such knowledge or belief had not been communicated by such other partner to the Income-tax Officer in the prescribed manner. "
(3.)THE assessee-firm has to make an application to the ITO concerned for obtaining registration of the firm under Section 184. In case the partnership is evidenced by an instrument in writing and the individual shares of the partners are specified in the instrument, such application should be accompanied by a copy of the partnership deed. An application for registration is to be made to the ITO having jurisdiction to assess the firm and is to be signed by all the partners personally, or in the case of a dissolved firm, by all the persons who were partners of the firm immediately before its dissolution and by the legal representatives of any deceased partner. An application for registration of a firm is to be made before the end of the previous year of the assessment year in respect of which the registration is sought. But in case the application is made after the end of the previous year, the ITO has a discretion to condone the delay and entertain the application for registration of the firm, if he is satisfied that the delay was caused due to sufficient cause. However, in case the ITO refuses to condone the delay, the application for registration of the firm would be rejected on the ground that it was filed beyond the period prescribed by law.
The procedure which the ITO is required to follow on the receipt of an application for registration of a firm is provided in Section 185. The ITO is to enquire about two matters, namely :
(1) genuineness of the firm ; and
(2) its constitution as may be specified in the instrument evidencing the partnership.
If, upon an enquiry, the ITO is satisfied that during the previous year of the assessment year, a genuine firm was in existence with the constitution specified in the instrument of partnership, he will grant registration to the firm. But in case, he is not satisfied either about the genuineness of the firm or regarding its constitution, as alleged by the firm, the ITO shall pass an order refusing to grant registration. Under Section 185(2), the ITO is authorised to reject an application for registration on the ground that the application was defective, or was not in order, but he is required to indicate the defect to the assessee and also to provide him an opportunity to rectify such defect before proceeding to reject the application for registration. If even in spite of an opportunity being given to him, the assessee fails to rectify the defect notified to him, then only the ITO may reject the application for registration. The ITO is also authorised to refuse to register a firm for the assessment year, if there is any failure on the part of the assessee as specified in Section 184.