JUDGEMENT
1. This is an appeal filed by the assessee and it relates to assessment year 1982-83 for which the previous year ended by 31-3-1982. The assessee is firm doing the business as commission agents in all sorts of grains in Nagarkurnool. For assessment year 1982-83 the assessee filed its return on 29-12-1984 in which it had disclosed an income of Rs. 14,550. However, the assessment was completed u/s. 144 by the assessment order dated 23-1-85 in which the Income-tax Officer determined the total income of the assessee from its business at Rs. 22,000. The status of the assessee was determined as that of unregistered firm. I may mention that the assessments were completed against the assessee for assessment year 1980-81 on 11-3-83 and for assessment year 1981-82 on 28-3-84 also under sec. 144. Admittedly the assessee-firm filed its Form No. 12 on 30-6-82. The assessee was granted initial registration u/s. 185 even during assessment year 1972-73 on 24-2-73. Since then onwards it was granted continuation of registration until and including assessment year 1979-80. As already stated for assessment years 1980-81 and 1981-82 the assessee courted ex parte assessment u/s. 144 and the status of the assessee accorded from those years was that of an unregistered form. No appeals were preferred by the assessee for assessment years 1980-81 and 1981-82. The first ground before this Tribunal was directed against the estimation of income of Rs. 22,000 instead of accepting the returned income of Rs. 14,550. Shri K. C. Devdass, learned counsel for the assessee-appellant specifically submitted that he was not pressing quantum aspect in the appeal and therefore, ground No. 1 in the appeal should be taken to have been not pressed. Grounds 2 to 4 deal with the question of granting continuation of registration. It is contended for the assessee-appellant that Form No. 12 having been filed in time, the Income-tax Officer ought to have granted continuation of registration to the form more so because the genuineness of the firm was never in doubt. The assessee went in appeal before the Appellate Asstt. Commissioner both against the quantum fixed by the I. T. O. as well as against the status accorded to the assessee firm. The A. A. C. in his impugned orders dated 11-8-86 justified the orders of the Income-tax Officers treating the assessee firm as an unregistered firm. He also held that the I. T. O.s order is in accordance with the provisions of sec. 185(5) of the I. T. Act. Further, the A. A. C. held that since the appellant firm failed to comply with the statutory notices issued by the ITO, the ITO was justified in refusing registration to the firm. Therefore, the A. A. C. dismissed appeal filed by the assessee both as regards the quantum as well as with regard to the status accorded to it. The second appeal filed by the assessee is directed against the order of the A. A. C. As already stated the learned counsel for the assessee gave up his appeal as regards the quantum aspect and he confined for the assessee only to attack the legality of the AACs order with reference to the status accorded to the assessee-firm. According to Shri K. C. Devdass, the genuineness of the firm was ever in dispute and Form No. 12 having been filed for the relevant assessment year quite in time viz., On 30-6-1982, the Income-tax Officer ought to have granted continuation of registration to the assessee-firm. Sri K. C. Devdass cited before me the Patna high Court decision in Purusottam Lal Kishorilal v. CIT [1978] 115 ITR 377 for the proposition that renewal of registration cannot be refused merely because registration was not renewed during immediately preceding year. In the facts of the Patnas case the firm was granted renewal of registration up to assessment year 1965-66. For 1966-67 though the firm had filed a declaration up envisaged u/s. 184 of the I. T. Act, the firm was treated as unregistered and assessed with an income of Rs. 2,256 for which there was no tax liability. Against the said order of assessment there was no appeal. For assessment year 1967-68 it was contended by the assessee that since there was no change in the constitution of the firm it was entitled to automatic renewal of registration by virtue of provisions of sec. 184(7) of the I. T. Act. The Income-tax Officer refused registration on the ground that since no registration has been allowed in the preceding year the question of renewal of registration did not arise. The A. A. C. allowed the appeal. On further appeal, however, the Appellate Tribunal accepted the contention of the revenue and held that the order of the AAC was without jurisdiction since an order refusing to grant registration was not an appealable order. The High Court was moved by a writ application filed under articles 226 and 227 of the Constitution of India. The Patna High Court in the above circumstances held as follows as per the head-not of the decision found at page 37 : -
(1.)"Held, that there was nothing in the order of the Tribunal to show that there had been any change in the constitution of the firm or readjustment of the shares of the partners in the existing firm and the mere fact that the firm had not been allowed the benefits of continuance of registration during the immediately preceding year 1966-67 was not sufficient legal justification for the ITO to refuse renewal of registration of the firm for the year 1967-68. The order of the ITO refusing to renew the registration of the firm of the year 1967-68 was without jurisdiction and should be quashed."
(2.)On the strength of the above decision Sri K. C. Devdass submitted that simply because the assessee courted ex parte assessments for assessment year 1980-81 and 1981-82 cannot form the basis for refusal to grant continuation of registration for assessment year 1982-83. He also contended that the order of the AAC justifying the refusal of continuation of registration under section 185(5) is legally wrong. Sri Devdass contended that the provisions of section 185(5) can apply only to the case of initial grant of registration but not to a case for grant of continuation of registration. In the case of the assessee-firm what was prayed for was continuation of registration and not grant of initial registration. Therefore, provisions of section 185(5) do not apply and in support of this contention the learned counsel cited before me the decision of the Allahabad High Court in Addl. CIT v. Radha Kishan Banwarilal [1979] 116 ITR 970 where it was categorically held as per the head-note as follows : "Held that the ITO had no power to refuse registration to the firm under section 185(5) as that provision applies at the initial stage of granting or recognising registration".
Sri Devdass contended that the only provision which is available to the ITO to refuse continuation of registration to the firm was under section 186(2). Section 186(1) and (2) according to the learned counsel should be read conjointly. When so read the yielded position under law would be that in a case where the firm was granted registration 8 years ago the benefits of continuation of registration cannot be denied under any circumstances. In such a case even the provisions of section 186(2) do not apply. But in cases where the registration was granted within a period of 8 years, to such cases only the cancellation of registration can be considered under section 186(2). In support of his submission which resulted from a conjoint reading of sub-sections (1) and (2) of section 186 the learned counsel did not cite any decision but he submitted that it is the obvious meaning which would flow from such a reading of sub-sections (1) and (2) of section 186. In any event the learned counsel contended that the present is a case where the ITO did not apply the provision of section 186(2) of the I. T. Act as he did not issue the notice contemplated under sub-sections (1) and (2) of section 186. Therefore, on this ground also continuation of registration cannot be denied for the assessee-firm.
(3.)THE learned Departmental Representative on the other hand contended that the ITO not state the provisions of law under which refusal to grant continuation of registration was felt justified. THE AAC, however, got justification for the action of the ITO under section 185(5). Now in view of the categorical decision section 185(5) cannot be invoked in cases where continuation of registration is prayed for, it should be taken that the ITO had in mind the provisions of section 186(2) while refusing continuation and not section 185(5) of the I. T. Act. THE learned Departmental Representative also tried his utmost to read the notice dated 12-12-1984 issued by the ITO requiring the assessee firm to appear before him on or before 20-12-84 as one issued under section 186(2). However, having found that clear 14 days notice was not given in the said notice the learned Departmental Representative gave up that argument and rest content by arguing that the refusal of continuation of registration to the assessee-firm may be justified under the provisions of section 186(2) and the AAC merely laid his hands on a wrong section in his impugned orders and that fact by itself does not vitiate his otherwise legal order.
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