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C.I.T. v. M/S E. Enterprises - INCOME TAX REFERENCE No. 24 of 1983 [2004] RD-AH 429 (3 August 2004)


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I.T.R. NO.24 OF 1983

The Commissioner of Income tax, Allahabad     ....      Applicant


M/s.  Electrical Enterprises, Allahabad              ....    Respondent


Hon'ble R.K. Agarwal, J.

Hon'ble K.N. Ojha, J.

The Income Tax Appellate Tribunal, Allahabad has referred the following two questions of law under Section 256(1) of the Income Tax Act, herein after referred to as the Act, for opinion of this Court.

1. Whether on the facts and in the circumstances of the

Case, the Appellate Assistant Commissioner could decide the point regarding registration in an appeal filed by the assessee against the assessment framed u/s 143(3) of the Act.?

2. Whether on the facts and in the circumstances of the

Case, the assessee was entitled to registration u/s 185(1) (b) of the Act.?

Briefly stated facts giving rise to the present reference are as follows.:-

While making the assessment for the assessment year 1977-78, the Income Tax Officer rejected the assessee's  opposite parties application for registration under Section 185(1) (b) of the Act in the following manner. :-

"During the course of assessment proceedings, it has come  my notice that assessee has filed partnership deed dated 17.3.1975 and form no.11 has been filed mentioning assessment year 1976-77.  The partnership deed do not specify the share of the partners and also do not indicate when  accounts shall be closed.  Moreover, there is no application for registration in the prescribed form i.e.,Form No.11 for assessment year 77-78.  The assessee was required vide this office letter dated 6.11.79 why registration should not be refused in his case.  In his reply the assessee has submitted that addendum to partnership showing ratio of the partners has been enclosed.  The addendum is dated 17.3.75  It was further contended that the closer of the account was decided mutually between the partners.  Regarding the application for registration, it has only been mentioned that the registration  was requested for 77-78 but no application was filed.  In view of the reply of the assessee, I am of the view that no genuine firm came into existence during this year.  As such, registration is refused."

Feeling   aggrieved    by   the order,  the   assessee

preferred one single appeal which was against the assessment as well as declining to grant registration.  The Appellate Assistant Commissioner allowed the appeal and granted registration to the firm.  The appeal filed by the Revenue has been dismissed.  

We have heard Shri A.N. Mahajan, learned counsel appearing for the Revenue.  Nobody has put in appearance on behalf of the assessee, opposite party.  The learned counsel for the Revenue submitted that against the order passed under Section 185 (1) (b) of the Act, an appeal lies under Section 246 of the Act.  Separate appeal lies against the order of assessment.  Thus, the assessee, opposite party  aught to have filed two separate appeals even though the order was passed on the same date and the registration was refused in the order of the assessment itself.  He thus, submitted that the appellate Assistant Commissioner was not justified in allowing the registration in the appeal filed against the assessment order.  The submission is misconceived.  Under Section 246 of the Act, an appeal lies against the assessment order as also against the  statuts under which the assessee is assessed. By declining to grant registration, the statuts of the assessee has been changed and, therefore, in the appeal filed against the assessment order, question of statuts under which the assessee has been assessed can very well be gone into .  In the case of Commissioner of Income Tax, West Bengal (V) Vs. Rupa Traders (1979) 118 ITR 412, the Calcutta High Court has held that :-

"Under s.246 of the I.T. Act, 1961 read with r.45 of the

I.T.Rules, 1962, and Form No.35 prescribed under the

Rules, where an assessee challenges before the AAC both

a best judgment assessment under s.143 and an order refusing registration under S.185 relating to more than one assessment year, a single consolidated appeal against the order of assessment as well as the orders refusing registration or renewal of registration is valid."

Similar view has been taken by the Bombay High Court in the case of Commissioner of Income Tax, Bombay City III Vs. Hansa Agencies 1980 121 I.T.R. 147 and the Gujarat High Court in the case of Patel and Company Vs. Commissioner of Income Tax 1986 161 I.T.R. 568 and by the Rajasthan High Court in the case of Ansari Jwellers Vs. Commissioner of Income Tax (1987) 167 I.T.R. 380.  

We are in respectful agreement with the views taken in the aforesaid cases and hold that a single appeal was maintainable against the order of assessment and refusal to grant registration.

In view of the foregoing discussions, we answer the first question in the affirmative, i.e., in favour of the assessee and against the Revenue.

So far as the second question is concerned, we find that the Appellate Assistant Commissioner had recorded  the finding which has been upheld by the Tribunal that there was certain typing errors and technical defaults committed due to the ignorance of the partners which defects have  been removed subsequently when pointed out to the I.T.O. during the course of assessment proceedings.  The assessment year mentioned in Form No.11 was on account of typographical mistake.  The share in profits and loss was specified by way of addendum dated 17th March, 1975, i.e., the date of partnership deed itself and was filed before the Income Tax Officer.  The other defect regarding closing of accounts was also mutually agreed in between the partners.  Thus the finding given by the appeal late authorities was that there was a valid partnership and the shares was duly specified and there were only certain technical errors due to inexperience of the partners.  The aforesaid findings are essentially findings of fact which has been arrived at on consideration of relevant materials and evidence on record which does not suffer from any infirmity.

In view of the findings recorded by the appellate authority, we are of the considered opinion that the assessee, opposite party was entitled to registration under Section 185 (1) (b) of the Act and, accordingly, we answer the second question also in the affirmative, i.e., in favour of the petitioner and against the Revenue.  However, there shall be no order as to costs.

Dated : 3/8/04



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