Court rules delay-based registration application rejection appealable under Income-tax Act 1961

Commissioner Of Income-Tax Versus Nagarmal Bisheshar Lal

Commissioner Of Income-Tax Versus Nagarmal Bisheshar Lal - [1991] 190 ITR 468, 90 CTR 88, 55 TAXMANN 294 Issues Involved:
1. Whether the order rejecting the application for registration on the ground that it was belated was an order under section 185 of the Income-tax Act, 1961, and was, therefore, appealable.

Issue-wise Detailed Analysis:

1. Nature of the Order Rejecting Registration Application:
The core issue was whether the order rejecting the application for registration due to delay was an order under section 185 and consequently appealable. The Tribunal held that the order rejecting a belated application was indeed an order under section 185 and thus appealable. This view was supported by the Gujarat High Court in Dineshchandra Industries and the Supreme Court in Mela Ram and Sons, which emphasized that an order rejecting an application for registration on the ground of delay is, in law, an order under section 185 and is appealable.

2. Relevant Legal Provisions:
The judgment analyzed sections 184 and 185 of the Income-tax Act, 1961. Section 184 outlines the application process for registration, while section 185 details the procedure upon receipt of such an application. Section 246(j) provides for appeals against orders under section 185. The court noted that section 185(3) deals with defective applications, and if the Income-tax Officer refuses to condone the delay, it is effectively an order under section 185(3), making it appealable.

3. Judicial Precedents:
The court reviewed various judicial precedents. The Madras High Court in A. S. S. S. S. Chandrasekaran and Brothers and the Orissa High Court in New Orissa Traders held that no appeal lies against such an order. Conversely, the Gujarat High Court in Dineshchandra Industries, the Andhra Pradesh High Court in Chekka Ayyanna, and the Allahabad High Court in Vinod Krishna Som Prakash held that an appeal does lie. The court found the latter view more persuasive, supported by the Supreme Court's decision in Mela Ram and Sons.

4. Interpretation of 'Status':
The court emphasized that the status of a firm as a registered or unregistered firm affects its tax liability. Refusal to condone delay alters the firm's status, making it appealable under section 246(c). The court cited Explanation 2 to section 143(3), which defines 'status' to include classification as a registered or unregistered firm.

5. Support from Legal Literature:
The court also referred to N. A. Palkhivala and S. A. Palkhivala's 'The Law and Practice of Income-tax,' which supports the view that an appeal lies against an order rejecting an application for registration on the ground of delay.

Conclusion:
The court concluded that the order refusing to condone the delay was indeed an order under section 185 and thus appealable. The court disagreed with the earlier decision in Ashwani Kumar Maksudan Lal and aligned with the view in Vinod Krishna Som Prakash. The question referred was answered in the affirmative, favoring the assessee, with costs payable by the Department.