1999 (5) TMI 74 - AT - Income Tax

Tribunal overturns decision, grants firm registration, emphasizes correct procedure and statutory compliance

The Tribunal allowed the revenue's appeal, overturning the CIT (Appeals)'s decision and reinstating the Assessing Officer's grant of registration to the ... Firm Issues Involved:1. Whether the CIT (Appeals) erred in holding that registration cannot be thrust on the assessee merely because Form Nos. 11A and 12 are filed.2. Whether the CIT (Appeals) erred in holding that registration cannot be granted even though the requisites for registration prescribed by the statute were satisfied.3. Whether the CIT (Appeals) erred in holding that taxing the firm as 'unregistered firm' is in the interest of the revenue.Detailed Analysis:Issue 1: Registration Thrust on AssesseeThe CIT (Appeals) held that merely filing Form Nos. 11A and 12 does not justify thrusting registration on the assessee. The Tribunal, however, disagreed, emphasizing that the Assessing Officer (AO) had followed due process. The AO had granted registration after verifying the partnership deed and the forms filed, concluding that a genuine firm existed. The Tribunal noted that the status claimed in the return as 'unregistered firm' was not final and could be scrutinized under section 143(3). The Supreme Court's decision in Sun Engg. Works (P.) Ltd. was cited, asserting that reassessment proceedings could not review concluded items unrelated to income escapement. The Tribunal found that the AO's decision was supported by the evidence and legal provisions.Issue 2: Requisites for RegistrationThe CIT (Appeals) held that registration should not be granted despite the statutory requisites being satisfied. The Tribunal overturned this, highlighting that the AO had legally granted registration based on timely and proper applications in Form Nos. 11 and 11A, and a valid partnership deed. The Tribunal referenced the Supreme Court's rulings in Amritlal Bhogilal & Co. and Agarwal & Co., which established that if a partnership is genuine and the statutory conditions are met, the AO is bound to grant registration. The Tribunal concluded that all essential conditions for registration were fulfilled, making the AO's decision correct.Issue 3: Interest of RevenueThe CIT (Appeals) opined that taxing the firm as an 'unregistered firm' was in the interest of the revenue. The Tribunal refuted this, noting the Departmental Representative's argument that treating the firm as 'unregistered' resulted in significant revenue loss. The Tribunal stated that even if taxing as 'registered' resulted in revenue loss, the firm could not be denied registration if all conditions were met. The Tribunal cited the Bombay High Court's decision in Nagappa Abdulpurkar, which held that a genuine firm could not be denied registration merely due to potential revenue loss. The Tribunal found the CIT (Appeals)'s conclusion legally incorrect and unsupported by evidence.Conclusion:The Tribunal allowed the revenue's appeal, reversing the CIT (Appeals)'s order and restoring the AO's decision to grant registration to the firm. The Tribunal emphasized that the AO had followed legal procedures and that all statutory conditions for registration were met. The Tribunal also clarified that the CIT (Appeals)'s reasoning regarding the interest of revenue was flawed and unsupported by the facts and legal precedents.