AI Drafter 
TaxTMI 
TaxTMI 
1956 (12) TMI 40
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....ns we are concerned with the income-tax assessment years, 1950-51, 1951-52, 1952-53 and 1953-54. For all these years, the firm has been assessed as a registered firm, that is to say, registered under the Indian Income-tax Act. In other words, it was registered under section 26A of the Indian Income-tax Act and assessed as a registered firm in accordance with section 23(3) read with section 23(5)(a) of the said Act. The registration of a firm is for the period of one year on each occasion, and the registration had been renewed from year to year until on or about September 30, 1955, an order had been passes by which renewal of registration has been refused. The petitioner firm has filed an appeal under section 30 of the said Act against the order refusing registration. This appeal is pending before the Appellate Assistant Commissioner of the Income-tax, Range 'C'. Before I proceed further it will be necessary for me to advert to the law of registration of firms under the Indian Income-tax Act. Under the said Act, a firm can be assessed as a separate entity. In the normal course, therefore, a firm would be assessed on its total income. The Act, however, provided for registr....
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.... or was a firm in existence, constituted as shown in the instrument of partnership, and that the application had been properly made, he should register the firm and grant a certificate of registration. Sub- rule (2) states that if the Income-tax Officer was not so satisfied he should pass an order in writing refusing to recognise the instrument of partnership or the certified copy thereof. Under rule 5 the certificate of registration has effect only for one year. Under rule 6 any firm to whom a certificate of registration had been granted under rule 4 May apply to the Income-tax Officer to have the certificate of registration renewed for a subsequent year. The form of such an application for renewal is also prescribed and is analogous to the form prescribed for an original application. Such an application also contains provision for furnishing particular and also for a certificate that profits or losses of the previous year were or will be divided or credited according to the manner as shown in the application. Under rule 6A, on receipt of such an application the Income-tax Officer May if he is satisfied that the application was in order and that there is or was a firm in existence....
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....r words, the right is regulated solely by the terms of the statue and it would be repugnant to the character of such a right to add to those terms by reference to other laws. The statute must be construed as exhaustive in regard to the conditions under which it can be claimed." In that case, the question was whether in view of the provision of the rules that an application must be signed by a partner, it was possible for a duly authorised agent of the partner to append his signature. Inspite of the fact that under the common law as well as under the powers of Attorney Act, a man can do through an agent what he can do himself, it was held that the rules must be strictly applied and an application could only be signed by a partner himself and not through his duly authorised agent. Bearing this in mind, we must go back to the order mentioned above, which has been made sometime in September, 1955, refusing renewal of registration. The order has been annexed to the petition and in the petition in Matter No. 117 to 1956, it is marked as annexure 'D'. The grounds for refusing the renewal has been stated therein. Shortly put, it is stated that while going through the accounts....
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.... assessment." The first notice states that under the power conferred by section 33B, the Commissioner had called for and examined the records of the assessment proceedings of the petitioner firm and it appeared to him from the said records that the order under section 26A passed by the Income-tax Officer renewing registration and the order of assessment passed by the Income-tax Officer for the respective assessment years were erroneous in so far as they we prejudicial to the interest of the revenue. The Commissioner, therefore, by the first notice called upon the assessee to appear before him on June 23, 1956, and show cause why the order passes under section 26A should not be cancelled or such other order made as the circumstances may justify. The second notice called upon the assessee to appear on the same date and show cause why the Income-tax Officer's order passed under section 23(3) read with section 23(5)(a) should not be cancelled or such other order made as the circumstances may justify. Certain legitimate grievances have been put forward in respect of these notices. There is no doubt that these notices were quite sudden and gave little time to the assessee to come ....
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.... is said that there is discrimination in violation of the guarantee given by article 14 of the Constitution. Dr. Pal relied on the recent Supreme Court decision : Bidi Supply Co v. Unison of India and Others. [1956] 29 I.T.R. 717. In the decision, sub-section (7A) of section 5 of the Income-tax Act was under challenge. It was held by the majority decision that the order of transfer which was expressed in general terms without any reference to any particular case (i.e., assessment year) and without any limitations to time was not contemplated by section 5(7A) and was beyond the competence of the Central Board of Revenue, and the sub-section contemplated only the transfer of an assessment case for a particular year actually pending before the Income-tax Officer. Bose, J., although concurrent in the conclusions arrived at by the majority of Judges, held that section 5(7A) of the Act was wholly ultra vires. Dr. Pal particularly relies on this decision of Bose, J. The learned Judge held that the power of transfer could only be conferred if it was hedged round with reasonable restrictions, the absence or existence of which could in the last instance be determined by the courts; and the e....
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....ory and he can pass no order unless he gives the assessee an opportunity of being heard, and it is only after hearing the assessee that he can pass an order enchancing or modifying the assessment etc. Then again, the order made has expressly been made appealable by sub-section (4) of section 33B. An appeal lies to the Appellate Tribunal and thereafter to the Board of Revenue. As has been pointed our, it does not also preclude a reference to this Court under section 66 of the Act. The compliant therefore that section 33B gives an arbitrary power cannot be accepted. Section 33B came into operation some time in 1948, but section 33A had already been in operation since 1941. There also, the Commissioner May of his own motion call for the record of any proceedings and make enquiries and pass orders. It is next said that section 34 being there, it was wholly unnecessary to make special provisions contained in section 33B. A comparison of the provision of section 33B with that of section 34 shows that although there is much overlapping, the one is not identical with the other. Under section 34 an assessment made in any particular year can be reopened if there has been under assessment or ....
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....bviously it was considered that the other provisions in the Act-wide as they aredid not properly attain this object. Section 33A granted a power of revision to the Commissioner but it was subject to the condition that the order should not be prejudicial to the assessee. Section 33B confers power which enables the Commissioner to interfere with the orders of the Income-tax Officer, where such orders are considered prejudicial to the interests of the revenue. The power sunder section 33B can only be invoked in the case of persons in whose favour orders have been made or assessments have been effected which are considered prejudicial to the interests of the revenue. The words "prejudicial to the interests of the revenue", have not been defined, but it must mean that the orders or assessment challenged are such as are not in accordance with law, in consequence whereof the lawful revenue due to the State has not been realised or cannot be realised. It can mean nothing else. If this is so, the class of persons in respect of whom such orders can be passed is a well-defined class in respect of whom there is an intelligent differentia. It is next said that the section is discriminatory beca....
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....s and decide here as to the validity of the charges and the legal results of the application of the petitioner being found to be inaccurate, of the legal results of the petitioner not having acted in accordance with the certificate granted in such applications. At the present moment, all that has happened is that the Commissioner has issued notices under section 33B to show cause. These notices read with the particulars supplied show that he has discovered a certain set of facts upon which he wishes to base his order for the cancellation of registration and the reopening of the assessment. The facts have been stated by the Commissioner are not accepted by the respondents. In other words, even the facts upon which the orders is to be made are disputed. It is obvious that the facts will have to be investigated and the correct facts ascertained. I will give one example. It is admitted that one of the partners who had ceased to be a partner has withdrawn more than his due. Mr. Banerjee argued that this was done because he went out in the middle of the accounting year and it was not possible to ascertain with strict accuracy the amount which should be paid to him. Thus, the payment was ....
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....e result is that although the partners will go on contesting the proceedings before the Commissioner, immediate proceedings will be taken by the service of a demand notice on the firm in respect of the assessment already made. Mr. Meyer has pointed our that this could never happen because the firm has hitherto been assessed on the footing of a registered firm and if it was now going to be assessed as an unregistered firm, the Income-tax authorities could not rely on the previous assessment of the firm when it was registered, and proceed at once to serve demand notices. He has no objection to this going on record that the Income- tax authorities contemplate no such action. The proceedings under section 33B will have to be completed and if the assessment is reopened and the registration cancelled, then the firm will have to be re-assessed on the footing of an unregistered firm. Dr. Pal had argued that these applications were maintainable even before the investigations have taken place, because notices had been issued which were bad because the section was ultra vires and the view of law taken was wrong view. He has made reference to the Bengal Immunity case. A.I.R. 1955 S.C. 661. It ....