TaxTMI 
TaxTMI 
1966 (2) TMI 78
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....and a penalty of Rs. 3,400 imposed by the Income-tax Officer under the provisions of section 46(1) on account of the assessee's default to pay the amount of tax as demanded by the Income-tax Officer. The relevant account year for the said assessment year 1956-57 is S.Y. 2011 (October 27, 1954, to November 14, 1955). During the said accounting year and also during the past several years, there and exist a firm constituted of four partners, viz.: 1. Shri R.S. Pawar, 2. Shri D.S. Pawar, 3. Shri A.S. Pawar, and 4. Shri G.R. Pawar. The said firm was being granted registration under section 26A year after year, in the past and it was so granted even for the assessment year 1955-56. One of these four partners, viz., R.S. Pawar, died on February 3, 1956, i.e., after the close of the said account year ended November 14, 1955. The surviving partners, thereafter, entered into partnership with two other persons, viz., a major son of the said RS. Pawar and a major son of another partner, A.S. Pawar, and also admitted to the benefits of the partnership two minor sons of the late R.S. Pawar. The partnership agreement was executed on June 28, 1956. It mentioned the individual sh....
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..... The department felt aggrieved by the said direction and brought the matter in appeal to the Tribunal contending that the Appellate Assistant Commissioner erred in directing the Income-tax Officer to grant registration to the new firm on the basis of the deed of June 28, 1956, for the assessment year 1956-57. By its order dated January 11, 1961, in I.T.A. No. 11238 of 1959-60, the Tribunal accepted the department's contention by mainly relying upon the Supreme Court decision in the case of R.C. Mitter&Sons v. Commissioner of Income-tax ([1959] 36 I.T.R. 194; [1959] SUPP. 2 S.C.R. 641). A copy of the said order is marked annexure "B" and forms part of the case. 5. On these facts, the assessee-company now requires the Tribunal to refer to the High Court the following question: "Whether, on the facts and in the circumstances of the case, the Tribunal was right in refusing registration to the firm?" In our opinion, on the facts of the case, the following question of law arises: "Whether the new firm that was....
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....ation to the appellant-firm. As a result, there would be no demand on the appellant-firm and the penalty under section 46(1) levied by the Income-tax Officer would therefore be unjustified and illegal." It was urged before the Tribunal that the order made by the Appellate Assistant Commissioner directing the Income-tax Officer to grant registration related back to the date of assessment and as such the demand raised upon it was illegal, and hence no tax demand was legally payable when the Appellate Assistant Commissioner disposed of the penalty appeal by his order of November 23, 1959. It is significant to add that the Appellate Assistant Commissioner also disposed of the assessee's appeal against the Income-tax Officer's refusal to grant registration on that very date. The Tribunal, however, was not impressed by this contention and by its following brief order, it rejected the assessee's appeal: "Admittedly no tax has been paid and the Appellate Assistant Commissioner was justified in holding that the appeal of the assessee under section 30 was incompetent....
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.... a penalty of Rs. 3,400 imposed by the Income-tax Officer under the provisions of section 46(1) on account of the assessee's default to pay the amount of tax as demanded by the Income-tax Officer. The relevant account year for the assessment year 1956-57 was S.Y. 2011 from October 27, 1954, to November 14, 1955. The partnership firm in the name and style of M/s. Bhausa Ganusa Pawar & Co., which carried on business during the whole of this account year as well as certain prior years, consisted of four partners, who were: (1) Shri R.S. Pawar, (2) Shri D.S. Pawar, (3) Shri A.S. Pawar and(4) Shri G.R. Pawar. Ever since its formation in the year 1946, or thereabouts, this firm had been granted registration under section 26A of the Indian Income-tax Act up to the assessment year 1955-56. On 3rd February, 1956, that is, some time after the close of the account year with which we are concerned in the present case, one of the four partners, viz., Shri R.S. Pawar, died. The surviving partners formed another partnership firm in the same name and style taking up one major son of Shri R.S. Pawar as a partner and admitting two other minor sons of him to the benefits of the partnership. Th....
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....ainst the order of the Income-tax Officer refusing registration, the assessee appealed to the Appellate Assistant Commissioner. He allowed the appeal of the assessee and cancelled the Income-tax Officer's order refusing registration and directed him to grant registration to the firm as applied for. According to him, since the newly constituted firm had come into existence immediately after the death of one of the partners of the old firm taking up one major son of the deceased partner as a partner and admitting his two minor sons to the benefits of the partnership and since the business of the firm had continued without a break, there was in fact no dissolution of the old firm and the formation of a new firm, but merely a change in the constitution of the firm. Under section 26(1) the assessment was to be made on the newly constituted firm and it was, therefore, entitled to ask for its registration under rule 2 of the Income-tax Rules. According to him, since the assessee-firm was the firm on which the assessment had to be made in respect of the year of account, it was entitled to be registered for the said year of account. In his opinion, therefore, the Income-tax Officer had ....
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....inst the order of penalty on the 23rd November, 1959, on a preliminary point that it was incompetent since the amount of tax had not been paid. On the same day, however, the Appellate Assistant Commissioner also decided the assessee's appeal against the Income-tax Officer's order refusing registration and allowed the said appeal and directed the Income-tax Officer to grant the assessee registration as was prayed for by it. The assessee appealed to the Tribunal against the order of the Appellate Assistant Commissioner rejecting its appeal against the penalty imposed by the Income-tax Officer. The Tribunal dismissed the said appeal and, thereafter, at the instance of the assessee, referred the following question to us under section 66(1) of the Indian Income-tax Act, 1922: "Whether the assessee's appeal against the penalty imposed under section 46(1) was properly rejected by the Appellate Assistant Commissioner as being incompetent?" Mr. J.P. Pandit, the learned counsel who appears for the assessee, has contended that on the application made by the assessee in the present case it was entitled t....
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....e case, because the firm had continued without a break after the death of one of the partners of the old firm and it was really and in substance not a case of the dissolution of the old firm and constitution of the new firm. According to Mr. Pandit, therefore, the Income-tax Officer could have treated the application of the assessee-firm as for registration of the firm as it existed during the relevant assessment year and should have granted registration because not only all the information was supplied by the assessee in order to obtain the registration, but all other requirements had also been complied with by it. Mr. Pandit complains that the Income-tax Officer and the Tribunal, in refusing registration to the assessee on the ground that no application for the registration of the firm as it existed during the account year was made, have laid too much stress on technicalities. There is no difficulty in the present case, he says, in treating the application made by the assessee as for registration of the firm as it existed during the account year. In support of this submission he has sought to derive support from certain decisions of this court, viz., Commissioner of Income-tax v.....
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....of 16th January, 1948, and the partnership deed, on the basis of which registration was sought by the firm was the latter deed of 16th January, 1948, and not the earlier partnership deed of 27th June, 1947. This court, however, did not regard the defect in the application made by the assessee for registration as fatal but went on to consider whether on merits of the case registration could be granted to the firm as it was constituted under the earlier partnership deed and having found on merits that the assessee would not be entitled to registration of the firm as constituted under the said partnership deed, held against the assessee. Mr. Pandit has relied on these two decisions for his submission that what is required to be considered is not whether the assessee has followed the letter of the law but whether he has substantially complied with the requirements of law. Mr. Pandit has argued that in the present case the assessee has substantially fulfilled all the requirements of law and procedure to be entitled to obtain registration of the firm as it existed during the year of account. Mr. Joshi, learned counsel for the revenue, on the other hand, has contended that section 26A ....
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....iterally and technically with the letter of the law, it is not possible to say that there has been such substantial and proper compliance with the requirements of law in the present case. Mr. Joshi, in our opinion, is right in his submission that the present case is really one of a dissolution of a firm and the formation of a new firm. The mere circumstance that the business has continued without interruption and the new firm has come into existence from the moment of the death of the deceased partner of the old firm is not sufficient to hold that there has been a mere change in the constitution of the old firm. The legal effect of the death of the partner of the old firm was its dissolution and the firm thereafter constituted is a new firm. Now, the firm, which existed during the year of account, was the old firm and registration of the said firm was necessary to be applied for. The said old firm had been granted registration in prior years up to the present assessment year. The proper procedure, therefore, was to ask for the renewal of the registration of the old firm in which case the provisions of rule 6 had to be complied with or, even if a fresh registration was to be applied....