TaxTMI 
TaxTMI 
1997 (7) TMI 3
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....ome-tax had no jurisdiction under section 263, Income-tax Act, to cancel the same ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the renewal of registration could not be cancelled by the Commissioner of Income-tax by invoking the provisions of section 263, Income-tax Act, on the ground that there is a difference in the profit-sharing ratio shown in Form No. 11A and those mentioned in the partnership deed, the shares in fact having been divided on the basis of the deed in the account books in the assessment year 1967-68 when registration was duly granted and the same was renewed year after year ? " Question No. I was answered by the High Court against the Revenue and in favour of the assessee. In view of the answer given to question No. 1, the High Court did not consider it necessary to answer the second question on the ground that it had become academic and the said question was returned unanswered. The respondent (hereinafter referred to as " the assessee-firm "), is a partnership firm which was allowed registration under section 185 of the Act for the assessment year 1967-68. Thereafter the assessee-firm continued to ....
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....t years 1972-73 and 1973-74 and directed the Income-tax Officer to reframe the assessments for each of the two years in accordance with law. The appeal filed by the assessee-firm against the said order of the Commissioner was allowed by the Tribunal on the view that according to section 184(7) registration of the firm was to remain effective for the years subsequent to the year 1967-68 automatically, provided the conditions laid down in the said section were fulfilled and that the said section does not contemplate the passing of an order either for renewal or continuance of registration of the firm and there was no order in regard to initial registration continuing to be effective in the subsequent years which could be revised by the Commissioner under section 263 of the Act. On the merits also the Tribunal ruled that profits of the firm in the various years had been divided amongst its partners in accordance with the shares mentioned in the partnership deed on the basis of which the firm was granted registration for the assessment year 1967-68 and neither registration of the assessee-firm for that year nor its being continued to be treated as registered for subsequent years could ....
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....period of one month from the date of such intimation ; and if the defect is not rectified within that period, the Income-tax Officer shall, by order in writing, declare that the registration granted to the firm shall not have effect for the relevant assessment year. (4) Where a firm is registered for any assessment year, the Income-tax Officer shall record a certificate on the instrument of partnership or on the certified copy submitted in lieu of the original instrument, as the case may be, to the effect that the firm has been registered under this Act for that assessment year ; and where a declaration under sub-section (7) of section 184 is furnished by the firm, for the relevant subsequent assessment year. Omitted. " The scheme of the aforesaid provisions regarding continuation of the registration differs from the provisions contained in section 26A of the Indian Income-tax Act, 1922, relating to the registration of firms. Under section 26A of the Indian Income-tax Act, 1922, the registration of a firm was valid only for one year and for the purpose of renewal of registration an application was required to be made every year. The process of renewal of registration was no diff....
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.... examined by the Commissioner in exercise of his revisional power under section 263 of the Act. In the impugned judgment, the Allahabad High Court has taken the view that in the matter of continuance of registration under section 185(4) of the Act no order is passed by the Income-tax Officer and he only appends a certificate on the instrument of partnership that the firm stands registered and that such an action of the Income-tax Officer cannot be regarded as the passing of an order against which revision would lie under section 263 of the Act. The High Court has placed reliance on the earlier judgment of the said court in Ashwani Kumar Mahsudan Lal v. Addl. CIT [1972] 83 ITR 854. That was a case of an order passed by the Income-tax Officer under section 185(3) whereby it was directed that the registration of the firm could not be continued for the reason that the declaration was not in order. Under the provisions of section 246 in force at that time no appeal lay against an order passed under section 185(3). The High Court held that the said order was revisable. In that case, the court was not dealing with the question whether action under section 185(4) was revisable under sectio....
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.... of section 263 of the Act. " We are in agreement with the aforesaid view taken by the High Court of Punjab and Haryana and are unable to endorse the view taken by the Allahabad High Court in the impugned judgment. For the purpose of treating the registration of a firm as continuing for a subsequent assessment year, the Income-tax Officer is required to apply his mind to the declaration that is furnished by the firm under section 184(7) and to examine whether the declaration is in accordance with the provisions of the Act and the Rules framed thereunder and after satisfying himself that it is so, he has to record the certificate on the instrument of partnership or on the certified copy submitted in lieu of the original instrument to the effect that the registration shall have effect for the relevant assessment year. In cases where the Income-tax Officer finds that the declaration is not in accordance with the provisions of the Act and the Rules framed thereunder he has to pass an order declaring that the registration granted to the firm in any assessment year shall have no effect for the relevant assessment year. This shows that at that stage the Income-tax Officer has to apply hi....