2009 (8) TMI 56 - HC - Income Tax

Registration of Partnership Firm Renewal - opportunity of being heard AO refused to renew registration without issuing show cause notice and without affording any opportunity of being heard to the assessee for explaining the delay in furnishing the declaration within the specified time contemplated U/s 184 (7) ITAT upheld the order of AO Held that It will be appreciated that even if an application is filed before the Income-tax Officer which prima facie appears to be out of time the Income-tax Officer cannot straightaway reject it or refuse to entertain it. He will have to give an opportunity to the assessee to show cause as to how it can be entertained. Sometimes even his impression that there is delay may itself be shown to be wrong. If the assessee satisfies the Income-tax Officer that there was sufficient cause then the application has to be entertained by the Income-tax Officer

Summary

Issues:
1. Whether the Tribunal was justified in upholding the order refusing to renew registration without issuing a show cause notice or providing an opportunity to be heard to the assessee for explaining the delay in furnishing the declaration under Section 184 (7) of the Income Tax Act, 1961Rs.

Analysis:
The case involved a partnership firm for the assessment year 1992-93 that failed to file its income tax return within the specified period. The firm submitted its return of income on 31st March, 1994, along with a declaration in Form 12 for the continuation of registration. However, the Assessing Officer refused the continuation of registration, citing that the declaration was not filed within the specified time under Section 139 of the Act. The firm's appeal to the Commissioner of Income Tax and the Income Tax Appellate Tribunal was rejected in terms of the registration continuation issue.

The counsel for the firm argued that the Assessing Authority's rejection of the registration continuation was based on the declaration being deemed "not in order," triggering the application of Section 185 (3) and entitling the firm to an opportunity to rectify the defect. The counsel relied on a Supreme Court decision in the case of Commissioner of Income Tax v. Ashoka Engineering Co. (1992) 194 ITR 645, emphasizing that even if an application appears out of time, the Assessing Officer must provide an opportunity for the assessee to explain and rectify the delay.

On the other hand, the Standing Counsel for the Revenue contended that if the declaration was not filed within the stipulated period, no defect needed rectification, and no opportunity was necessary for the assessee. However, the Court disagreed with this stance, citing the Supreme Court's decision in the Ashoka Engineering Co. case, which established that even a delayed declaration should be considered "not in order," warranting an opportunity for the assessee to clarify the circumstances of the delay.

The Court, considering the established legal position, concluded that the firm was entitled to a hearing before the declaration could be rejected. Consequently, the Court answered the referred question in favor of the assessee and against the Revenue. However, no costs were awarded based on the facts and circumstances of the case.