TMI Blog2003 (4) TMI 248X X X X Extracts X X X X X X X X Extracts X X X X ..... to intimate if they had signed the Form No. 12, for the assessment year 1991-92, all the partners except one partner, namely Smt. Sarala Thard, confirmed that they had signed the Form No. 12, Smt. Sarala Thard, one of partners, intimated vide her letter dated 16-4-1994 that she had not signed Form No. 12. The Assessing Officer therefore, brought the fact of non signing Form No. 12 by Smt. Sarala Thard to the notice of the assessee, who thereupon submitted before the Assessing Officer that mere denial by her regarding her signature on the Form No. 12 was not sufficient as she had now retired from the firm. It was submitted by the assessee that she should be summoned under section 131 to Identify her signature on Form No. 12. The assessee also requested the Assessing Officer to supply it a copy of the letter dated 16-4-1994 written by Smt. Sarala Devi Thard. The Assessing Officer however, did not find it necessary to issue summon under section 131 to her. The Assessing Officer therefore, refused continuation of registration by saying that the assessee has not produced any evidence to the effect that said Smt. Sarala Devi Thard had signed the Form No. 12, and thus Form No. 12 which w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partners, who constituted the firm at the time of making declaration for granting registration. 5. We further find that there is a force in the submission made by the learned counsel for the assessee that non-signing of declaration by one partner would make the declaration defective but not totally in firm or non est in law, and therefore, the Assessing Officer could not have straightaway denied the continuation of registration to the assessee firm, but Assessing Officer was bound to give an opportunity to the assessee to remove the defect. 6. In view of that matter, and in the facts and circumstances of the case and in the light of foregoing discussions made by us, we are of the considered opinion that the CIT(A) was justified in directing the Assessing Officer to decide the issue afresh after proper enquiry examining Smt. Sarala Thard and giving the other partners or the assessee-firm an opportunity of cross-examination of Smt. Sarala Thard. We would like to observe that the Assessing Officer shall also provide an opportunity to the assessee firm to remove the defect in the declaration filed by the assessee firm if so desired by the assessee firm. 7. Therefore, the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) was not in dispute before us. After observing as above, the CIT(A) restored the matter of continuation of registration to the file of Assessing Officer with the direction to reconsider the same after proper enquiry and examination as stated above. The assessee being aggrieved by this direction has come in appeal before us. 2. In my considered opinion to make as assessment is a quasi-judicial proceeding. In discharge of their duties, the Assessing Officer receive a good deal of information which is not all evidence according to the accepted norms of law. Consequently, it is only fair and just that the accuracy or otherwise of such information be ascertained by giving the assessee an opportunity to prove that the Officer is misinformed vide Nagulkonda Venkata Subba Rao v. CIT [1975] 31 ITR 781 (AP), Principles of natural justice demand that there should be a fair determination of question by quasi-judicial authorities. Arbitrariness will certainly not ensure fairness. If giving a mere opportunity to show cause and to explain would satisfy the principles of natural justice, the notice to show cause becomes an empty formality signifying nothing, for after issuing the notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssarily be directed to the ascertainment as to the parties who would be adversely affected if there is a non-continuance of the registration of the firm. In other words, the partners who are already retired from the firm will not be affected or troubled by non grant of continuance of registration to the assessee firm. Thus, drawing an analogy from the above decision, it is my considered opinion as Smt. Sarala Devi retired from the firm on 31-3-1992 and was not constituting the assessee firm in March, 1994 when the assessment of the firm was taken up by the Assessing Officer. She would now not be affected or troubled if the continuance of registration is not granted to the assessee firm. In the above circumstances, in my considered opinion, the Assessing Officer was not justified in treating the statement of Smt. Sarala Devi as sacrosanct without examining her and without allowing the other partners to cross examine her. 4. It is observed that no reason has been given in the order of assessment for assuming the statement of Smt. Sarala Devi as true and correct and for ignoring the statement of the assessee firm as false and incorrect. The Hon'ble Punjab Haryana High Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment cannot be sustained in law and the same is liable to be quashed. My above view also finds support from the decision of Hon'ble Kerala High Court in the case of M.O. Thomakutty v. CIT [1958] 34 ITR 501. 6. Further, in the instant case no doubt about the genuineness of the assessee partnership firm or its constitution in the relevant year was entertained by the Assessing Officer. It is not in dispute that the firm was in existence since 1985 and has all along been granted registration. The constitution of the firm during the year under consideration remained the same as in earlier years and in the immediately subsequent year. It is also an admitted fact that even in the immediately subsequent year the firm was granted the continuation of registration. Further, as required under section 184(7) of the Act, the assessee firm has also filed declaration in the Form No. 12 within the due date. It was the duty of the department to keep properly the documents filed by the assessee. There is no reliable and relevant material on record to show that the said Form No. 12 was not verified in the manner as required by law. In the circumstances, in my considered opinion the lower authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Rs. 5,000 out of telephone expenses of the Calcutta Branch Office of the assessee firm on the ground that the expenses under this head were very high. 11. I fully agree with my Ld. Brother in respect of deletion of the disallowance of Rs. 5,000 relating to the Branch Office of the assessee firm. 12. In respect of the disallowance of Rs. 10,000 relating to RO. it has been found that the disallowance was made by the Assessing Officer on estimate without bringing any material in this behalf. In view of this finding and as the reason given by the Assessing Officer for disallowance of telephone expenses of Rs. 10,000 in H.O. of and Rs. 5,000 in branch office were similar and we have already deleted the disallowance of Rs. 5,000 in respect of Branch Office, in my considered opinion, a different view in respect of the disallowance of Rs. 10,000 relating to Head Office cannot be taken. Hence, the disallowance of Rs. 10,000 is also hereby deleted. 13. In the result, the appeal filed by the assessee is allowed. ORDER UNDER SECTION 255(4) OF THE INCOME- TAX ACT, 1961 In this appeal there is difference of opinion between the Members. In view thereof, the issue is referred to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of Smt. Sarala Thard was relied upon by the Assessing Officer without examining her and without allowing the assessee to cross-examine her whether the CIT(A) was justified in restoring the matter back to the file of the Assessing Officer so as to allow the Assessing Officer to play the second innings on the same set of fact? 9. Whether after finding that disallowance of telephone charges of Rs. 10,000 was made by the Assessing Officer on estimate without bringing any material in that behalf, still the issue is to be set aside to the file of the Assessing Officer for reconsidering the matter and thereby allowing him to playa second innings on the same set of facts of the disallowance so made is to be deleted? 10. Whether on the facts and circumstances of the case as disallowance of telephone expenses of Rs. 5,000 out of the expenses of the Branch Office was deleted by us, the disallowance of telephone expenses of Rs. 10,000 out of the expenses of the H.O. is to be deleted or set aside? ORDER UNDER SECTION 255(4) OF THE INCOME-TAX ACT, 1961 A difference of opinion having emerged between the Judicial Member and the Accountant Member, who heard this appeal, we hereby sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for assessment year 1991-92. The main question is whether the order of the CIT (Appeals) be set aside and restored to the Assessing Officer for fresh consideration, after proper enquiry and examination or registration to the assessee firm for the year under consideration should be granted. 3. The assessee is a firm. It is a wholesale-cum-retail dealer in various types of hardware goods. Return of income was filed on 26-3-1993. The assessee claimed the status of registered firm by filing Form No. 12 on 28-6-1991 vide receipt No. 84. A thorough search was made by the dealing clerk concerned of the ITO Ward-3 from whom the file was received by the Assessing Officer on transfer. The same could not be traced out. Since there was evidence of filing of Form No. 12, the Assessing Officer wrote to all the partners to intimate, if they had signed the Form No. 12 for the assessment year 1991-92 which is under consideration. Except Smt. Sarala Thard, all the partners confirmed the signing of the Form No. 12 Smt. Sarala Thard, however, intimated vide her letter dated 16-4-1994 that she had not signed the Form No. 12 for the assessment years 1991-92 and 1992-93. The Assessing Officer, theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an opportunity of cross-examination of Smt. Sarala Thard. It was further directed that the assessee should be provided an opportunity to remove the defect in the declaration filed by the assessee firm, if so desired by the assessee. 7. On the other hand, the learned Accountant Member was of the view that the continuation of registration should be granted to the assessee. According to him the correctness of the statement of Smt. Sarala Thard was not verified and in the absence of such verification, ad verse inference could not be taken against the assessee. Secondly, the genuineness of the partnership firm or its constitution in the relevant year was not doubted. The firm was in existence since 1985 and has all along been granted registration. Even in any case the non signing of the declaration in Form No. 12 by one of the partners will be a technical defect which could be cured. The claim of continuation of registration could not be rejected without giving opportunity to the assessee to rectify the defect. In that view of the matter it was held by him that non-grant of continuation of registration to the assessee firm for the year under consideration was not proper. He, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in Form No. 12 for the year under consideration Smt. Sarala Thard, however, denied that she had signed the said application in Form No. 12. The original Form No. 12 was submitted on 28-6-1991. The letter of enquiry by the Assessing Officer was sent on 10-2-1994 i.e., 3 years after the filing of the application in Form No. 12 on28-6-1991. Smt. Sarala Thard denied having signed the application in Form No. 12. There is, however, no denial about her being partner at that relevant time. She did not also deny that she received the share of profit and also whatever receivable at the time she retired from the firm w.e.f. 1-4-1992. Not only that the Assessing Officer completed the assessment for the subsequent assessment year 1992-93 on 23-3-1995 and allowed continuation of registration in spite of the letter of Smt. Sarala Thard denying signing of the application in Form No. 12 for assessment years 1991-92 and 1992-93. From the above facts, it is clear that the genuineness of the partnership firm was not doubted and it is also not doubted that the partnership was run on the basis of the partnership deed and the profit etc. were distributed on the basis of the partnership deed. The only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the parties, I am of the view that they are not necessary for deciding the issue in view of the findings given above. I, therefore, do not consider it necessary to discuss those decisions at this juncture. 16. With regard to the remaining point regarding disallowance of Rs. 10,000 on account of telephone expenses in the H.O. and Rs. 5,000 in the Branch Office, it is the finding of the learned Judicial Member that the learned CIT(A) did not deal with this issue, though the ground was taken up before him. He, therefore, considered it fair and reasonable to set aside the matter and restored it to the file of the Assessing Officer for fresh adjudication on the basis of the materials and evidences that may be produced by the assessee. It is also seen that both the Members agreed that the disallowance was made by the Assessing Officer merely on estimated basis. In such a case, it is fair and reasonable that the matter should be back to the Assessing Officer for deciding the issue afresh after considering the evidences that may be produced by the assessee. I, therefore, agree with the learned Judicial Member on this point. 17. The matter will now go back to the regular Bench for decis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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