TMI Blog1956 (12) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... 952-53 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 registration of firms. This is done under section 26A which runs as follows: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 constituted as shown in the instrument of partnership, grant to assessee a certificate signed and dated by him in the form prescribed. If the Income-tax Officer was not so satisfied he is entitled to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 of the individual partners it was found that the profits of the previous years were not credited in the books in accordance with the shares specified in the partnership deed, or in accordance with the particulars given in the application forms, or in accordance with the certificates appended thereto. It appears that according to a practice followed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 prepared for its defence. Secondly, it is rightly stated that no particulars have been given in the notices showing the grounds on which the Commissioner considered that the interest of the revenue had been prejudiced. If the matter stood there, it could certainly be said that the petitioner was not placed in a position to defend itself. As appears from the affidavits in opposition affirmed by the Commissioner, the pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 exercise of the power must be heard when that is reasonably possible, and the reasons for the orders must be reduced to writing, so that one might know that the powers conferred on these quasi-judicial bodies were being justly and properly exercised. Dr. Pal argues that just like section 5(7A), equally arbitrary powers were granted to the Commissioner under section 33B. In my opinion a reference to section 5(7A) would a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 if there has been an escape of assessment. There are however conditions which have to be satisfied, and an assessment can be reopened only if those conditions are fulfilled. The provisions of section 34 have progressively been enlarged, until now they cover a wide field indeed. It is however not possible to say that the provisions of section 34 and 33B are identical. Mr. Banerjee has argued that the only instance in which an order can be held as prejudicial to the interests of the revenue is when there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ked 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 because it provides for two appeals, whereas in the normal case there would have been three appeals. Here again I am unable to agree. As I have already held in the case of Laduram Taparia v. D.K. Ghose and Others, [1956] 29 I.T.R. 103 there can be no discrimination if there is no cutting down of the higher court of appeal. There can be no prejudice simply by providing for a number of appeals, somewhat less in one case that in another, by which an appeal to a lower Court is not provided for. In my opinio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 rough and ready calculation and has been subsequently adjusted. Mr. Banerjee also argues that it is not correct to say that the profits have bet been distributed in accordance with the shares specified in the deed. He argues that in the certificate it was not merely stated that the profits have been distributed, but it was also stated that the same will be distributed. He says that in fact it has been distributed in accordance with the share, and where it has not been so distributed, there is a perfe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 was held there that where a notice has been served intending to charge a citizen with tax based upon a law which is ultra vires, it was not to be expected that the citizen should ignore the notice. It has been held that in such a case he in entitled to come to the Court and get relief. This proposition is now well-established. If the petitioner could show that section 33B was ultra vires, or if the notice showed on the fact of it that it was illegal or without jurisdiction, when there is no doubt that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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