TMI Blog1991 (4) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... he defect in Form No. 12 ? " The respondent/assessee, a firm of ten partners, was granted registration for the assessment year 1978-79. We are concerned in this reference with the assessment year 1979-80, for which the accounting period ended on December 31, 1978. For the assessment year 1979-80, the assessee filed an application seeking continuation of registration. It turned out that two of its partners, who held 8% share each, did not sign the declaration in Form No. 12 of the Income-tax Rules. The mother of the above two persons affixed her signature in Form No. 12 as per the power of attorney enclosed to the application. The Income-tax Officer held that the declaration in Form No. 12 filed before him was not in order and continuation of registration was declined. The order of assessment is dated September 23, 1982. In the appeal, the Commissioner of Income-tax (Appeals) held that if there was defect in Form No. 12 filed by the assessee, the Income-tax Officer should have granted an opportunity to rectify the defect. He directed the assessing authority to grant continuation of registration to the assessee-firm. The Revenue appealed before the Income-tax Appellate Tribunal. By ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellate Tribunal was incompetent in law in giving a direction to the Income-tax Officer to return the Form No. 12 declaration filed by the assessee-firm with a direction to resubmit the same after rectifying the defect within the time given by the Income-tax Officer. Counsel for the Revenue brought to our notice the decisions in Rao Bahadur Ravulu Subba Rao v. CIT [1956] 30 ITR 163 (SC) ; CIT v. Jagannath Pyarelal [1985] 156 ITR 220 (SC) ; Rampatmal Tirkha Ram v. CIT [1967] 65 ITR 596 (Raj) ; Subba Rao and Sons (J.) v. CIT [1970] 77 ITR 241 (Mys) and CIT v. Delhi Colonizers [1985] 154 ITR 50 (Delhi). On the other hand, counsel for the assessee submitted that the assessee-firm was granted registration for the assessment year 1978-79, that for the assessment year 1979-80 the assessee had filed an application for continuation of registration and filed the declaration in Form No. 12 and if the Income-tax Officer felt that the assessee cannot be given the status of registered firm as hitherto enjoyed by it, fairness in action behoved on the Income-tax Officer to give notice to the assessee before denying the continuation of registration. It was further argued that the filing of decl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration was granted ; and (ii) the firm furnishes, before the expiry of the time allowed under sub-section (1) or sub-section (2) of section 139 (whether fixed originally or on extension) for furnishing the return of income for such subsequent assessment year, a declaration to that effect, in the prescribed form and verified in the prescribed manner, so, however, that where the Income-tax Officer is satisfied that the firm was prevented by sufficient cause from furnishing the declaration within the time so allowed, he may allow the firm to furnish the declaration at any time before the assessment is made ... 185. Procedure on receipt of application.-(1) On receipt of an application for the registration of a firm, the Income-tax Officer shall inquire into the genuineness of the firm and its constitution as specified in the instrument of partnership, and (a) if he is satisfied that there is or was during the previous year in existence a genuine firm with the constitution so specified, he shall pass an order in writing registering the firm for the assessment year ; (b) if he is not so satisfied, he shall pass an order in writing refusing to register the firm ... (2) Where the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery year. Under the Income-tax Act of 1961, if registration is granted to a firm in a year, if there was no change in the constitution of the firm or in the shares of the partners, no application for renewal is required to be made and the registration once granted will have effect for every subsequent year, provided the firm furnishes, before the expiry of the time for filing the return of income, a declaration signed by all the partners that there is no change in the constitution of the firm or in the shares of the partners as evidenced by the instrument of partnership. In other words, in cases governed by section 184(7) of the Income-tax Act, the registration will have effect for subsequent years. Even under the old Act, if an application for registration filed was defective, the court took the view that it was the duty of the Income-tax Officer to bring to the notice of the firm the defect and afford it an opportunity to rectify the same. (See CIT v. Hyderabad Stone Depot [1977] 109 ITR 686 (AP) [FB]). The relevant statutory provisions (sections 184 and 185 of the Act) were amended by Taxation Laws (Amendment) Act, 1970. Even earlier the scope and effect of section 184(7), consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation for registration of a firm is rejected by the Income-tax Officer on the ground that the defect in the application is not rectified within the time allowed, as provided in the existing sub-section (3), the Income-tax Officer shall do so by an order in writing. At present, there is no provision requiring the Income-tax Officer to allow an opportunity to the firm to rectify any defect in the declaration furnished by it in pursuance of section 184(7). Nor is there any requirement, at present, that a written order should be made by him rejecting the application for registration on account of its being defective, even after the grant of opportunity to the firm to rectify the defect, or declaring that the registration granted to the firm for an earlier assessment year or years shall not have effect for the relevant assessment year. The amendment removes the inconvenience and hardship caused to a partnership firm by reason of the absence of any such provisions. " The language of section 184(7) read with section 185(3) of the Act is very clear. If registration is granted for any assessment year, it shall have effect for every subsequent assessment year, if there is no change in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t cannot be said that the declaration so filed, notwithstanding the defect aforesaid, is not a declaration and so totally infirm or non est in law. It is a case where a declaration is filed, but it is defective and it has not satisfied the requirements of the law. In such case where a declaration filed does not in terms conform to the requirements of law and so technically defective, a duty is cast on the Income-tax Officer, under section 185(3) of the Act, to intimate the said defect to the firm and afford it an opportunity to rectify the defect within one month. Courts have laid down that where an application for registration or a Form No. 12 declaration is not personally signed by one of the partners, it is only a technical defect for which the firm should be given an opportunity to rectify the defect. (See Brij Rattan Lal Bhoop Kishore v. CIT [1982] 136 ITR 722 (All) ; CIT v. Ghosh and Sons [1986] 159 ITR 459, 463 (Cal) ; CIT v. M. N. Ghosh and Sons [1987] 167 ITR 125, 128 (Pat) and Vijay Cloth Stores v. CIT [1989] 176 ITR 50, 62 (Pat)). Even in the absence of section 185(3) of the Act, the position in law was understood in the above manner by the Central Board of Direct Taxes, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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