Commissioner of Income Tax vs Kesava Prabhu and Sons

K.S. Paripoornan, J.—The Revenue is the petitioner herein. The respondent is a firm. It is an assessee to Income Tax. The matter relates to the assessment year 1981-82. For the year 1980-81, the Income Tax Officer, after notice to the assessee-firm, cancelled the registration. For the assessment year 1981-82, the respondent was assessed as an unregistered firm. The recalcitrant conduct of the assessee in courting ex parte assessment was noticed by the Appellate Tribunal. It took the view that the assessee was a chronic defaulter in the matter of filing returns. The assessment made on the assessee was affirmed by the Appellate Assistant Commissioner of Income Tax. He held that there was failure on the part of the assessee which attracted Section 144 of the Income Tax Act and registration was cancelled for valid reasons. In second appeal, the Appellate Tribunal held that there was, on the part of the assessee, failure as mentioned in Section 144 of the Act. But it took the view that so far as this case is concerned, the decision of this court in C.K. Abdul Khader and Co. Vs. Income Tax Officer, B-Ward and Another, will apply. The Appellate Tribunal took a sympathetic view in the matter and held that the circumstances do not justify the cancellation of registration. The appeal was allowed. The Revenue filed an application u/s 256(1) of the Income Tax Act. The contumacious conduct of the assessee in not filing returns year after year was highlighted. Moreover, the plea of the Revenue was that the decision of this court in C.K. Abdul Khader and Co. Vs. Income Tax Officer, B-Ward and Another, will not apply to the facts of this case, but, on the other hand, the decision of the Calcutta High Court in Askaran Kissenlal Vs. Commissioner of Income Tax, will apply and that the Income Tax Officer was justified in refusing registration u/s 185(5) of the Act. The Appellate Tribunal rejected the application filed by the Revenue. Thereafter, the Revenue has filed this petition u/s 256(2) of the Act praying that the question of law formulated in paragraph 11 of the original petition may be directed to be referred to this court for decision by the Appellate Tribunal. The question is as follows :

"Whether, on the facts and in the circumstances of the case, the learned Tribunal is right in cancelling the cancellation of the registion ?"

We heard counsel for the Revenue, Mr. Menon, and also counsel for the assessee, Mr. Radhakrishnan. All the authorities have categorically found that the assessee has invited the assessment u/s 144 of the Act. There was such failure on his part as to invoke Section 144. The Appellate Tribunal further found that the registration was cancelled mechanically and this is not permissible in view of the decision of this court in C.K. Abdul Khader and Co. Vs. Income Tax Officer, B-Ward and Another, . On the other hand, the plea of the Revenue was that the decision in C.K. Abdul Khader and Co. Vs. Income Tax Officer, B-Ward and Another, has no application and in this case there is no cancellation of registration u/s 186(2) of the Act but only a refusal of continuation of registration u/s 185(5) of the Act. This plea was taken since the assessee, even after notice, did not produce the accounts. The assessee was deliberately avoiding an investigation into its business affairs. The Revenue sought to sustain the cancellation or refusal of continuation of registration u/s 185(5) of the Act on the above premises and relying upon the decision of the Calcutta High Court in Askaran Kissenlal Vs. Commissioner of Income Tax, . After hearing the rival arguments of counsel appearing for both sides, we are satisfied that the question of law formulated in paragraph 11 of the original petition (extracted above) does arise out of the appellate order of the Tribunal and the question posed for consideration deserved a fresh look.

We direct the Appellate Tribunal to refer the question of law, formulated in paragraph 11 of the original petition (extracted above), for the decision of this court.

A copy of this judgment shall be forwarded to the Income Tax Appellate Tribunal for information and compliance.