K.M.S. Subbiah Chettiar and Bros. (Firm) vs State of Tamil Nadu

This tax revision case arises under the Tamil Nadu Agricultural Income Tax Act, 1955 (referred to as ""the act"" in this judgment). There was

originally a partnership firm styled K.M.S. Mallayan Chettiar and Brothers in Theni. The firm consisted of seven partners. Mallayan Chettiar died

on July 4, 1972. Thereupon, the firm was reconstituted under the name and style, K.M.S. Subbiah Chettiar and Brothers,. The reconstituted firm

has 17 partners. On September 17, 1974 pursuant to its reconstitution the reconstituted firm applied for registration to the Agrl. ITO Theni, for the

registration of the firm under s. 27 of the Act. The application was filed in September, 1974. In and by his proceedings GIR 48(m) Upm/74-75,

dated December 20, 1974 the Agrl, ITO Theni, passed an order directing the registration of the firm with effect from the assessment year 1974-

For the years 1975-76 and 1976-77 renewal of registration was also granted to the firm. On the very same date, the said Agrl. ITO

completed the assessment for the year 1974-75 i.e. for the accounting period April 1, 1973, to March 31, 1974.

On April 30, 1976 the Agrl. ITO Madurai, issued a notice to the firm under s 35 of the Act calling upon the firm to show cause why the

assessment for the years 1974-75 and 1975-76 should not be revised. The notice stated that the application for registration of the reconstituted

firm filed by the firm on September 17, 1974 was time barred and that, therefore, the assessment for the year 1974-75 should both have been

made on the basis that the assessee was a firm but should have been made only on the basis that the assessee was an association of persons. The

firm sent a reply on June 10, 1976. In the said reply, the firm stated that the delay in filing the application for registration was due to the fact that the

clerk who was in charge of the matter fell ill and that the managing partner, Subbiah Chettiar, m was preoccupied with certain family matters. This

matter was brought to the notice of the Agrl. ITO Theni, on the earlier occasion. The firm, therefore, prayed that the delay in filing the application

for the registration of the firm for the year ending March 31, 1975, might be condoned. On July 3, 1976 the Agrl ITO Madurai, passed an order

condoning the delay on the part of the firm in filing the application for registration for the assessment year 1974-75, and regularised the matter.

On November 30, 1977, the Commr. of Agr l.I.T. issued a notice to the firm under s. 34 of the Act stating that the registration granted to the

firm for the assessment year 1974-75 was liable to be canceled in the view of the fact the Agrl. ITO, Theni, had not confound the delay before

ordering registration of the firm and, therefore, the assessment orders for the years 1974-75 to 1976-77 would also have to be canceled. The firm

offered an explanation. The Commr. Agrl. I.T. by his proceedings SMRP No. 38 to 95/77-A1, dated December 17, 1977, passed the impugned

order setting aside the granting registration of the firm and also the assessment orders for the years 1974-75 to 1976-77. The tax revision case has

been field by the firm against the said order of the Commr. of Agrl. I.T.

The Commr. of Agrl I.T. in his order impugned herein has stated that the order of the Agrl, ITO, Theni, could not be sustained and that he had

not applied his mind to the question whether the application field by the firm for registration was within time and whether there was sufficient cause

of excusing the delay. The Commissioner came to the conclusion that the order passed by the Agrl. ITO, Madurai, on July 3, 1976 was equally

legal on the ground that he being a co-ordinate authority had no jurisdiction to rectify the action predecessor in office and that the illegality that

attached itself to the order passed by the Agrl. ITO, Theni, could not be cured by the Agrl. ITO, Madurai by any subsequent order of his. The

Commissioner also rejected the contention on behalf of the firm that the show-cause notice had not been served on the firm.

Section 27 of the Act deals with the procedure in registration of the firms. It reads thus :

(1) Application may be made to the Agriculture Income Tax Officer on behalf of any firm, constituted under an instrument of partnership

specifying the individual shares of the partners, for registration for a purpose of this Act and of any other for the time being in force relating to

agricultural Income Tax.

(2) The application shall be made by such person and at such times and shall contain such particulars and shall be in such form, and be varied in

such manner, as may be prescribed, and it shall be dealt with by the Agricultural Income Tax Officer in such a manner as may be prescribed.

Rule 16 of the Tamil Nadu Agrl. I.T. Rules (referred to as ""the Rules"" in this judgment), reads thus :

Any firm constituted under an instrument of partnership specifying the individual shares of the partners may, on application made in this behalf

under the provision of section 27, register with the Agricultural Income Tax Officer, the particular contained in the said instrument. Such application

shall be signed by all the partners (not being minors) personally, or in the case of dissolved firm by all the partners (not being minors) who were

partners in the firms immediately before dissolution and by a legal representative of any such partner who is deceased and shall, for any year of

assessment up to and including the assessment year ending on the 31st day of March, 1958, be made before the 15th day of March, 1958, and for

assessment subsequent thereto, be made -

(a) where the firm is not registered under the Indian Partnership Act, 1932 (Central Act IX of 1932), or where the deed of partnerships not

registered under the Indian Registration Act, 1908 (Central Act XVI of 1908), and the application for the registration is being made for the first

time under the Act -

(i) within the period of six months of the constitution of the firm or before the end of the ''previous year'' of the firm, whichever is earlier, if the firm

was constituted in the previous year; and

(ii) before the end of the previous year in any other case,

(b) where the firm is registered under the Indian Partnership Act, 1932 (Central Act IX of 1932), or where the deed of the partnership is

registered under the Indian Registration Act, 1908 (Central Act XVI of 1908), before the end of the previous year of the firm; and

(c) where the application is for renewal of registration under rule 20 for any year, before the 30th day of June of that year.

Provided that the Agricultural Income Tax Officer may entertain an application made after the expiry of the time-limit specified in this rule, if he is

satisfied that the firm was prevented by sufficient cause from making the application within the specified time.

Undoubtedly, in this case, the application for registration for the year 1974-75 was filed by the firm belatedly on September 3, 1974. The

Proviso to r. 16 of the Rules confers power on the Agrl. ITO to entertain the application made after the prescribed time limit if he is satisfied that

the firm was prevented by sufficient cause from making the application within the specified time. The learned Addl. Govt. Pleader vehemently

argued that Agrl. ITO, Theni, overlooked the fact that the application for registration was filed by the firm belatedly and, consequently, did not

apply his mind at all to the question whether there was sufficient cause for the belated application. The order directing registration of the firm

passed by the said officer on December 20, 1974, was illegal and, consequently, the Agrl. ITO, Madurai had no jurisdiction to rectify the order

passed by the Agrl. ITO, Theni, on December 20, 1974. Viewed in this sense, argued the learned Addl. Govt. Pleader that in passing his order

dated 20th December 1974 the Agrl. ITO did not take into account the fact that the application for registration had been made by the firm

belatedly. Naturally, therefore, he did not go into the question whether the firm was prevented by sufficient cause from making the application

within the specified time, It is clear from r. 16 of the Rules that a firm has to apply for registration within the period specified therein. The

application for registration filed beyond the prescribed period of time cannot be entertained unless the Agrl. ITO is satisfied that the firm was

prevented by sufficient cause from making the application within the specified time, As rightly pointed out by the learned Addl. Govt. Pleader the

order dated December 20, 1974, does not on the face of it show that the Agrl. ITO, Theni, applied his mind to the question of delay in the filing of

the application for registration on the part of the firm and on the question whether the firm was prevented by sufficient cause from making the

application within the prescribed time-limit. That being the case, the order passed by the Agrl. ITO Theni, on December 20, 1974, must be

deemed to be a nullity and has no legal effect. The Agrl. ITO, Madurai, was, therefore, perfectly justified in coming to the conclusion that the

registration ordered by the Agrl. ITO, Theni, on December 20, 1974, in view of the belated application filed by the firm was irregular and in issuing

a show-cause notice to the firm to show cause why the assessment for the year 1974-75 should not be revised under s. 17(3) of the Act treating

all the partners of the firm as association of persons. In his reply addressed to the Agrl. ITO, Madurai, Subbiah Chettiar, managing partner of the

firm, besides stating the fact that on the earlier occasion the Agrl. ITO, Theni, had condoned the delay in filing the application for registration, had

also explained the cause which prevented the firm from filing the application for registration in time and had also requested that the delay in seeking

the registration of the firm for the year ending March 31, 1975, might be condoned. The Agrl. ITO, ITO, Madurai, stated that the files did not

show that the Agrl. ITO, Theni, had condoned the delay as contended for by the firm. However, the said officer, on consideration of the

explanation offered by the firm and also the relevant circumstances, passed an order condoning the delay on the part of the firm in making the

application for registration for the assessment year 1974-75, thereby regularising the registration. It is clear from the order dated July 3, 1976,

passed by the Agrl. ITO, Madurai, that he had applied his mind to the question whether the firm was prevented by sufficient cause from filing the

application for registration for the assessment year 1974-75. He was satisfied that there was sufficient cause for the delay and accordingly,

condoned the delay. It is not a case of the Agrl. ITO, Theni, as has been understood by the Commr, if I.T. It was not attempted to be argued by

the learned addl. Govt. Pleader and it could not have been so argued that the Agrl. ITO Madurai, could not have condoned the delay on the part

of the firm in applying for registration for the year 1974-75. If that be the true legal position, we have no hesitation in holding that the Agrl. ITO,

Madurai, was perfectly justified in exercising his discretion and condoning the delay in preferring the application for registration on the part of the

firm, when once he was satisfied that the firm was prevented by sufficient cause from making the application within the time. Once we come to the

conclusion that the delay in seeking the registration of the firm was properly condoned by the Agrl. I.T.O. Madurai, by the order dated July

30,1976, it necessarily follows that the registration granted for 1974-75 and the renewals for 1975-76 and 1976-77, and the assessment for the

years 1974-75 to 1976-77, are valid. We are, therefore, of the view that the impugned order of the Commr. of Agrl. I.T. is liable to be set aside

and is, accordingly, set aside. The tax revision case is allowed, but, under the circumstances of the case, without costs.