Rajendra Singh Bharat Singh Chouhan vs Commissioner of Income Tax

J.S. Verma, Actg. C.J.

This reference u/s 256(1) of the Income Tax Act, 1961, is at the instance of the assessee for answering the following question of law, namely :

" Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the order of the Income Tax Officer refusing registration had been passed u/s 185(5) of the Act ? "

The material facts are these. The relevant assessment year is 1973-74. During that year, the assessee filed an application seeking (declaration of) registration as a (registered) firm u/s 185 of the Income Tax Act, 1961. The Income Tax Officer, by order dated February 12, 1976, refused registration u/s 185(5) of the Act and completed the assessment. The assessee filed an appeal to the Appellate Assistant Commissioner against the refusal of registration by the Income Tax Officer u/s 185(5) of the Act. The appeal was obviously filed u/s 246(j) of the Act. Subsequently, the assessee also made an application u/s 146 to the Income Tax Officer for cancellation of the ex parte assessment. By an order dated September 10, 1976, the Income Tax Officer, without even referring to the earlier order dated February 12, 1976, refusing registration u/s 185(5) of the Act, granted registration to the assessee and completed the assessment. The assessee thereafter withdrew the appeal pending before the Appellate Assistant Commissioner against refusal of registration by the earlier order dated February 12, 1976. In these circumstances, the Commissioner of Income Tax exercised the power u/s 263 of the Act and held that the Income Tax Officer had no jurisdiction to pass another order granting registration u/s 185 of the Act after having refused to grant registration by an earlier order which had not been set aside by any competent authority. On this conclusion, the Commissioner of Income Tax directed the Income Tax Officer to pass a fresh order in accordance with law. On appeal, the Tribunal upheld the Commissioner''s conclusion that the Income Tax Officer had no jurisdiction to pass a fresh order granting registration u/s 185 of the Act after having refused the registration earlier without the order refusing registration being set aside. However, it further held that on this conclusion rightly reached by the Commissioner, the only course open to the Commissioner was to cancel the subsequent assessment order made by the Income Tax Officer and no remand to the Income Tax Officer was called for. It was, therefore, only this part of the Commissioner''s order which was modified by the Tribunal. The above question of law has been referred for decision by this court at the instance of the assessee under these circumstances.

The only question for our decision is whether the Income Tax Officer''s earlier order dated February 12, 1976, refusing registration was made u/s 185(5) of the Act. In our opinion, there can be no doubt that it was so. The earlier order dated February 12, 1976, passed by the Income Tax Officer, clearly stated that the Income Tax Officer was not satisfied about the genuineness of the firm stated to have been reconstituted under the partnership deed executed on July 1, 1972 ; and that the registration was, therefore, refused under Sub-section (5) of Section 185 of the Act. It was also mentioned that the registration had been refused also in the earlier assessment year. It was concluded that the business carried on by the alleged firm, M/s. Rajendrasingh Bharatsingh Chouhan, during the assessment year 1973-74 actually belonged to Shri Bharatsingh Chouhan in his individual capacity. The assessment was, therefore, completed on this basis after refusing registration u/s 185(5) of the Act. A bare perusal of the order is sufficient to indicate that it was an order refusing registration u/s 185(5) of the Act. The assessee also construed the order accordingly and preferred an appeal to the Appellate Assistant Commissioner u/s 246(j)of the Act, which provides for an appeal against an order refusing registration u/s 185(5) of the Act. It was only after the Income Tax Officer, by a subsequent order dated September 10, 1976, had granted registration on the same facts without even referring to the earlier order refusing registration against which an appeal was pending before the Appellate Assistant Commissioner that the assessee withdrew that appeal. There can thus be no doubt that the order dated February 12, 1976, was the Income Tax Officer''s order refusing registration u/s 185(5) of the Act, as rightly held by the Tribunal.

Consequently, the reference is answered against the assessee and in favour of the Revenue as under :

"The Tribunal was justified in holding that the order of the Income- tax Officer, dated February 12, 1976, refusing registration had been passed u/s 185(5) of the Act. "

The Revenue shall get costs of this reference from the assessee. Counsel''s fee Rs. 200, if certified.