Holding

The application filed in Form IIA on 29 September 1962 was a good and valid application; the refusal under section 184(7) was improper.

Summary

The firm Amar Singh Gowamal & Sons, originally registered under the Income Tax Act, 1922 up to assessment year 1961‑62, altered its partnership constitution on 8 November 1961. It applied for registration under the Income Tax Act, 1961 on 29 September 1962 (Form UA). The Income‑Tax Officer rejected the application invoking section 184(7) of the 1961 Act, and the Tribunal upheld the refusal. On reference, the Patna High Court held that the application was valid under Rule 22(4)(ii) because the firm existed throughout the previous year for the first assessment year under the 1961 Act. The Supreme Court affirmed this view, stating that registration under the 1922 Act does not continue automatically into the assessment year 1962‑63 governed by the 1961 Act, and that a fresh application under section 184(1) was required and properly filed. Consequently, the refusal was invalid and the appeal by the Commissioner was dismissed.

Issues considered

Whether the application for registration filed on 29 September 1962 under the Income Tax Act, 1961 was validly refused under section 184(7).
Whether registration granted under the Income Tax Act, 1922 continues for assessment years after the commencement of the 1961 Act.

Legislation cited

Income Tax Act, 1922s. 26, s. 26A
Income Tax Act, 1961s. 182, s. 184(1), s. 184(4), s. 184(7), s. 185(2), s. 185(4), s. 297(2)(k)
Income Tax Ruless. Rule 22(4)(ii), s. Rule 2(a)(i), s. Rule 6

Subjects

firm registrationincome taxsection 184rule 22assessment yearrenewal of registrationIncome Tax Act 1922Income Tax Act 1961change in constitution

Judgment

A

COMMISSIONER OF INCOME TAX, BIHAR, PATNA y
v.
AMAR SINGH GOWAMAL & SONS, JHARIA, DHANBAD
B
JULY 17, 1986.

[R.S. PATHAK AND SABYASACHI MUKHARJI, JJ.]
}
(

--
Income Tax Act 1961, s.184/26A-Registration of firm-Regis-
tration-Whether ensures for every subsequent year. '
c
(
The respondent-assessee firm was registered in 1945 under the
Indian Income Tax, 1922. The registration was up to the assessment
year 1961..(i2. On 8th November, 1961, the last day of the previous year
relevant to the assessment year 1962-63, there was a cliange in the
D constitution of the firm. From November 9, 1961, a new btstrument of
partnership came into existence. On September 29, 1962 the respon-
dent-assessee firm applied for registration in Form UA under the
Income Tax Act, 1961. The Income Tax Officer refused registration on
the ground that the case fell under section 184(7) of the Act. The Tri-
bunal upheld the order of the Income Tax Officer.
E
The High Court in a reference made by the Tribunal under Sec-
lion 256(1) of the Act. held that on the date of application, the coustitu-
lion of the assessee firm had changed and that the application was for
registration of the firm which was in existence throughout the length of
the previous year in relation to the first assessment under the Act of
F 1961 and that being so, in accordance "ith Rule 22(4)(ii) of the Income
Tax Rules, the application tiled in Form 11-A was a good and valid
application.

Dismissing the appeal by the revenue, this Court,

G HELD: 1. The High Court was right in holding that the applica-
lion tiled in Form 11-A was a good and valid application. [313C-D]

2.1 Section 26A of the 1922 Act dealt with the procedure in regist-
ration of the fiml. Under the provision, application might be made to
the Income-tax Officer on behalf of any firm constituted under an in- )-
H strument of partnership specifying the individual shares of the partners
308
C.I.T. "· A.S. GOWAMAL 309
A
for registration for the purpose of that Act and of any enactment for the
1' time being in force either relating to income-tax or snper-tax. The
application was required to be made by such person or persons and was
required to contain such particulars and had IQ be in such form and was
required to be verified in snch manner as had been prescribed. It was
thereafter required to be dealt with by the Income-tax Officer, in the B
manner prescribed. [311G-H; 312A-B]

~. The Act of 1922 contained power for the Central Board to make
....l...1 roles nnder the said Act. Rule 2(a}(i) of said Rules required the filing of
an application for registration within a period of six months of the
coustitntion of the firm whichever was earlier or in any other case
before the end of the previous year, as was required by clause (ii).
c
Application for renewal of registration under role 6 had to be filed
before the 30th day of Jnne of a particular assessment year. [3128-C]
,(
2.2 There were two types of forms given in form I which was the
form of application for registration of the rmn under section 26A of D
1922 Act. One was an application for registration simpliciter where
there was no registration but when the firm as constituted on the date of
the application was different from the one whose income was under
assessment then in schedule (B) of the form particulars of the appor-
tionment of income, profits or gains or loss of the business in the previ-
~
ous year, between the partners who were entitled to shares in such E
income, profits or gains or loss had to be given. The form of the renewal
application was appended to role (6). [312C-E]

2.3 Under the 1922 Act both the forms were meant for the

l
purpose of first registration of the rmn and not renewal, bot the form of
renewal appended to role 6 was different. Essentially, similar is the F
position nnder the 1961 Act. Chapter XVI of the 1961 Act deals with
that position. Section 182 of the Act deals with assessment ofregistered
firms, and section 184 of the Act deals with application for registration
of firm. Sub-section (4) of Section 184 stipulates that the application
should be made before the end of the previous year for the assessment in
respect of which registration was sought. The Income-tax Officer had G
power to entertain application even after the end of the previous year.
, [312G-H; 313A-B]
l 2.4 The scheme for renewal under 1961 Act was different from
the one under the 1922 Act in one significant aspect, while under 1922
Act the application for registration meant application for registration H
310 SUPREME COURT REPORTS [1986] 3 S.C.R.
A
for every year and if granted it was valid for one assessment year but
under 1961 Act once registration is granted, such registration enures
for every subsequent year, if certain requirements are fulfilled. Such
requirements are provided in sub-section (7) of section 184 of the Act.
[313B-C]
B
2.5 It is apparent from relevant provisions of the two Acts that
registration granted under 1922 Act cannot have effect of continuing
the registration for the assessment year 1962-63 where 1961 Act would
apply. For that year an application for registration of the firm has to be
made under section 184(1) of the 1961 Act, and the fact of such registra-
tion noted under sub-section (4) of section 185 of the Act. Sub-section
c (7) would not come into effect at that time. It would come into effect for
the subsequent assessment year 1963-64. [313D-F]

CIVIL APPELLATE JURISDICTION: Civil Appeal No.
1912 (NT) of 1974
D
From the Judgment and Order dated 23rd November. 1973 of
the Patna High Court in Tax Case No. 46 of 1969.

S.C. Manchanda, K.P. Bhatnagar and Miss A. Subhashini for
the Appellant.
E
The Judgment of the Court was delivered by
SABYASACHI MUKHARJI. J. This is an appeal from the deci-
sion and judgment of the High Court of Patna dated 23rd November,
1973. The appeal is by certificate from the High Court under section

F
261 of the Income Tax Act, 1961, hereinafter called the 'Act'. The
assessee firm was registered in 1945 under the Indian Income Tax Act,
1922. The registration was upto the assessment year 1961-62. There
was a change in the constitution of the firm on the last day of the
previous year relevant to the assessment year 1962-63 on 8th
November, 1961. From November 9, 1961, a new instrument of part-
l
nership came into existence. On September 29, 1962, the firm applied
G for registration under the Act in Form UA. The Income-tax Officer
refused registration on the ground that the case fell under section
184(7) of the Act. The Tribunal, thereafter upheld the order of the
Income-tax Officer. There was a reference to the High Court. It was
held by the High Court that the application was filed in September,
1962. On that date the constitution of the firm had changed. The
H
C.I.T. v. A.S. GOW AMAL [MUKHARJI, J.) 311

"'( A
I application for registration under the 1961 Act was for registration of
the firm which was in existence throughout the length of the previous
year in relation to the first assessment year under the Act of 1961. That
being so, in accordance with rule 22(4)(ii), Income Tax Rules, the
application filed in Form I IA was a good and valid application.
B
The High Court, further, observed that the scheme of renewal of
registration under the Act of 1961 was different from the one that
obtained under 1922 Act. Under the Act of 1922, application for re-
newal of registration meant application for registration every year and
had the effect of registering the firm every year. Under the Act of 1961
when once registration was granted under the Act of 1922 to any firm c
for any assessment year ii enured for subsequent years also unless
there was a change in the constitution of the firm. A registration
granted under the Act of 1922 would not have the effect of continuing
the registration for the assessment year 1962-63 to which the Act of
1961 became applicable. For that year an application for registration D
had to be made for the purposes of the Act of 1961 in accordance with
section 184(1) and the fact that the registration under the Act had got
to be noted under sub-section (4) of section 185 of the Act. A renewal
of registration granted under the Act of 1922 is not a "recognition
granted" or "order issued" within the meaning of section 297(2)(k) of
the 1961 Act and was, therefore, not saved by the provisions of that
E
section.

The question that was referred by the Tribunal to the High Court
under section 256( I) of the Act was as follows:

"Was the application for registration made in Form No. F
1IA on 29th September, 1962 validly refused?"

The question of registration of the firm under the relevant In-
come Tax Acts was dealt with under section 26A of 1922 Act. Section
26 of the 1922 Act dealt with the change in the constitution of a firm, as
neither the revenue authorities nor the High Court has proceeded on G
any question of the constitution of the firm, it is not necessary for the
I
present purpose to deal with that. Section 26A of the 1922 Act dealt
--f with the procedure in registration of the firm. Under the provision,
application might be made to the Income-tax Officer on behalf of any
firm constituted under an instrument of partnership specifying the
individual shares of the partners for registration for the purpose of that H
312 SUPREME COURT REPORTS 119861 3 S.C.R.
A Act and of any enactment for the time being in force either relating to
income-tax or super-tax. The application was required to be made by
such person or persons and was required to contain such particulars
and had· to be in such form and was required to be verified in such
manner as had been prescribed. It was thereafter required to be dealt
B with by the Income-tax Officer in the manner prescribed. The Act of
1922 contained power for the Central Board to make rules under the
said Act. Rule 2(a)(i) of said Rules required the filing of an application
for registration within a period of six months of the constitution of the
firm or before the end of the previous year of the firm whichever was
earlier or in any other case before the end of the previous year, as was
required by clause (ii). Application for renewal of registration under
c rule 6 had to be filed before the 30th day of June of a particular
assessment year. There were two types of forms given in form I which
was the form of application for registration of the firm under section
26A of 1922 Act. One was an application for registration simpliciter
where there was no registration but when the firm as constituted on the
D date of the application was different from the one whose income was
under assessment then in schedule (B) of the form particulars of the
apportionment of income, profits or gains or loss of the business in the
previous years, between the partners who were entitled to shares in
such income, profits or gains or loss had to be given. The form of the
renewal application was appended to rule (6). It might be noted that
E the Central Board of Direct Taxes had extended the time for registra-
tion during the transitional period after coming into operation of the
Act of 1961, upto 30th September, 1962. It would thus be seen that
when the application was filed it was in time, it was not necessary to fill
up the two schedules but if the application was filed for the first registra-
tion of the fi:in, which was in existence in the previous year at a point of
F time when the firm was reconstituted then the particulars of both kinds
had to be given. But the assessment on the newly constituted firm on the
date as it was constituted at the time of assessment could be made when
it was found that the firm as constituted was different from the one
which had earned the profit in the previous year.

G It is apparent, therefore, that under the 1922 Act both the forms
were meant for the purpose of first registration of the firm and not
renewal, but the form of renewal awended to rule 6 was different. Essen- I
tially, similar is the position under the 1961 Act. Chapter XVI of the Act )--
deals with that position. Section 182 of the Act deals with assess-
ment of registered firms, and section 184 of the Act deals with
H application for registration of firm. Sub-section (4) of section 184
C.I.T. v. A.S. GOW AMAL [MUKHARJ!. J.) 313
A
'"'( stipulates that the application should be made before the end of the
' previous year for the assessment in respect of which registration was
sought. The Income-tax Officer had power to entertain application
even after the end of the previous year. The basic point that has to be
borne in mind in this case is that the scheme for renewal under 1961
B
Act was different from one under the two Acts in one significant
aspect, while under 1922 Act the application for registration meant
application for registration for every year-and if granted it was valid
1 for one assessment year but under 1961 Act, once registration is
,,_,
, granted, such registration enures for every subsequent year, if certain
requirements are iulfilled. Such requirements are as provided in sub-
section (7) of section 184 of the Act. Such procedure, it seems to us, c
has been substantially complied with. The question which the High
Court posed before it was whether the application filed on 29th Sep-
!ember, 1961 in Form llA was a good application in accordance with
1961 Act and the rules framed thereunder or whether it was a case of
continuance of the registration granted under 1922 Act within the
D
meaning of sub-section (7) of section 184 of the Act. It is apparent
from relevant provisions of the two Acts that registration granted un-
der 1922 Act cannot have effect of continuing the registration for the
assessment year 1962-63 where 1961 Act would apply. For that year an
application for registration of the firm has to be made under section
184 (1) of 1961 Act, and the fact of such registration noted under
-f sub-section (4) of section 185 of the Act. Sub-section (7) would not E
come into effect at that time, it would come into effect for the subse-
quent assessment year 1963-64. In the instant case, the application was
filed in September, 1962-on that date the constitution of the firm had
changed-the application for registration under 1961 Act was for re-
gistration of the firm which was in existence throughout the length of
F
the previous year in relation to the first assessment under 1961 Act.
That was in accordance with rule 22(4)(ii) of the Rules and the applica-
tion filed in Form llA was a good and valid application. The High
Court so held. We agree. The other aspect-whether section 297(2)(k)
of 1961 Act was applicable, was also discussed by the High Court but it
is not necessary to refer to it in the view, we have taken.
G

In any view of the matter in the facts of this case and in view of
so-called alleged defects in the application. according to the Income-
--(_ tax Officer, the Income-tax Officer under sub-section (2) of section
185 of the Act should have given an opportunity to the firm, and in not
having done so, did not act validly and the rejection of the application H
314 SUPREME COURT REPORTS [1986] 3 S.C.R.
A was invalid. The question referred to the High Court was rightly ans-
wered in the negative. The appeal fails and is dismissed. Since the
other side was not represented here, there will be no order as to costs.

B M.L.A.
Appeal dismissed.