SETHURAMAN J.


The following question has been referred under s . 256(1) of the I.T. Act


"Whether the Tribunal was right in holding that the assessee-firm was not entitled to continuation of registration for the assessment year 1970-71 ?" *


The assessee is a firm consisting of four partners, viz., 1. Papanasa Nadar, 2 Paulraj Nadar, 3. Annamalai Nadar, and 4. Sundaraswamy. The shares of each of these partners differed and it is not material for our present purpose. The assessee filed a declaration in Form No. 12 for continuance of registration. This declaration was signed by the legal representative of the first partner, namely, Papanasa Nadar, who died, and by Paulraj and Annamalai. Sundaraswamy, the fourth partner, did not append his signature to the form. This form was filed on January 7, 1971, before the ITO


By the end of December, 1972, the ITO by a letter dated December 11, 1972, pointed out that the declaration was defective and he afforded an opportunity to the assessee under s. 185(3) of the Act to rectify the defect and resubmit the form duly signed by all the partners of the firm within a period of one month. He pointed out also that if this defect was not rectified within the time, the registration granted to the firm for the earlier year would not continue for the assessment year 1970-71


The declaration should have been received in the office of the ITO on or before January 12, 1973. It was, however, received only on January 22, 1973. The ITO passed an order under s. 185(3) stating that as the defect was not rectified within the period of one month, the registration granted to the firm could not enure for the assessment year 1970-71. On appeal, the AAC, relying on Circular No. 105, dated 23rd February, 1973, issued by the CBDT, held that the short delay in filing the declaration should be condoned, and he, therefore, directed continuation of registrationThe Department appealed to the Tribunal which held that s. 185(3) clearly applied to the case, and that since the defect was not rectified within the stipulated period of one month, the, ITO had no option but to pass an order in writing declaring that the registration granted would not have effect for the assessment year 1970-71. In the result, it allowed the appeal filed by the ITO. Feeling aggrieved by this order of the Tribunal, the assessee has brought this matter on reference to this court


Section 184 prescribes the procedure for registration. An application for registration of the firm has to be made to the ITO either during its existence or after its dissolution. The application has to be signed by all the partners (not being minors) personally and in the case of a dissolved firm, by all persons (not being minors) who were partners in the firm immediately before its dissolution and by the legal representative of any such partner who is deceased. The application has to be in the prescribed form and has to contain the prescribed particulars. Section 184(7) provides that where registration is granted to any firm for any assessment year it shall have effect for every subsequent assessment year provided (i) 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 on the basis of which the registration was granted, and (ii) that the firm furnishes before the expiry of the time allowed under sub-s. (1) or (2) of s. 139 or before any extended period for furnishing the return of income of the firm, a declaration to the effect that there was no change in the constitution of the firm or the shares of the partners. Where the ITO was 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 (s. 184(7)). It may be seen that s. 184(7) applies to those cases where the form is filed for the first time. Section 185 details the procedure on receipt of such application. On receipt of the application for registration, the ITO has to enquire into the genuineness of the firm and its constitution as specified in the instrument of partnership. If it was a genuine firm he has to pass an order in writing registering the firm for the assessment year. If he was not satisfied with the existence of a genuine firm, he has to pass an order in writing refusing to register the firm. Sub-section (2) of s. 185 applies to those cases where the ITO considers that the application for registration is not in order. In such a case, he has to intimate the defect to the firm and give it an opportunity to rectify the defect in the application within a period of one month from the date of such intimation, and if the defect is not rectified within that, period, the ITO, has peremptorily to reject the application. Sub-section (3) of s. 185 deals with cases where the declaration contemplated by s. 184(7), i.e., for continuance of registration is filed. Where the ITO considered that the declaration furnished under s. 184(7) was not in order, he has to intimate the defect to the firm and give it an opportunity to rectify the defect within one month from the date of such intimation. If the defect is not rectified within that period, then the ITO has to peremptorily pass an order in writing declaring that the registration granted to the firm would not have effect for the relevant assessment yearIt may be seen that there are two distinct steps to be taken in the case of an application for registration. A firm may for the first time apply for registration and in such a case sub-ss. (1) to (6) of s. 184 would apply. Where registration is granted to a firm for any earlier assessment year, that registration would have effect for every subsequent year provided the two conditions prescribed by sub-s. (7) of s. 184 were complied with, namely, (i) the filing of a declaration that there was no change in the constitution of the firm or the shares of the partners, and (ii) filing it within the period prescribed by sub-ss. (1) and (2) of s. 139. There is also power on the part of the ITO to condone the delay in filing the declaration for the first time if there was sufficient cause for doing so. In the case of the declaration being defective, sub-s. (3) of s. 185 requires the ITO to intimate the firm about the existence of the defect and the deed for its rectification within a period of one month. As contrasted with sub-s. (7) of s. 184, there is no power to condone the delay available under sub-s. (2) or sub-s. (3) of s. 185. It is in the context of these provisions that we have to consider the question referred to us


In the present case, as already seen, the declaration filed on 7th January, 1971, was defective. The case thus clearly fell within s. 185(3) and the assessee had to rectify the defects within the period of one month prescribed by the law. It is not in dispute that the assessee had not filed the declaration within the extended period of one month. The ITO was thus clearly right in refusing to condone the delay as he bad no power to do so, and the Tribunal acted properly in reversing the order of the AAC to the contrary


The learned counsel for the assessee drew our attention to a circular dated February 23, 1973 (F.No. 225/86/71-ITA. 11) Government of India, Central Board of Direct Taxes. That circular ex facie contains the procedure to be adopted in cases where s. 184(7) is attracted. Section 184, as already seen, deals with cases of filing of declaration (for continuation) by the assessee within the time allowed stating that there was no change in the constitution of the firm or in the shares of the partners. It is with referenc

e to the filing of such a declaration that the ITO is given power to condone the delay if he was satisfied that the firm was prevented by sufficient cause from furnishing the declaration within the time allowed under the law. The circular does not prima facie deal with cases arising under s. 185. Therefore, even assuming that we have to consider the circular in interpreting the provisions of the Act, we are not satisfied that the assessee can derive any assistance from the said circular. However, we would not stand in the way of the assessee getting any benefit if the Board is satisfied, on being moved by the assessee, that the circumstances of this case would warrant the application of the said circular. The question referred to us is answered in the affirmative and in favour of the Revenue. The Department will be entitled to its costs. Counsel's fee Rs. 500.