SHANTI TRADING CO Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN this reference under section 256(1) of the INcome-tax Act, 1961, made at the instance of the assessee, the following question of law has been referred by the INcome-tax Appellate Tribunal Bangalore Bench, for the opinion of this court :

(2.) THE assessee is a firm consisting of four partners carrying on business in mill cloth in Bangalore City. It was assessed in the status of a registered firm up to and including the assessment year 1965-66. For the assessment year 1966-67, the assessee failed to submit the return of income in response to the notice under section 139(2) and assessment was made on the best of judgment basis on 27th March, 1967.

(3.) IN Madivalappa and Sons v. Commissioner of INcome-tax we have held that the registration granted to a firm for an assessment year will not ensure for the subsequent years if the firm does not furnish its return of income or declaration as required by the proviso to sub-section (7) of section 184 of the INcome-tax Act, 1961. That decision is sought to be distinguished by Sri H. L. Narasimha Sastry, the learned counsel for the assessee. He urged that in Madivalappa's case the assessee had not only failed to file his return but also filed to file a declaration in the prescribed form, whereas in the instant case the assessee had furnished a declaration in the prescribed form. According to the learned counsel, where registration is granted to a firm for any assessment year, it shall have effect for every subsequent year provided that there was no change in the constitution of the firm or the shares of the partners as evidenced by the instrument of partnership on the basis of which the registration was granted and the firm furnishes a declaration to that effect in the prescribed form and verified in the prescribed manner. IN other words, the submission was that the benefit of sub-section (7) of section 184 of the Act is available to a firm even if it does not furnish a return but files a declaration to the effect firm there is no change in the constitution of the firm or the shares of the partners as evidenced by the instrument of partnership on the basis of which the registration is granted.