COMMISSIONER INCOME TAX THE GUJARAT Vs. JEKISONDAS BHUKHANDAS

JUDGEMENT

(1.) The short question of law which arises in this Reference turns on the construction of an order passed by the Income-tax Officer. The assessee is a firm which was originally constituted under a deed of partnership dated 30th October 1957 and it appears that for the assessment years prior to the assessment year 1961-62 with which we are concerned in the present reference it was registered under sec. 26A of the Income-tax Act 1922 There was a change in the constitution of the assessee from the commencement of Samvat Year 2016 being the relevant previous year for the assessment year 1901-62 and a new partnership deed dated 5th March 1960 was executed between the partners. On 29th June 1961 a notice under sec. 2222) calling for return of income for the assessment year 1961-62 was served on the assessee but the assessee neither filed a return of its income nor applied for extension of time to file its return. The Income-tax Officer therefore proceeded to make a best judgment assessment on the assessee under sec. 23(4) and by an assessment order dated 23rd December 1961 he assessed the assessee on an estimated income of Rs. 45 0 The assessee thereafter made an application for cancellation of the best judgment assessment under sec. 27 but the application was rejected by the Income-tax Officer and on appeal the order rejecting the application was confirmed by the Appellate Commissioner and the Tribunal. The result was that the best judgment assessment made under sec. 23(4) remained undisturbed against the assessee. The assessee had also made two applications for registration under sec. 26A: one being an application for registration dated 26th May 1960 and the other being an application for renewal of registration dated 26th June 1961. Both the applications related to the same assessment year namely 1961 The Income-tax Officer by an order dated 23rd December 1961 rejected both the applications and as the entire controversy between the parties turns on the true construction of this order it is desirable to set the same in extenso The order was in the following terms:- Order under sec. 26A:-

(2.) In order to arrive at a proper determination of the question it is necessary to notice the relevant provisions of the Act. There are two sections under which the Income-tax Officer has power to refuse registration of a firm: one is sec. 26A and the other is sec. 23(4). Sec.

(3.) Turning to the order of the Income-tax Officer we find-and that was the circumstance strongly relied upon on behalf of the assessee that order is intituled Order under sec. 26A but no undue emphasis can be placed on the mere title of the order. The question as to the true nature of the order whether it was made under sec. 26A or under sec. 23(4) or under both. must be decided not by reading one or other part of the order in isolation but on a proper reading of the order as a whole in all its parts and in doing so two principles of importance must not be overlooked. The first is that a construction must be placed which gives meaning to every part of the order and does not render any part superfluous or meaningless and the second is that regard must be land to the substance of the order and not the form. If we read the order in this manner it is clear that the order is made by the Income-tax Officer not only under sec. 26A but also under sec. 23(4). The Income-tax Officer has not only referred to sec. 23(4) but in express terms he has stated that he is exercising the discretion vested in him under that section. The words ....... the assessment is being completed under sec. 23(4)and under the discretion vested in this section I refuse to renew registration leave no doubt that the Income-tax Officer was consciously exercising his power under sec. 23(4) when he refused the application for registration. The argument urged on behalf of the assessee was that the reference to sec. 23(4) was merely a casual reference and there was nothing to show that the discretion under that section was exercised by the Income-tax Officer. But this argument is plainly contrary to the clear and specific words used by the Income-tax Officer in the order and fails to give due effect to them. The argument in effect comes to this; that though the Income-tax Officer has in terms stated that he is refusing to renew registration in exercise of the discretion vested in him under sec. 23(4) still he must be held not to have exercised the discretion under that section. We cannot accept such an argument: the argument carries its own refutation. At is Undoubtedly true that before referring to sec. 23(4) the Income-tax Officer also pointed out the difficulty of verifying the correctness of the statements made in the application owing to the failure of the assessee to file a return and the partners accounts and this statement read with the title of the order might suggest that the Income-tax Officer was also acting under sec. 26A. But that does not exclude the conclusion which follows clearly from the succeeding words quoted above that the Income-tax Officer was also exercising his discretion under sec. 23(4) in making the order. The Order was an order under both sec. 26A and 23(4) and the Income-tax Officer simultaneously exercised his powers under both the sections in refusing registration to the assessee.