KRISHNASWAMI MUDALIAR Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE assessee firm consisted of three partners in its first year of assessment 1949 -50, the account period having ended on 2nd Aug., 1948. The firm did not apply for registration under S. 26A of the IT Act at any time before the ITO completed the assessment. The firm, however, applied under r. 2 (c) of the Indian IT Rules, 1922, to the AAC, before whom the appeal preferred by the assessee against the order of assessment was then pending. The Asstt. CIT eventually rejected that application. The reasons for rejection and the order of rejection formed part of the order the Asstt. CIT passed on the appeal. The refusal of the Asstt. CIT to accord permission to the assessee under r. 2(c) was one of the points raised by the assessee in the further appeal it preferred to the Tribunal against the order of the Asstt. CIT. On that issue, the order of the Tribunal was :

(2.) THE question as framed by the Tribunal does not bring out the real question for determination by us. The ground on which the Tribunal refused to consider the correctness of the order of the AAC, who rejected the application preferred by the assessee under r. 2(c), was that the assessee had not preferred an appeal to the Tribunal independent of the appeal against the order of the Asstt. CIT confirming the order of assessment. What was stressed in the question as framed by the Tribunal was the absence of an order of the Asstt. CIT, independent of his order on the appeal preferred to him against the ITO's order of assessment. Neither of them is relevant in deciding the real question at issue, which, as Mr. Rama Rao Saheb, the learned counsel for the Department, pointed out, was, " whether an assessee had a right to appeal to the Tribunal against an order passed by the Asstt. CIT on an application preferred to him under r. 2(c) ? " Rule 2(c) of the Indian IT Rules, as it stood when the assessee preferred his application under that provision ran : " Any firm constituted under an Instrument of Partnership specifying the individual shares of the partners may, under the provisions of S. 26A of the Indian IT Act, 1922 . . . . . . . . . . . . . register with the ITO the particulars contained in the said instrument on application made in this behalf, (c) with the permission of the AAC hearing an appeal under S. 30 of the Act, before the assessment is confirmed, reduced, enhanced or annulled . . . "

(3.) IF , on a proper application presented under R. 2(c) to the AAC, he condoned the delay in the presentation of the application for registration under S. 26A, the ITO would have to receive the application for registration under S. 26A and dispose of it. If the ITO rejected that application, the assessee could prefer an appeal to the Asstt. CIT against that order of rejection under S. 30 of the Act. If the Asstt. CIT refused to accord permission, that is, if he refused to condone the delay, there could thereafter be no application under S. 26A and therefore no order under S. 26A. An application under r. 2(c) is not itself an application for registration, for which registration S. 26A of the Act provided. The Asstt. CIT, to whom alone an application could be preferred under r. 2(c), has him -self no authority to order registration, except, of course, on an appeal against an order of the ITO refusing registration. An appeal is a creature of statute, and the Act itself did not specifically provide for any appeal against an order passed by an AAC on an application preferred to him under r. 2(c). There was provision made in the Act only for an appeal against an order passed on an application for registration under S. 26A of the Act.