KRISHNA MERCERISERS Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS writ petition is filed by one of the partners of the petitioner firm. It is alleged that the firm is carrying on business in mercerising and is liable to be assessed to income-tax under the Income-tax Act, 1961. It is also stated that from the year 1971-72 onwards, the petitioner-firm was assessed to income-tax as a registered firm by the assessing authority. The petitioner-firm filed the return of income for the assessment year 1987-88. It is also averred that the petitioner-firm also filed Form No. 12 prescribed as per the Income-tax Rules, 1962, for continuation of the registration of the firm for the assessment year on July 29, 1987. By assessment order under Section 145(1) of the Act, dated November 20, 1987, the second respondent, accepting the return which included the claim of status of the assessee as a registered firm, without granting any opportunity to the petitioner, passed the assessment order, assessing the petitioner as an unregistered firm on the ground that the declaration in Form No. 12 was made by the partners of the petitioner-firm on February 20, 1987, before the end of the previous year, i.e., March 31, 1987, and was not valid for renewal of registration. It is further averred that the above decision was arrived at by the concerned officer on the basis of the decision of the Gujarat High court in CIT v. Trinity Traders [1974] 97 ITR 81. It is also stated that the objections have been filed under Section 143(2) to the above assessment order made under Section 143(1)(a) of the Act. In the objections the petitioner has stated that rejection of Form No. 12 was not valid and no opportunity was granted to the petitioner to cure the defect in the declaration form as provided for under Section 185(3) of the Act. It is also contended that according to the above provisions, the second respondent was statutorily bound to grant opportunity to the petitioner where the declaration furnished by the petitioner-firm in pursuance of Sub-section (7) of Section 184 was not in order. It is also contended that on January 11, 1988, the second respondent, without affording a personal hearing to the petitioner, stated that the points raised by the petitioner in Form No. 6-A were not maintainable, that the declaration in Form No. 12 was not defective, but it was only invalid and hence no opportunity of hearing need be given. It is also contended that the decision relied on by the second respondent in CIT v. Trinity Traders [1974] 97 ITR 81 (Guj), was concerned with the facts and law relating to the assessment year 1967-68 which was prior to the amendment of Section 185(3) by the Taxation Laws (Amendment) Act, 1970, with effect from April 1, 1971, that the case of the petitioner was a bona fide mistake and the decision of the Gujarat High Court cited above, is not applicable, that the second respondent was statutorily obliged under Section 185(3) to intimate the defect and grant one month's time to rectify the same before passing the assessment order for the assessment year 1987-88 under consideration instead of treating the Form No. 12 filed as invalid. It is also brought to the notice of this court that the partnership was continued as a registered firm from the assessment year 1971-72 onwards.

(2.) LEARNED senior counsel for the Department Mr. S. V. Subramaniam, has vehemently contended that there is no need to give opportunity to the petitioner herein as in the opinion of the Department, the declaration in Form No. 12 was not defective but it was only invalid. Hence, the assessment has been done as if it is an unregistered firm. It is further argued that nothing prevented the petitioner from filing the declaration after March 31, instead of filing it before the end of the financial year. It is also argued that the petitioner is entitled to invoke the provisions of Section 185(3) only if the officers feel there is a typographical error or there is a defect in the form. LEARNED senior counsel has further contended that the Department is right in not invoking the provisions of Section 185(3) as they felt that the declaration in Form No. 12 was invalid but not a defective one. He argued that the decision cited by the Department clearly applies to the facts of the case and hence the action of the respondents is not questionable in the writ petition.

(3.) IN view of the above, it could be held that the declaration filed for continuation of registration in Form No. 12 was only defective as it was filed before the end of the relevant accounting year and the assessee-firm is entitled to an opportunity for rectification of the defect as provided for under Sub-section (3) of Section 185. The authorities herein are not right in rejecting the declaration as invalid. INstead, they should have treated it as a defective declaration. Hence, the respondents are directed to afford an opportunity to the assessee to rectify the defect. The writ petition is allowed. No costs. Consequently, WMP No. 10628 of 1989 is dismissed.