AGARWAL AND CO Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) THIS is a petition under article 226 of the Constitution.

(2.) THE petitioner is a firm carrying on the business of managing agency. THE petitioners firm was constituted in 1934 and a deed of partnership was drawn up on the 24th of January, 1936. THE partnership consisted of 18 members. It was provided in the deed of partnership that upon the death of any partner, the other partners shall take the heirs or legal representatives of the deceased partner into partnership, in place of the deceased. Four of the partners subsequently died and their heirs were taken in. One fresh partnership deed was executed on the 17th of November, 1938, the second on the 24th of July, 1942, the third on the 21st of January, 1949, and the fourth deed was executed on the 7th of July, 1950; and all these deeds contained substantially the same terms on which the firm was registered in the year 1936 and the registration was renewed every year till the financial year 1951-52. For the year 1952-53 an application was made as unusual for the renewal of the registration under section 26A of the Income-tax Act. THE Income-tax officer, Special Circle, Kanpur, appears to have taken up this matter at the time of assessment of the firm to income-tax for the year 1952-53. He took up the matter on the 23rd October, 1954, and he first dealt with the matter of the registration of the firm. In his opinion the firm had been wrongly registered previously and he cancelled the registration for the years 1950-51 and 1951-52. As regards the application for renewal of registration for the year 1952-53, he says that the registration for the previous years having been cancelled, the registration could not be renewed. He also remarked that as the firm consisted of more than 20 members it could not be registered nor could its registration be renewed. THE firm ostensibly consisted of 18 partners, but the Income-tax Officer was of the view that at least two of these partners were kartas of joint Hindu families and the members of those families should also be deemed to be the members of this firm and adding the names of all the members of the two joint families, the number of members would exceed 20 and the registration of the firm would be invalid because of the provisions of section 4 of the Companies Act. As a result of the cancellation of registration, the partners of the firm became liable to pay an additional income-tax of Rs. 20,000 for the year 1950-51 and Rs. 15,000 for the year 1951-52. THE refusal to renew the registration of the firm for the year 1952-53 has resulted in an assessment of more than a lakh of rupees. THE petitioners firm filed appeals against these orders on the 22nd of November, 1954, before the Appellate Assistant Commissioner of Income-tax. THEse appeals are still pending. On the 30th of November, 1954, an application was made on behalf of the petitioner praying that the demand of the tax from the firm be stayed till the disposal of the appeals already filed, but the said officer rejected the application. A representation was made to the Commissioner of Income-tax, but it did not prove to be of much avail. THE present petition was then filed on the 5th of April, 1955. praying that a writ of certiorari be issued quashing the orders of the Income-tax Officer dated the 23rd of October, 1954, cancelling the registration of the petitioners firm in respect of the years 1950-51 and 1951-52 and refusing to renew the registration for the year 1952-53 and that a writ of mandamus be issued directing the Income-tax Officer to withdraw the above orders and to reconsider the petitioners application for renewal of registration for the year 1952-53.