COMMISSIONER OF INCOME TAX Vs. PANDURANGA ENGINEERING CO

JUDGEMENT

(1.) The Income-tax Appellate Tribunal, in respect of the assessment year 1982-83 pertaining to the assessee, Panduranga Engineering Co. - which is a partnership firm situate at Vijayawada, referred the following question for the opinion of this court under section 256(1) of the Income-tax Act, 1961 :

(2.) In respect of the above assessment year, the Income-tax Officer issued notices under sections 142(1) and 143(2) of the Income-tax Act, 1961 (for short, "the Act"), to the assessee and as the letter did not comply with the requirements of the said notices, the assessing authority issued a notice under section 186(2) read with section 185(5) also seeking to cancel the registration of the firm. As there was no response even to that notice, the assessment was made according to the best judgment on 24/07/1984, and, on the same day, another order was passed contemporaneously refusing continuation of registration of the firm in respect of that year. It appears, the best judgment assessment was upheld in appeal. As regards the order passed under section 186(2), the matter was carried in appeal unsuccessfully. Before the appellate authority, it was pleaded by the assessee that his failure to be present on the dates given by the assessing authority was because of his pre-occupation, viz., attending on his ailing parents.

(3.) The appellate authority dismissed the appeal on the view that the assessee had not only disregarded the notices issued under sections 143(2) and 142(1) but also consciously disregarded the notice under section 186(2) and this act was nothing but indifference on the part of the assessee. The Appellate Tribunal, in the second appeal, set aside the view taken by the appellate authority on the ground that under section 185(5), the Assessing Officer has discretionary power to refuse to register the firm and such a discretion must be exercised fairly and reasonably. The registration cannot automatically be refused because of the passing of the best judgment assessment. In respect of this proposition, the Tribunal placed reliance upon four ruling-CIT v. Krishnamma and Co. [1955] 28 ITR 273 (AP); Phoolchand Ramsahai v. CIT [1979] 117 ITR 631 (MP); J.M. Sheth v. CIT [1965] 56 ITR 293 (Mad) and C.K. Abdul Khader and Co. v. ITO [1983] 141 ITR 159 (Ker). The Tribunal, while allowing the appeal, set aside the order passed by the assessing authority under section 185(5) and remitted the matter to the Income-tax Officer "to consider the question of allowing instance of the Revenue, the above question was referred by the Tribunal for the opinion of this court.