UTTAM CONSTRUCTION COMPANY Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference made under Section 256(1) of the Income-tax Act, 1961, at the instance of the assessee for deciding the following question of law, namely :

(2.) THE assessee-firm was carrying on business in the name of M/s. Uttam Construction Company, Khairagarh, comprised of five partners and the firm was granted registration for the assessment year 1972-73 under Section 185 of the Income-tax Act, 1961, which was continued up to the assessment year 1974-75 under Section 184(7) of the Act. On behalf of the firm, it was alleged that there was a change in the constitution of the firm evidenced by a fresh deed dated December 31, 1973. THE accounting period of the assessee was the year ending on Diwali, 1974 and, therefore, the assessoe had to submit an application in "Form 11A" before the end of the accounting period ending on Diwali 1974, i.e., November 13, 1974, for registration of the reconstituted firm under Section 185 of the Income-tax Act. THE firm, however, submitted the application on April 6, 1976, and attempted to explain the delay on the ground of inadvertence of their chartered accountant, Shri P.C. Bafna, with whom the papers continued to He during that period. Affidavits of Shri Uttam Chand Jain, a partner of the firm, as well as the chartered accountant, Shri P.C. Bafna, were filed in support of this contention. This was done obviously to support the prayer for extension of time, in accordance, with the proviso to Sub section (4) of Section 184 of the Act.

(3.) IT is not disputed that it was open to the Tribunal to take into account even additional material produced before it by the parties for deciding the question relating to condonation of delay in making the application for registration of the firm. However, if any new material was to be relied on or any material, which though present on the record, was to be relied on for the first time, it is only reasonable that an opportunity should have been given to the parties to explain the same before an adverse inference was drawn against any of them merely on that basis. IT is more so, when the material being present in the record was not relied on in this manner by any of the two lower authorities. The Tribunal was, therefore, not justified in reaching the concluded opinion on the point without giving an opportunity to the assessee to explain the above circumstance. We may add that for this purpose, the Tribunal could either itself take the explanation and any further material produced by the parties as evidence or direct the departmental authorities to give a fresh finding after taking into account the entire material including that produced by the parties for this purpose. Such a course not having been adopted by the Tribunal before reaching the above conclusion, the same will have to be done now.