RAJPUT TRANSPORT COMPANY Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN this case the Tribunal has referred the following question of law for the opinion of the High Court : -

(2.) THE assessee is a firm consisting of four partners. For the asst. year 1947 -48 and 1948 -49 the assessee was assessed in the status of an unregistered firm, as no application for registration was made under S. 26A of the Act. For the asst. year 1949 -50 the firm filed an application for registration under S. 26A of the Act in the prescribed form. The ITO accepted the application and registered the firm "for the assessment for the year ending on the 31st March, 1950" and endorsed the following certificate on the instrument of partnership : -

(3.) ON behalf of the assessee Mr. Mazumdar put forward the argument that a duty was imposed on the ITO to give a notice required under the proviso to S. 23(4) of the Act before treating the assessee firm as an unregistered firm. In our opinion, this argument is without substance. It is clear in the first place that the firm was registered under S. 26A only for the asst. year 1949 -50. This is borne out by the certificate granted by the ITO and endorsed on the instrument of partnership under r. 4(1) which has already been quoted. It is clear, therefore, that the registration granted by the ITO was effective only for the asst. year 1649 -50 and the registration has no effect or force for the asst. year 1950 -51. It is also the admitted position that for the asst. year 1950 -51 the assessee firm made no application for renewal of the certificate. Rule 5 of the Indian IT Rules makes provision that a certificate of registration granted under r. 4 shall have effect only for the assessment to be made for the year mentioned therein. Rule 6 provides that any firm to whom a certificate of registration has been granted under r. 4 may apply to the ITO to have the certificate of registration renewed for a subsequent year. The rule further enacts that such application shall be signed personally by all the partners of the firm and should be accompanied by a certificate in the form set out in the rule. Rule 6A provides that on receipt of an application under r. 6 the ITO may, if he is satisfied that the application is in order and that there is a firm in existence constituted as shown in the instrument of partnership, grant to the assessee a certificate in the prescribed form. If the ITO is not so satisfied, he is required to pass an order in writing refusing to renew the registration of the firm. In the present case it is admitted that the assessee firm did not make an application in writing under r. 6 for the renewal of the registration. It is submitted by Mr. Mazumdar that his client intended to make a written application for the renewal of the registration but could not do so because the case was remanded by the AAC. But the fact remains that no written application was made as required by r. 6, and in the absence of a written application no question could arise for renewal of registration or cancellation of registration on the part of the IT authorities. In this context it is necessary to bear in mind the principle that the registration of the firm under the Indian IT Act is not a general right but is a mere privilege given to the firm in order to enable the individual partners to get the benefit of the lower rates of assessment applicable, and if the firm desires to take advantage of this privilege, it must conform strictly to the requirements of S. 26A and the rules made under S. 59. (See the decision of this Court in Khimji Walji & Co. vs. CIT (1954) 25 ITR 462. It is, therefore, manifest that in the present case the ITO was not bound to give a notice under the proviso to S. 23(4) of the Act before determining the status of the firm as an unregistered firm for the asst. year 1950 -51. It follows that the question referred to the High Court must be answered in favour of the IT Department and against the assessee. The assessee must pay the costs of this reference. Hearing fee Rs. 250.