DWARKA PRASAD CHIRANJILAL Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE petitioner in this application under Article 226 of the Constitution of India has prayed for issuance of an appropriate writ quashing the orders as incorporated in annexures '2' and '5' to the petition. THE order as contained in annexure '2' is that dated the 27th February, 1970, passed by the ITO, Ward-C, Muzaffarpur (respondent No. 2), rejecting the application for registration filed by the petitioner under Section 185 of the I.T. Act, 1961 (hereinafter referred to as "the Act"), and that contained in annexure '5' is dated the 23rd July, 1970, passed by the CIT (respondent No. 1) upholding the order of respondent No. 2 in revision filed by the petitioner under Section 264 of the Act.

(2.) THE short facts relevant for disposal of this application may be summed up thus : THE petitioner claims to be a partnership firm carrying on business in cloth. It claimed that the partnership was constituted on the 1st January, 1968, on which date a draft of the partnership deed was duly drawn up on a plain paper. Later on when the necessary stamp paper was purchased on the 19th January, 1968, the same draft was typed thereon and without apprehending any irregularity and through inadvertence under a bona fide belief the partners signed the deed under the same date as was typed out in the draft because, it is said, they had formed the partnership on January 1, 1968 itself. A copy of the partnership deed has been marked as annexure '1'. Later on this mistake was detected by the partners and a fresh deed was also drawn up on the 24th January, 1968, on new stamp papers purchased on the 23rd January, 1968. For the assessment year 1969-70 an application for registration under Section 185 of the Act was filed by the petitioner before respondent No. 2, admittedly on the close of the corresponding accounting year. THE ITO held that since the accounting year of the assessee ended on the 20th October, 1968, the application was within the time prescribed by the Act and the Rules. He, however, held on scrutiny of the original partnership deed, that though the stamp paper was purchased on the 19th January, 1968, it was purported to have been executed on January 1, 1968, which was quite impossible and since the registration under the Act was a special privilege which was granted to an assessee, the petitioner was not entitled to such privilege on account of the wrong date of execution given in the deed which went to show that the assessee had wanted to play fraud with the department. A copy of the aforesaid order has been marked annexure 2. THE petitioner thereafter filed an application under Section 264 of the Act before the Commissioner (respondent No. 1); a copy of the application in revision has been marked annexure '4'. By his revisional order as contained in annexure 5 the Commissioner agreed with the view of the ITO and relying upon a Bench decision of the Kerala High Court in Malankara Timbers v. CIT [1967] 66 ITR 200, rejected the petitioner's revision application. THE petitioner thereafter filed a writ application in this court which was registered as C.W.J.C. No. 1709 of 1970 and when this application came up for admission before a Bench of this court it was observed that since the petitioner had not exhausted the internal remedy by way of appeal and further second appeal, the application was not maintainable. THE counsel for the petitioner appearing in that case then sought permission to withdraw the application for exhausting such remedies as may be available to the petitioner under the Act. THE permission to withdraw was granted, a copy of this court's order has been marked annexure '6'. THE" petitioner thereafter preferred an appeal to the AAC with a prayer for condonation of delay. This application was filed on affidavit and the reason for withdrawal, as given above, has been asserted therein on affidavit"; a copy of that petition has been marked annexure '7'. By an order dated the 16th November, 1971, however, the AAC returned the memorandum of appeal to the petitioner on the ground that by filing revisional application under Section 264 of the Act, the petitioner had waived its right of appeal. This is borne out by the order dated the 16th November, 1971, as incorporated in annexure '8'. THE petitioner in order to exhaust all the appellate remedies under the Act, pursued the matter in second appeal before the Income-tax Appellate Tribunal, but the Tribunal dismissed the appeal on the ground that the AAC had rightly held that the petitioner had waived its right of appeal in filing its application in revision before the Commissioner under Section 264 of the Act; a copy of the order of the Tribunal has been marked annexure '9'. After having so exhausted all such remedies as were available to the petitioner under the Act, the petitioner moved this application which was duly admitted. THE sole question for determination in this case is as to whether the order of refusal to register under the provisions of Section 185 or for that matter Sections 184 and 185 read with the relevant rules and the forms prescribed thereunder, can be said to be justified in law or not. To this aspect of the case on merits, we shall advert later.

(3.) IN Sri Ram Mills' case the stamp for the partnership deed was purchased on November 17, 1959, whereas the recital in the deed of partnership showed that it was written on October 31, 1959, and this was one of the main reasons why the registration was refused by the ITO and the Tribunal although the AAC in the first appeal preferred before him had allowed registration. Untwalia C.J., speaking for the Bench, held in such circumstances thus (page 281):