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1987 Supreme(AP) 685
Andhra Pradesh High Court
Commissioner of Income Tax - Appellant
Versus
Indian Medicine (Sales House) - Respondent
Decided On : 11-26-87
One single appeal is maintainable against both assessment and refusal of registration.
Headnote:
INCOME TAX - REGISTRATION OF FIRM - APPEAL - SINGLE APPEAL AGAINST ASSESSMENT AND REFUSAL OF REGISTRATION - VALIDITY - WHETHER ONE SINGLE APPEAL IS MAINTAINABLE AGAINST BOTH ASSESSMENT AND REFUSAL OF REGISTRATION - YES
Fact of the Case:
The assessee, a partnership firm, filed a return for the assessment year 1975-76 accompanied by a declaration under section 184(7) of the Income-tax Act, 1961. The declaration was signed by only two partners, and the Income-tax Officer passed an order under section 185 treating the firm as an unregistered firm. The assessee filed an appeal before the Appellate Assistant Commissioner, who confirmed the Income-tax Officer's orders. The assessee then filed a further appeal to the Tribunal, challenging both the assessment of income and the refusal to register the firm. The Revenue objected that two appeals should have been filed, one against the refusal of registration and the other against the assessment of income. The Tribunal rejected the objection and held that one single appeal was sufficient.
Finding of the Court:
The court held that the assessee was not required to file two separate appeals, one against the refusal of registration and the other against the assessment of income. The court held that the order passed by the Income-tax Officer under section 185 was superfluous and non est in law, and that the assessee's appeal before the Tribunal was referable to the computation of income under section 143(3). The court also held that the Tribunal was right in relying on two decisions of the Calcutta and Bombay High Courts, which held that one single appeal would meet the requirements of the case.
Issues: Whether one single appeal is maintainable against both assessment and refusal of registration.
Ratio Decidendi: The court held that the assessee was not required to file two separate appeals, one against the refusal of registration and the other against the assessment of income. The court held that the order passed by the Income-tax Officer under section 185 was superfluous and non est in law, and that the assessee's appeal before the Tribunal was referable to the computation of income under section 143(3). The court also held that the Tribunal was right in relying on two decisions of the Calcutta and Bombay High Courts, which held that one single appeal would meet the requirements of the case.
Final Decision: The court answered the question referred in the affirmative, that is to say in favour of the assessee and against the Revenue.
( 1 ) THIS reference arises under the Income-tax Act, 1961 ("the Act" for short ). The Income-tax Appellate Tribunal referred the following question of law for the consideration of this court under section 256 (1) of the Act. "whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in law in holding that the appeal filed before it by the firm of M/s. Indian Medicine (Sales House), Vijayawada, for the assessment year 1975-76 was a composite appeal both against the assessment as such and also against the order of registration under section 185 of the Income-tax Act, 1961, and both the question of validity of assessment made on the assessee-firm and the question of refusal of registration could be decided buy it in this appeal ?"
( 2 ) THE matter relates to the income-tax assessment year 1975-76. The assessee is a partnership firm carrying on business in the purchase and sale of pharmaceuticals. It was constituted by a deed of partnership dated 7/04/1970. Up to and including the income-tax assessment year 1974-75, the partnership firm was registered. For the income-tax assessment year 1975-76, the firm filed a return accompanied by a declaration under section 184 (7) of the Act in the prescribed Form No. 12. It would appear would appear that the declaration in Form No. 12 was signed by only two partners. The remaining two partners did not sign the Form, as there were differences between the partners. The Income-tax Officer passed an order under section 185 of the Act treating the status of the assessee-firm as an unregistered firm on the ground that the declaration under section 184 (7) did not contain the signatures of all the partners of the firm. The Income-tax Officer found that the firm was dissolved with effect from 31/12/1974. Consequently, the income up to 31/12/1974, relevant to the assessment year 1975-76 was determined. The Income-tax Officer further held that the entire income was liable to be taxed in the hands of only one of the partners, Lakshminarayana, as an individual and not in the hands of the firm.
( 3 ) AGAINST the order of assessment and also the order refusing registration, appeals were filed before the Appellate Assistant Commissioner who confirmed the Income-tax Officers orders. The assessee carried the matter in further appeal to the Tribunal. It appears that before the Tribunal only one appeal was filed against the order of the Appellate Assistant Commissioner challenging the assessment of the income in the hands of Lakshminarayana and also questioning the refusal to register the firm for the assessment year 1975-76. Before the Tribunal, a preliminary objection was taken by the Department as well as counsel appearing for Lakshminarayana. That objection was to the effect that two appeals should have been filed - one against the order refusing registration of the firm and the other against the order under section 143 (3) of the Act determining the income for the purpose of assessment. Inasmuch as only one appeal was filed, it was contended that that appeal could be related to the refusal to register the firm under section 185 of the Act with the result that no appeal subsists so far as the determination of income under section 143 (3) was concerned. The Tribunal rejected this preliminary objection and held that one single appeal filed accords with law, relying on certain decisions of the Calcutta and Bombay High Courts. Aggrieved by the aforesaid order of the Tribunal, the Revenue asked for and obtained this reference for consideration of the question of law we have already extracted above.
( 4 ) IT seems to us that there is a misconception in the mind of the Revenue both as regards facts as well as law. This case really did not call for two orders. If an assessee filed a declaration under section 184 (7), which is not valid, the Income-tax Officer is not supposed to pass an order under section 185 refusing to register the firm. The scheme of reg
