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1996 Supreme(Gau) 31
GAUHATI HIGH COURT
D.N.Baruah, D.N.Chowdhury, JJ.
Tru Steel Products -Appellant
Versus
Commissioner of Income Tax NE Region, Shillong -Respondent
Income Tax Reference No. 61 of 1990
Decided On : 25-02-1996
A.K.Saraf , K.H.Choudhary, B.Rajkhowa
Rectification of a partnership deed beyond the accounting year is not valid and cannot cure a defect in the original deed.
Headnote:
INCOME TAX - REGISTRATION OF FIRM - RECTIFICATION OF DEED - TIME LIMIT - SECTION 184 AND 185 OF THE INCOME TAX ACT, 1961 - WHETHER RECTIFICATION OF DEED BEYOND ACCOUNTING YEAR IS VALID - HELD, NO.
Fact of the Case:
The assessee, a partnership firm, applied for registration under section 184 of the Income Tax Act, 1961. The Income Tax Officer (ITO) rejected the application on the ground that the partnership deed was defective as it showed one of the partners as having retired on 16.8.83, when in fact he had retired on 31.3.83. The assessee filed a rectification deed on 23.6.86, but the ITO held that this was beyond the accounting period and therefore could not cure the defect. The Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal (ITAT) upheld the ITO's decision.
Finding of the Court:
The High Court held that the ITAT was justified in holding that the assessee was not entitled to registration in the facts and circumstances of the case. The Court relied on a decision of this Court in M/s Singh Brothers and Company vs. CIT, NER, Assam, reported in 137ITR 63, in which it was held that subsequent rectification beyond the accounting year could not be allowed and the Tribunal was correct in law in upholding the order of refusal of registration for the assessment year.
Issues: Whether the ITAT was justified in holding that the assessee was not entitled to registration in the facts and circumstances of the case.
Ratio Decidendi: The Court held that the ITAT was justified in holding that the assessee was not entitled to registration because the rectification deed was executed beyond the accounting year and therefore could not cure the defect in the original partnership deed.
Final Decision: The Court answered the question in favour of the assessee and against the Revenue. The matter was remanded to the Tribunal to consider the case afresh in the light of observations made by the Court.
In this reference under section 256 (1) of the Income Tax ' Act, 1961 the following question has been referred for opinion of this Court: "Whether under the facts and circumstances of the case, the Tribunal is justified in not accepting the claim for granting registration to the firm."
2. An application for registration in Form No. 11 together with a copy of Partnership Deed was filed on 30.3.84 before the Income Tax Officer, F Ward, District II, Guwahati. The Income tax Officer on scrutiny of the deed noticed that the partnership firm was originally constituted with three members as per Deed of Partnership dated 24.3.77, The partners were, namely, (1) Muralidhar Rajkhowa, Smti Anuradha Borooah and Shri Ranjit Bora. The new partnership was formed with effect from 1.4.83 in the same name and style. As per the said Partnership Deed dated 1.4.83 Shri Muralidhar Rajkhowa and Smti Anuradha Barooah decided and agreed to admit Smti Nirupama Barooah and Shri Pradip ; Kumar Kalita as new partners in the said partnership wef 1.4.83. Accordingly an application for registration of the said new partnership firm was filed on 30.3.84. The Income Tax Officer found that Sri Ranjit Bora was a partner in the original Partnership Deed and he retired from the partnership only on 16.8.83. Therefore by a notice dated 5.6.86 the Income Tax Officer asked the assessee to explain how the two partners could decide and induct the said two new partners, viz Smti Nirupama Barooah and Sri Pradeep Kumar Kalita in the business wef 1.4.83 without consent of third partner Sri Ranjit Bora, who was still a partner. In reply the assessee stated that in the Partnership Deed dated 1.4.83 the date of retirement of Sri Ranjit Bora was wrongly written as 16.8.83 instead of 31.3.83 and this was rectified subsequently by a Deed of Rectification dated 23.6.86 and therefore, no consent was necessary. The Income Tax Officer held that the assessee could not remove the defect from Partnership Deed inasmuch as the Rectificatioin Deed was executed and file beyond the accounting period.
3. Being aggrieved by this order dated 19.9.86 the applicant preferred an appeal before the Commissioner of Income Tax (Appeals), Guwahati. The Commissioner of Income Tax also after considering the facts and circumstances was of the view that the Rectification Deed executed beyond an accounting period and therefore, it could not cure the defect in the original Partnership Deed and that defect remained as it was. The Commissioner of Income Tax accordingly held that the ITO rightly refused the registration of the firm.
4. Against that decision, the assessee preferred an appeal before the Income Tax Appellate Tribunal, Guwahati. The Tribunal also was of the opinion that Income Tax Officer rightly refused registration. While passing that order, the Tribunal relied on a decision of this High Court in Singh Brothers & Co., reported in 137 ITR 63.
5. We have heard learned counsel appearing for the parties. Mr. KH Choudhury, appearing for the applicant submits that the Tribunal rejected the Deed of Rectification only on the ground that the rectification was made after the expiry of the accounting year and thereby confirmed the conclusion arrived at by the Commissioner of Income Tax (Appeals). In this connection, Mr. Choudhury has drawn our attention to section 184 and 185 of the Income Tax Act and submits that as per provisions contained in sub-section (2) of section 185 of the Act if there is any defect in the application for registration this could be rectified within the time prescribed therein. In the instant case, when the defect was detected, immediately the assessee wrote to the Income Tax Officer stating about the typographical mistake and executed documents to show that there had been some mistakes mentioning the date as 16.8.83 instead of 31.3.83. If that is rectified within the time by the assessee, the assessee is entitled to registration.
6. Dr. AK Saraf, learned special counse
