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1993 Supreme(All) 592
High Court Of Allahabad
R.K. Gulati, G.P. Mathur, JJ.
Madan Mohan Paul And Anr.
Vs.
Commissioner Of Income-Tax And Ors.
Civil Miscellaneous Writ Petition 1819 of 1993
Decided on: 6th December, 1993
Advocate Appeared:
B.B. Paul, R.K. Agarwal, B.K. Agarwal, B.J. Agrawal, R.R. Agarwal, Ashok Kumar, S. Srivastava
The Assessing Officer is required to inquire into the genuineness and legality of the firm while considering the application for registration under Section 185 of the Income-tax Act.
Headnote:
INCOME TAX - REGISTRATION OF FIRM - GENUINENESS AND CONSTITUTION OF FIRM - ENQUIRY BY ASSESSING OFFICER - SCOPE - DEEMED REGISTRATION - CIRCUMSTANCES - SECTION 185(6) OF THE INCOME-TAX ACT, 1961.
Fact of the Case:
The petitioner, Madan Mohan Paul, was a partner in a firm, Messrs. Allied Metal Products, along with respondents Nos. 4, 5 and 7. The firm was registered under the Indian Partnership Act and the Income-tax Act, 1961. On July 1, 1990, a fresh deed of partnership was executed, excluding the petitioner and including respondent No. 6. The reconstituted firm applied for fresh registration under Section 184/185 of the Income-tax Act. The petitioner challenged the validity of the reconstituted firm and sought a writ of mandamus to restrain the Income-tax authorities from accepting the income-tax returns of the reconstituted firm and to decide his representations/applications before deciding the application of respondents Nos. 4 to 7 seeking registration of the firm under Section 184/185 of the Income-tax Act.
Finding of the Court:
The court held that the petitioner was not entitled to any relief. It held that the reconstituted firm could not be restrained from filing a return of income. It also held that the petitioner's representations/applications were not maintainable and that the Assessing Officer was not bound to decide them. The court further held that the Assessing Officer was required to inquire into the genuineness and legality of the firm while considering the application for registration under Section 185 of the Income-tax Act.
Issues: 1. Whether the reconstituted firm could be restrained from filing a return of income? 2. Whether the petitioner's representations/applications were maintainable? 3. Whether the Assessing Officer was bound to decide the petitioner's representations/applications? 4. Whether the Assessing Officer was required to inquire into the genuineness and legality of the firm while considering the application for registration under Section 185 of the Income-tax Act?
Ratio Decidendi: 1. A firm is an assessee under Section 2(7) of the Income-tax Act, whether it is registered or not under Section 185 for purposes of this Act. 2. The provisions of Section 139 of the Act cast a statutory obligation on every person to file his return within a specified period if his total income or the total income of any other person in respect of which he is assessable under the Act during the previous year exceeds the maximum limit which is not chargeable to income tax. 3. The representations/applications of the petitioner were not maintainable as they were not statutorily maintainable and were motivated by ulterior purposes. 4. The Assessing Officer is required to inquire into the genuineness and legality of the firm while considering the application for registration under Section 185 of the Income-tax Act.
Final Decision: The writ petition was rejected in limine. The court refused to grant a certificate for leave to appeal to the Supreme Court.
R.K. Gulati, J.
1. Although there are two petitioners in the writ petition, in fact the first petitioner, Madan Mohan Paul (hereinafter referred to as "the petitioner"), is the person aggrieved. Messrs. Allied Metal Products arrayed as the second petitioner, is a partnership concern which came into being as a result of a partnership agreement dated October 1, 1980, in which the first petitioner was admittedly one of the partners along with respondents Nos. 4, 5 and 7 who were the other partners. The firm has its head office at Station Road, Gonda, and the production unit at Kanpur. It is averred that the firm was registered with the Registrar of Firms under the Indian Partnership Act. It was also registered under Section 184/185 of the Income-tax Act, 1961 (for short, "the Act"), and the registration was allowed for the subsequent years also as contemplated under Section 184(7) of the Act. It appears that a fresh deed of partnership dated July 1, 1990 (annexure "4" to the writ petition), was executed. The preamble to that deed, inter alia, recites that the petitioner, Madan Mohan Paul, by his written notice dated May 25, 1990, to the remaining partners expressed his desire to retire from the partnership after the expiry of the notice period of one month as required under Clause 14 of the partnership deed dated October 1, 1980, and on the expiry of the notice period he submitted his retirement consent on June 25, 1990, confirming his retirement with effect from the close of June 30, 1990, and from that date, he actually retired. It is further recited that the remaining partners of the said firm have accepted the retirement of the petitioner with effect from the close of June 30, 1990, and they have reconstituted the firm from July 1, 1990, along with respondent No. 6 who was not a partner in the earlier partnership deed dated October 1, 1980.
2. We may notice that respondent No. 4 is the brother-in-law of the petitioner being married to his sister and respondents Nos. 4, 5 and 6 are brothers. The case of the petitioner is that he continues to be a partner of the firm and the initial deed of partnership dated October 1, 1980, still subsists, inasmuch as the firm, Messrs. Allied Metal Products, under that deed was never dissolved at any point of time. According to the petitioner, respondents Nos. 4, 5 and 7 in collusion with each other stealthily manipulated a fresh partnership deed dated July 1, 1990, excluding him from the partnership and including respondent No. 6 in disregard of the mandatory provisions of the Indian Partnership Act. The reconstituted firm, it is averred, has applied for fresh registration in terms of Sub-section (8) of Section 184 of the Act and the matter is sub judice before the Income-tax Officer, Gonda, the third respondent. The reconstituted firm had also applied and was granted fresh registration on January 25, 1991, by the Registrar of Firms under the Indian Partnership Act. The question whether such registration under the Partnership Act could be granted, is the subject-matter of another Writ Petition No. 21890 of 1993 filed before this court with which we are not concerned in this case. The petitioner also alleges that he has made certain representations/applications to the Income-tax Officer, Gonda (third respondent), which are pending adjudication and no orders on his representations/applications have so far been passed. Copies of those representations/applications have been filed as annexures "9" to "14" to the writ petition. It is at this stage that the petitioner has approached this court for a writ of mandamus commanding respondents Nos. 1, 2, 3 and 3A not to accept the income-tax returns of the reconstituted firm particularly in respect of the assessment year 1991-92 without affording an opportunity of hearing to the petitioner. It is further prayed that a direction be issued to the aforesaid respondents to decide the representations/applications of the petitioner before deciding the ap
