Delhi High Court
Puran Mal Girraj Kishore vs Commissioner Of Income-Tax on 10 February, 1992
Equivalent citations: 1992 197 ITR 170 Delhi
Author: B Kirpal
Bench: B Kirpal, S Duggal
JUDGMENT
B.N. Kirpal, J.
1. This order will dispose of Income-tax References Nos. 211 to 215 of 1978.
2. The Income-tax Appellate Tribunal has referred under section 256(1) of the Income-tax Act, 1961, the following two questions to this court for our decision :
"1. Whether an order for cancellation of registration passed under section 186(1) of the Income-tax Act, 1961, is a valid order in the absence of an order passed under section 185(1) or 184(7) of the Act ?
2. Whether the Income-tax Appellate Tribunal was justified in refusing to grant continuation of registration by going into the question of genuineness of the firm in view of the fact that the registration for the assessment years 1962-63 and 1966-67 had already been granted and conditions as laid down in section 184(7) of the Income-tax Act, 1961, had also been complied with ?"
3. Briefly stated, the facts are, as is evident from the statement of the case, that the assessed was stated to be a partnership firm consisting of three partners, namely, Puran Mal, Laxmi Narain and Bimla Devi and, in addition thereto, two minors were also admitted to the benefits of the partnership. The present reference is in respect of the assessment years 1965-66, 1969-70, 1970-71, 1971-72 and 1974-75.
4. The assessed applied for registration of the partnership for the first time for the assessment year 1962-63. Registration was refused by the Income-tax Officer but, on an appeal being filed, the registration was allowed. In respect of the assessment year 1965-66, the first of the assessment years with which we are concerned in this reference, registration was cancelled by an order passed under section 186(1) and the same was confirmed by the Appellate Assistant Commissioner and subsequently by the Tribunal.
5. In respect of the assessment year 1966-67, registration was refused, but, in appeal, the Appellate Assistant Commissioner allowed continuation of the registration and the Department did not file any further appeal. For the other assessment years in question, registration was refused and the appellate authorities including the Tribunal confirmed the refusal of the registration. The refusal was by passing orders under section 186(1) of the Act.
6. The order under section 186(1) was passed by the Income-tax Officer in respect of each of the assessment years on the basis that the said firm was not genuine. It had been contended on behalf of the assessed that the registration having been granted in respect of the assessment years 1962-63 and 1966-67, there was not reason as to why registration should not have been continued for the other years.
7. The authorities under the Act came to the conclusion that, not withstanding the grant of registration under section 184(1) of the Act, if the conditions stipulated by section 186(1) were satisfied, then an order could be passed by the Income-tax Officer and registration refused.
8. Feeling aggrieved, the assessed sought reference of a number of questions to this court. One of the questions sought to be referred for each of the years was whether there was any justification for refusal of the grant of registration. Another question sought was whether there was any material for holding that the assessed-firm was not a genuine firm. The Income-tax Appellate Tribunal did not refer any questions on the merits, dealing with the contentions relating to the genuineness of the firm. It came to the conclusion that the said questions were pure questions of fact. The Tribunal, however, referred the aforesaid two questions to this court.
9. We have heard learned counsel for the parties at length. It is evident from a bare perusal of the provisions of sections 184 to 186 that the provisions of sections 186(1) are independent of sections 184 and 185. Sections 184 and 185 deal with the questions of application for grant of registration and the procedure to be adopted on the receipt of applications. Under sub-section (7) of section 184, where registration is granted or is deemed to have been granted to any firm for any assessment year, then, subject the provisions of the proviso thereto, the said grant shall have effect for every subsequent assessment year. It was contended by learned counsel for the assessed that, by repeatedly approaching the Income-tax Department, there is a lot of harassment which is caused. There is no merit in this case and sub-section (7) of section 184 takes care of this aspect.
10. Section 186(1) clearly stipulates that, where a firm has been registered or is deemed to have been registered, but the assessing authority is of the opinion that, during the previous year, no genuine firm was in existence, he may, after giving an opportunity of being heard, cancel the registration of the firm for that assessment year. Section 186(1), therefore, pre-supposes that, for an earlier assessment year, registration had been granted and that, notwithstanding grant of that registration, a valid order under section 186(1) can still be passed. If there is a change in the composition of the firm, then section 184(7) itself does not apply because of the proviso thereto. But where there is no ostensible change in the constitution of the firm and the Assessing Officer still comes to the conclusion on the basis of the evidence on record, that the firm is not genuine, then the jurisdiction under section 186(1) is in no way curtailed. As the question of genuineness of the firm is not before us, we must proceed on the basis that the said firm was not found to be genuine for the years in question. This being so, an order under section 186(1) could validly be passed.
11. In our opinion, it makes no difference whether for two years, namely, 1962-63 and 1966-67, registration had been granted. It only means that, in law, in these two years, a genuine firm was in existence. Nevertheless, the provisions of section 186(1) were not outed. Notwithstanding the grant of registration for the assessment years 1962-63 and 1966-67, the Income-tax Officer came to the conclusion, which he did, that the firm was not a genuine one and, accordingly, an order under section 186(1) was passed. Similarly, the firm must be regarded as having been genuine for the assessment year 1966-67, but in the subsequent years when the Income-tax Officer found that there was no genuine firm, he could and did pass an order under section 186(1) of the Act. Whether, on the facts he could or could not have passed the order cannot be gone into before us. That question had not been referred. What is referred in question No. 2 is as to whether having come to the conclusion that, for the assessment years 1962-63 and 1966-67, registration had been granted, registration could be refused for other years ? The answer is self-evident. Each assessment year is an independent one. In respect of any assessment year, an order under section 186(1) can be passed if the Income-tax Officer comes to the conclusion that the firm was not genuine. In the present case, the Income-tax Officer has found, as a fact, which finding has been upheld by the Tribunal, that, for the assessment years in question, namely, 1965-66, 1969-70, 1970-71, 1971-72 and 1974-75, no genuine firm was in existence. This finding of fact cannot be challenged before us.
12. Having come to this finding of fact, it must follow that an order under section 186(1) of the Act can be passed. We, therefore, find no illegality in this.
13. For the foregoing reasons, the aforesaid questions of law are answered in the affirmative and against the assessed.
14. The respondents will be entitled to costs.
15. Questions answered in the affirmative.
