Madras H.C : The tax revision case arises under the Tamil Nadu Agrl. IT Act, 1955 (referred to as “the Act” in this judgment).

Counsel Appeared

V.M. Leni, for the Petitioner : A. Khakthavatsalam, for the Respondent

BALASUBRAHMANYAN, J.:

The tax revision case arises under the Tamil Nadu Agrl. IT Act, 1955 (referred to as “the Act” in this judgment). There was originally a partnership firm styled K.M.S. Mallayan Chettiar & Brs. at Theni. The firm consisted of seven partners. Mallayan Chettiar died on 4th July, 1972. Thereupon, the firm was reconstituted under the name and style K.M.S. Subbiah Chettiar & Bros.. The reconstituted firm had 17 partners. On 17th Sept., 1974, pursuant to its reconstitution the reconstituted firm applied for registration to the Agrl. ITO, Theni, for the registation of the firm under s. 27 of the Act. The application was filed in September, 1974. In and by his proceedings GIR 49(m) upm/74-75 dt. 20th Dec., 1974 the Agrl. ITO, Theni passed an order directing the registration of the firm with effect from the asst. yr. 1974-75. For the years 1975-76 and 1976-77, renewal of registration was also granted to the firm. On the very same date the said Agrl. ITO completed the assessment for the year 1974-75, i.e., for the accounting period 1st April, 1973, to 31st March, 1974. On 30th April, 1976, the Agrl. ITO, Madurai, issued a notice to the firm under s. 35 of the Act calling upon the firm to show cause why the assessment for the years 1974-75 and 1975-76 should not be revised. The notice stated that the application for registration of the reconstituted firm filed by the firm on 17th Sept., 1974, was time-barred and that therefore the assessment for the year 1974-75 should not have been made on the basis that the assessee was as firm but should have been made only on the basis that the assessee was an AOP. The firm sent a reply on 10th June, 1976. In the said reply the firm stated that the delay in filing the application for registration was due to the fact that the clerk who was in charge of the matter fell ill and that the managing partner Subbiah Chettiar was preoccupied with certain family matters. This matter was brought to the notice of the Agrl. ITO, Theni on the earlier occasion. The firm, therefore, prayed that the delay in filing the application for registration of the firm for the year ending 31st March, 1975, might be condoned. On 3th July, 1976, the Agrl. ITO, Madurai, passed an order condoning the delay on the part of the firm in filing the application for registration for the asst. yr. 1974-75 and regularised the matter. On 30th Nov., 1977, the Commr. of Agrl. IT issued a notice to the firm under s. 34 of the Act stating that the registration granted to the firm for the asst. yr. 1974-75 was liable to be cancelled in view of the fact that the Agrl. ITO, Theni, had not condoned the delay before ordering registration of the firm and, therefore, the assessment orders for the years 1974-75 to 1976-77 would also have to be cancelled. The firm offered an explanation. The Commr. of Agrl. IT by his proceedings SMRP No. 38 to 85/77-A1 dt. 17th Dec., 1977, passed the impugned order setting aside the order granting registration of the firm and also the assessment orders for the years 1974-75 to 1976-77. The tax revision case has been filed by the firm against the said order of the Commr. of Agrl. IT.

The Commr. of Agrl. IT in the his order impugned herein has stated that the order of the Agrl. ITO, Theni, could not be sustained and that he had not applied his mind to the question whether application filed by the firm for registration was within time and whether there was sufficient cause for excusing the delay. The Commr. came to the conclusion that the order passed by the Agrl. ITO, Madurai on 3rd July, 1976, was equally illegal on the ground that he being a co-ordinate authority had no jurisdiction to rectify the action of his predecessor in office and that the illegality that had attached itself to the order passed by the Agrl. ITO, Theni could not be cured by the Agrl. ITO, Madurai by any subsequent order of his. The Commr. also rejected the contention on behalf of the firm that the show-cause notice had not been served on the firm. Sec. 27 of the Act deals with the procedure in registration of firms. It reads thus : “(1) Application may be made to the Agrl. ITO on behalf of any firm, constituted under an instrument of partnership specifying the individual shares of the partners, for registration for the purposes of this Act and of any other enactment for the time being in force relating to Agrl. ITO. (2) The application shall be made by such person or persons and at such times, shall contain such particulars and shall be in such form, and be verified in such manner, as may be prescribed and it shall be dealt with by the Agrl. ITO is such manner as may be prescribed. Rule 16 of the Tamil Nadu Agrl. IT Rules (referred to as Rules in this judgment) reads thus : “16. Any firm constituted under an instrument of partnership specifying the individual shares of the partners may, on application made in this behalf under the provisions of s. 27, register with the Agrl. ITO, the particulars contained in the said instrument. Such application shall be signed by all partners (not being minors) personally, or in the case of a dissolved firm by all persons (not being minors) who were partners in the firm immediately before dissolution and by the legal representatives of any such partner who is deceased, and shall, for any year of assessment upto and including the assessment for the year ending on the 31st March, 1958, be made before the 15th March, 1958, and for any year of assessment subsequent thereto, be made. (a) Where the firm is not registered under the Indian Partnership Act, 1932 (Central Act IX of 1932), or whether the deed of partnership is not registered under the Indian Registration Act, 1908 (Central Act XVI of 1908), and the application for registration is being made for the first time under the Act : (i) within a period of six months of the constitution of the firm or before the end of the ‘previous year’ of the firm whichever is earlier, if the firm was constituted in that previous year; and (ii) before the end of the previous year in any other case; (b) where the firm is registered under the Indian Partnership Act, 1932 (Central Act IX of 1932) or where deed of partnership is registered under the Indian Registration Act, 1908 (Central Act XVI of 1908) before the end of the previous year of the firm; and (c) where the application is for renewal of registration under r. 20 for any year, before the 30th day of June of that year:

Provided that the Agrl. ITO may entertain an application made after the expiry of the time-limit specified in this rule, if he is satisfied that the firm was prevented by sufficient cause from making the application within the specified time.” Undoubtedly, in this case, the application for registration for the year 1974-75 was filed by the firm belatedly on 3rd Sept., 1974. The proviso to r. 16 of the Rules confers power on the Agrl. ITO to entertain the application made after the prescribed time-limit if he is satisfied that the firm was prevented by sufficient cause from making the application within the specified time. The learned Addl. Government Pleader vehemently argued that the Agrl. ITO, Theni overlooked the fact that the application for registration was filed by the firm belatedly and consequently did not apply his mind at all to the question whether there was sufficient cause for the belated application. The order directing registration for the firm passed by the said officer on 20th Dec., 1974, was illegal and consequently the Agrl. ITO, Madurai had no jurisdiction to rectify the order passed by the Agrl. ITO, Theni on 20th Dec., 1974. Viewed in this sense, argued the learned Addl. Govt. Pleader the impugned order of the Commr. of Agrl. IT would be unassailable. We are unable to accept the contentions of the learned Addl. Govt. pleader. We accept the finding of the Commr. of Agrl. IT as well the argument of the learned Addl. Govt. pleader that in passing his order dt. 20th Dec., 1974 the Agrl. ITO did not take into account the fact that the application for registration had been made by the firm belatedly. Naturally, therefore, he did not go into the question whether, the firm was prevented by sufficient cause from making the application within the specified time. It is clear from r. 16 of the Rules that a firm has to apply for registration within the period specified therein. The application for registration filed beyond the prescribed period of time cannot be entertained unless the Agrl. ITO is satisfied that the firm was prevented by sufficient cause from making the application within the specified time. As rightly pointed out by the learned Addl. Government Pleader, the order dt. 20th Dec., 1974 does not on the face of it show that the Agrl. ITO, Theni, applied his mind to the question of delay in the filing of the application for registration on the part of the firm and on the question whether the firm was prevented by sufficient cause from making the application within the prescribed time-limit. That being the case, the order passed by the Agrl. ITO, Theni, on 20th Dec., 1974, must be deemed to be a nullity and has no legal effect. The Agrl. ITO, Madurai was, therefore, perfectly justified in coming to the conclusion that the registration ordered by the Agrl. ITO, Theni, on 20th Dec., 1974, in view of the belated application filed by the firm was irregular and in issuing a show-cause notice to the firm to show cause why the assessment for the year 1974-75 should not be revised under s. 17(3) of the Act treating all the partners of the firm as AOP. In his reply addressed to the Agrl. ITO, Madurai, Subbiah Chettiar, managing partner of the firm, besides stating the fact that on the earlier occasion the Agrl. ITO, Theni had condoned the delay in filing the application for registration, had also explained the cause which prevented the firm from filing the application for the registration in time and had also requested that the delay in seeking the registration of the firm for the year ending 31st March, 1975, might be condoned. The Agrl. ITO, Madurai, stated that the files did not show that the Agrl. ITO, Theni, had condoned the delay as contended for by the firm. However, the said officer, on a consideration of the explanation offered by the firm and also the relevant circumstances, passed an order, condoning the delay on the part of the firm in making the application for registration for the asst. yr. 1974-75, thereby regularising the registration. It is clear from the order dt. 3rd July, 1976, passed by the Agrl. ITO, Madurai that he had applied his mind to the question whether the firm was prevented by sufficient cause from filing the application for registration for the asst. yr. 1974-75. He was satisfied that there was sufficient cause for the delay and accordingly condoned the delay. It is not a case of the Agrl. ITO, Madurai, merely ratifying the action of the Agrl. ITO, Theni, as has been understood by the Commr. of Agrl. IT. It was not attempted to be argued by the learned Addl. Govt. Pleader and it could not have been so argued that the Agrl. ITO, Madurai, could not have condoned the delay on the part of the firm in applying for registration for the year 1974-75. If that be the true legal position, we have no hesitation in holding that the Agrl. ITO, Madurai, was perfectly justified in exercising his discretion and condoning the delay in preferring the application for registration on the part of the firm, when once he was satisfied that the firm was prevented by sufficient cause from making the application within the time. Once we come to the conclusion that the delay in seeking the registration of the firm was properly condoned by the Agrl. ITO, Madurai by the order dt. 30th July, 1976, it necessarily follows that the registration granted for 1974-75 and the renewals for 1975-76 and 1976-77 are valid. We are, therefore, of the view that the impugned order of the Commr. of Agrl. IT is liable to be set aside and is, accordingly, set aside. The tax revision case is allowed, but under the circumstances of the case without costs.

[Citation : 142 ITR 16]