Punjab & Haryana H.C : There was no error in the order of the ITO in granting registration and that, therefore, the CIT had no jurisdiction under s. 263 in respect thereof ?

High Court Of Punjab & Haryana

CIT vs. A.K. Timber Traders

Sections 186, 144, 263

G.C. Mital & S.S. Sodhi, JJ.

IT Ref. No. 41 of 1980

22nd November, 1988

Counsel Appeared

Sood, for the Revenue : Rajiv Bhalla, for the Assessee

S. SODHI, J. :

By his best judgment assessment order under s.144 of the IT Act, 1961 (hereinafter referred to as “the Act”), the ITO granted registration to the assessee-firm, A. K. Timber Traders, Pathankot.

2. According to the CIT, the ITO should, in fact, have cancelled the registration of the assesseefirm and failure on his part to do so constituted an error within the meaning of s. 263 of the Act. The matter then went up before the Tribunal where the question arose as to whether failure on the part of the ITO in cancelling the registration of the assessee-firm, constituted an error within s. 263 of the Act, inasmuch as the error was such that caused prejudice to the interests of the Revenue. The Tribunal came to the conclusion that according to the judgment of the Supreme Court in Y. Narayana Chetty vs. ITO (1959) 35 ITR 388 (SC), penalty should not necessarily be imposed upon the assessee wherever it is provided under the law and it was thus not imperative on the part of the ITO to levy penalty on the assessee and consequently no error was committed by him in not cancelling the registration lawfully granted earlier to the assessee. It was, therefore, held that there being no error in the order of the ITO, the CIT was not right in exercising jurisdiction under s. 263 of the Act.

3. It was in this context that the following question of law came to be referred to this Court for its opinion

:”Whether, on the facts and in the circumstances, the Tribunal is right in law in holding that there was no error in the order of the ITO in granting registration and that, therefore, the CIT had no jurisdiction under s. 263 in respect thereof ?”

4. The question posed stands answered by the judgment of the High Court of Patna in CIT vs. Standard Mercantile Co. (1985) 49 CTR (Pat) 139:(1986) 157 ITR 139(Pat), where it was held that s. 186(2) of the Act lays down that where there has been any failure on the part of a registered firm in regard to matters stated in s. 144 of the Act, the ITO may cancel the registration of the firm and further that in terms of all the three clauses of s. 144, it is possible to take the view that there has been no wilful default by the assessee. If the assessee-firm can satisfy the Revenue that there has been no wilful default, the benefit of continuation of registration may not be denied. But once a conclusion is reached that the default was wilful, the benefit conferred by s. 185 must be denied.Applying the ratio of Standard Mercantile Co.’s case (supra), the question referred must be answered in the affirmative, in favour of the assessee and against the Revenue. There will be no order as to costs.

[Citation : 177 ITR 486]

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