Rajasthan H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that no appeal lay against the order under s. 184(7) of the IT Act, 1961?

Counsel Appeared

N.M. Ranka, for the Assessee : R.N. Surolia, for the Revenue

BY THE COURT:

As three reference applications relating to the asst. yrs. 1967- 68, 1968-69 and 1969-70 have been referred for disposal by this Court in which identical questions of law arise, the office is directed to register the reference application for the asst. yr. 1967-68 as 14 of 1976, for the asst. yr. 1968-69 as 14(a) of 1976 and for the asst. yr. 1969-70 as 14(b) of 1976. All the three reference applications are disposed of by one single order.

The Tribunal, Jaipur Bench, Jaipur, has referred the following question of law for opinion of this Court :”Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that no appeal lay against the order under s. 184(7) of the IT Act, 1961?”

The brief facts of the case are that M/s Gudmal Matoliram (hereinafter referred to as the assessee) had claimed for itself the status of a firm, evidenced by a partnership deed dt. 1st April, 1965, drawn up on 5th April, 1965. The first accounting year ended on 31st March, 1966, corresponding to the asst. yr. 1966-67. The assessee filed an application for registration of the firm on 5th April, 1965. The ITO passed no order on this application for registration filed by the assessee as early as on 5th April, 1965. The assessee thereafter filed a return for the asst. yr. 1966-67 on 1st April, 1972. The ITO took no action on the aforesaid return because it had been filed beyond the period of 4 years from the end of the asst. yr. 1966-67.

The assessee also filed returns for the asst. yrs. 1967-68, 1968- 69 and 1969-70 on 1st April, 1972. As these returns were within time, the ITO considered the said returns and passed assessment orders in respect thereto. The aforesaid returns were accompanied by an application for continuation of registration in accordance with sub-s. (7) of s. 184 of the Act. The ITO did not accept the said applications for continuation of registration on the preliminary ground that registration of the firm had not been granted and that in respect of the aforesaid three assessment years in question, the assessee had not moved any fresh application for registration. The ITO passed the assessment orders treating the assessee as an unregistered firm.

4. The assessee, aggrieved against the orders of the ITO, filed appeals before the AAC. The AAC took the view that the applications filed by the assessee under s. 184(7) were within time and as such the same should have been disposed of by the ITO on merits. The AAC also realised that the same could not be disposed of on merits unless the ITO had also considered the assessee’s application for registration filed on 5th April, 1965, for the asst. yr. 1966-67. The AAC as such gave the following direction : “The ITO is directed to dispose of these applications after considering the claim for registration for the asst. yr. 1966-67 and the status of the assessee and the firm’s liability to tax should be determined in the light of the order which the ITO should pass for the asst. yr. 1966-67.”

5. The Department, aggrieved against the order of the AAC, filed an appeal before the Tribunal. The argument was raised before the Tribunal that no appeal lay against the order under s. 184(7) of the Act to the AAC and, therefore, the AAC committed an error in entertaining the appeal of the assessee. The Tribunal held that no appeal lay against the order of the ITO to the AAC and the AAC’s order was wholly without jurisdiction. The assessee then moved an application for making a reference to this Court and the learned Tribunal has referred the aforesaid question for our opinion. Mr. Ranka, learned counsel for the assessee, submitted that the assessee had already submitted an application for registration on 5th April, 1965, for the asst. yr. 1966-67, but the ITO did not pass any order on the said application. It is submitted that in this circumstance, the assessee was right in submitting the applications under s. 184(7) of the Act for the subsequent asst. yrs. 196768, 1968-69 and 1969-70. It is submitted that the ITO committed a clear mistake in not deciding the application for registration and treating the status of the assessee as that of unregistered firm. It is submitted that the AAC, in these circumstances, was justified in entertaining the appeals and giving directions for considering the claim of the assessee for registration for the asst. yr. 1966-67 and thereafter to determine the firm’s liability to tax in the light of the order which the ITO should pass for the asst. yr. 1966-67. Mr. Ranka also placed reliance on a decision of a Division Bench of this Court in Bishambar Dayal Sriniwas vs. CIT (1986) 55 CTR (Raj) 164: (1986) 162 ITR 5 (Raj) : TC6R.526 (D.B. Ref. Appl. No. 38 of 1976—decided on 3rd Oct., 1985). It was contended by Mr. Ranka that in the above case it was clearly held that where the case is of a composite nature and no separate order has been passed, the provisions of cl. (c) of s. 246 of the Act will be attracted. It has been further held in the above case that if there is a composite order and the appeal is preferred from the aforesaid order to the appellate authority on the ground of assessment and on the ground of status, then the appeal is maintainable under cl. (c) of s. 246 to the AAC.

6. Mr. Surolia, learned counsel for the Revenue, on the other hand, submitted that the above case isdistinguishable on the ground that in that case an application for registration had been allowed in the earlier assessment years and, subsequently, the assessee had submitted an application under s. 184(7) of the Act. In this circumstance, when a composite order was passed by the assessing authority, then an appeal would lie under cl. (c) of s. 246 of the Act. Mr. Surolia submitted that in the present case, the application filed by the assessee on 5th April, 1965, for registration of the firm for the asst. yr. 1966-67 had not been decided at all and in view of these circumstances, no question of filing any application under s. 184(7) of the Act arises in the present case.

7. We have given our careful consideration to the argument advanced by learned counsel for both the parties. In the present case, an anomalous situation has arisen on account of the non-action of the ITO on the application filed by the assessee on 5th April, 1965. So far as the assessee is concerned, he was not at fault inasmuch as he had submitted an application as early as on 5th April, 1965, for granting registration to the firm. The ITO passed no order on such application for registration and the same remained pending till returns were filed by the assessee for the asst. yr. 1966-67 as well as the asst. yrs. 1967-68, 1968-69 and 1969-70. The ITO took no action on the return filed by the assessee with regard to the asst. yr. 1966-67. As regards the application submitted by the assessee for the asst. yrs. 1967-68, 1968-69 and 1969-70, he took the view that as no application for registration had been filed for these years and no order for registration had been granted in favour of the assessee for the asst. yr. 1966-67, as such, the status of the firm would be taken as unregistered firm. In our view, the entire mistake in this case lies on the part of the ITO and the assessee cannot be considered at fault when his application for registration filed on 5th April, 1965, well within the time, has not been disposed of by the ITO. Be that as it may, when the application for registration filed on 5th April, 1965, had not been disposed of, the assessee was not at fault in filing the application under s. 184(7) of the Act. The AAC in this circumstance had taken a correct view in giving a direction to the ITO to dispose of the application after considering the claim for registration for the asst. yr. 1966-67. As a matter of fact, in such a matter where a mistake had been committed by the ITO himself, there was no occasion for the Department to have gone in appeal before the Tribunal against the order of the AAC. The AAC had passed a just and proper order in the circumstances of the case and the Department has unnecessarily dragged the assessee into litigationwhich serves no purpose.

As the order passed by the ITO in the present case is a composite order and according to the view already taken by the Division Bench of the Court in Bishambhar Dayal’s case (supra), with which we are perfectly in agreement, an appeal was entertainable by the AAC. We do not want to express any opinion on the question whether where an order is passed by the ITO simpliciter under s. 184(7) of the Act, an appeal can lie or not to the AAC under s. 246(c) of the Act. However, in the facts and circumstances of the present case, we are clearly of the view that the order passed by the ITO was a composite order and an appeal against such order was clearly maintainable to the AAC.

10. In the result, the answer to the above question is that, on the facts and circumstances of this case, the Tribunal was not right in holding that no appeal lay against the order of the ITO to the AAC. The reference is answered accordingly. There will be no order as to costs.

[Citation : 170 ITR 66]