IT: Once registration certificate is granted to a firm, same is to be continued till default
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[2013] 38 taxmann.com 373 (Jharkhand)
HIGH COURT OF JHARKHAND
Om Enterprises
v.
Commissioner of Income-tax, Dhanbad*
PRAKASH TATIA, CJ.
AND MRS. JAYA ROY, J.
AND MRS. JAYA ROY, J.
TAX APPEAL NO. 71 OF 2008†
AUGUST 16, 2012
Section 184, read with section 143, of the Income-tax Act, 1961 - Firm - Assessed as such [Continuation of registration] - Assessment year 1987-88 - Whether once registration certificate has been granted to a firm and it has not been subsequently effected by subsequent event or by default committed by firm, it continues for all subsequent years - Held, yes [Para 8] [In favour of assessee]
FACTS
| ■ | The appellant's firm was registered firm from the assessment year 1984-85. Due to reconstitution of the firm during financial year 1986-87, the appellant applied for re-registration of the firm by submitting Form No. 11-A. | |
| ■ | The Assessing Officer refused the registration of the firm. | |
| ■ | The Commissioner (Appeals) dismissed the appeal so far the registration part was concerned. | |
| ■ | On further appeal, the Tribunal remanded the matter for registration to the Assessing Officer. | |
| ■ | The petitioner since got the order of registration of his firm pertaining to year 1987-88, the petitioner's contention was that from the year 1987-88, the appellant firm's registration continued till its constitution was changed. Therefore, the order passed by the Assessing Officer for the assessment year 1988-89 should have been rectified. | |
| ■ | The Assessing Officer refused to rectify. The Commissioner (Appeals) and Tribunal also dismissed the appeals. | |
| ■ | On appeal: |
HELD
Theory of merger
| ■ | The theory of merger cannot be applied in a case where the appeal itself was not competent. The appeal become competent only when it is within the limitation and before that as per the settled law, the appellate authority has no jurisdiction to examine the merits of the appeal so as to judge the legality and validity of the impugned order under the appeal. Therefore, the principle of merger cannot apply when the appeal is dismissed on the ground of bar of limitation. Therefore, the order can be treated to be passed by the lower authority whose order was challenged under the appeal. |
Registration - continuation of
| ■ | The registration of certificate since was applied prior to the assessment year relevant i.e., the assessment year 1988-89 and it was assessed according to the fact that the firm was not registered for the assessment year 1988-89. However, this assessment order was sought to be rectified by moving proper application by the appellant-assessee on the ground that the application for registration of the firm has been allowed for the assessment year 1987-88. | |
| ■ | As per section 184(7) and once the registration is granted, it is a valid registration for subsequent assessment year subject to condition enumerated under section 184(7) wherein it has been provided that under certain circumstances that registration will come to an end for the reasons namely that there is change in the constitution or share of the partners and the firm has not furnished, within time allowed in such extended time, a declaration to the effect in Form No. 12. Therefore, once the registration certificate has been granted to a firm and it has not been subsequently effected by subsequent event or by default committed by the firm, then it continues for all subsequent years. Therefore, the firm shall be deemed to be registered for and from the assessment year 1987-88 and for all subsequent years and it is not a case of the revenue that subsequently for the assessment year 1988-89, the assessee incurred any disqualification so as to render it as an unregistered firm. |
B. Poddar, Mahendra Choudhary, Anil Choudhary, Darshan Poddar, Piyush Poddar and Amrita Sinha for the Appellant. Deepak Roshan,Amit Kumar and Rupa Kumari for the Respondent.
ORDER
1. Heard learned counsel for the parties.
2. In this tax appeal, the following substantial question of law is involved:
| "(i) | Whether the doctrine of Merger applies in the facts and circumstances of the case, particularly in view of the fact that the status as of 'Registered Firm" was denied to the appellant for the previous year, followed in the current assessment year, but allowed in the previous assessment year after remand. | |
| (ii) | Whether in the facts and circumstances of the case, the status as of "Registered Firm" as being allowed for the preceding assessment year and for subsequent years, the same have to be allowed for the year under appeal (Assessment year 1988-89)". |
3. The facts which are in dispute are that the appellant's firm was registered firm from the assessment year 1984-85. However, due to reconstitution of the firm during financial year 1987-88 corresponding to assessment year 1987-88 the appellant applied for re-registration of the firm by submitting Form No. 11-A under the Income Tax Act, 1961. The A.O. refused the registration of the firm and against that order, the assessee preferred appeal before the C.I.T. (A), who dismissed the appeal so far the registration part is concerned. On further appeal, the I.T.A.T. vide order dated 04.08.1995, remanded the matter for registration to A.O. for the assessment year 1987-88. Therefore, the petitioner's firm stand registered from and for the assessment year 1987-88 and has been assessed as such. During this period, the appellant-petitioner was already assessed for the subsequent assessment year 1988-89 treating the petitioner's firm to be a not registered firm. The petitioner since pursuing its appeal before the I.T.A.T. as well as after remand, before the A.O. for getting registration of the firm from the year 1987-88, therefore did not choose to prefer appeal against the assessment order for the year 1988-89, and after dismissal of his appeal before the C.I.T. (A) (for assessment year 1988-89). It would be worthwhile to mention here that the C.I.T. (A) dismissed appeal of the appellant-assessee for the assessment year 1988-89, on the ground of delay holding it to be barred by time as the appeal was preferred by the assessee after delay of 1253 days. Therefore, the C.I.T. (A) did not decide the appeal on merits. However, petitioner submitted an application under Sections 154, 185A and Section 251 of the Income Tax Act, 196l, which stand rejected throughout up to tribunal.
4. The petitioner since got the order of registration of his firm vide order dated 26.02.1996 pertaining to year 1987-88 as was passed by the A.O. after remand by the I.T.A.T. for the purpose of registration of the firm, therefore, the petitioner's contention before the A.O. was that since as registration has already been ordered for the year 1984-88, therefore, as from that year, the appellant's firm's registration continues from the year 1987-88, till its constitution is changed. Therefore, since the fact of non-registration of the firm became non-existent with effect from the date submitting the form 11-A of the Income Tax Act, 1961 for assessment year 1987-88 the order passed by the Assessing Officer for the assessment year 1988-89 should have been rectified. The A.O. refused to rectify, the C.I.T. (A) and tribunal also dismissed the appeals. Therefore, this appeal has been preferred by the assessee.
5. It appears from the order passed by the lower authority that there were two issues involved:
6. First, whether in a case where the impugned order before the appellate authority was dismissed on the ground of being barred by time whether the order of original authority is stand merged in the order passed by the appellate authority and second, what is the effect of the order of the registration of the firm on application submitted for previous year and that registration was granted subsequent to the assessment of a subsequent year?
7. So far as the first question is concerned, the theory of merger cannot be applied in a case where the appeal itself was not competent. The appeal become competent only when it is within the limitation and before that as per the settled law, the appellate authority has no jurisdiction to examine the merits of the appeal so as to judge the legality and validity of the impugned order under the appeal. Therefore, the principle of merger cannot apply when the appeal is dismissed on the ground of bar of limitation. Therefore, the order can be treated to be passed by the lower authority whose order was challenged under the appeal. In this case, the appellant's appeal was dismissed on the ground of bar of limitation, and therefore, that was not a decision on merit. Consequentially, the effective order was passed by the lower authority.
8. The registration of certificate since was applied prior to the assessment year relevant i.e. the assessment year 1988-89 and it was assessed according to the fact that the firm was not registered for the assessment year 1988-89. However, this assessment order was sought to be rectified by moving proper application by the appellant-assessee on the ground that the application for registration of the firm has been allowed for the assessment year 1987-88. As per Section 184(7) of the Income Tax Act, 1961, once the registration is granted, it is a valid registration for subsequent assessment year subject to condition enumerated under Section 184(7) of the Income Tax Act, 1961 wherein it has been provided that under certain circumstances that registration will come to an end for the reasons namely that there is change in the constitution or share of the partners and the firm has not furnished, within time allowed in such extended time, a declaration to the effect in Form No. 12. Therefore, once the registration certificate has been granted and it has not been subsequently effected by subsequently event or by default committed by the firm, then it continues for all subsequent years. Therefore, the firm shall be deemed to be registered for and from the assessment year 1987-88 and for all subsequent years and it is not a case of the Revenue that subsequently for the assessment year 1988-89, the assessee incurred any disqualification so as to render it as an unregistered firm.
9. Therefore, it is held that in the facts and circumstances of the case, the principle of merger of lower authority's order in appellate authority's order cannot be applied. It is also held that the appellant-firm is required to be treated to be registered from the assessment year 1987-88 and also for the assessment year 1989-90 and appeal is allowed.
SB*In favour of assessee.
†Arising out of ITAT order dated 4-8-1995.
Regards
Prarthana Jalan
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