ORDER
T. MEEMAKUMARI, J.:
This writ petition is filed by one of the partners of the petitioner firm. It is alleged that the firm is carrying on business in mercerising and is liable to be assessed to income-tax under the IT Act, 1961. It is also stated that from the year 1971-72 onwards, the petitioner firm was assessed to income-tax as a registered firm by the assessing authority. The petitioner firm filed the return of income for the asst. yr. 1987-88. It is also averred that the petitioner firm also filed Form 12 prescribed as per the IT Rules, 1962, for continuation of the registration of the firm for the assessment year on 29th July, 1987. By assessment order under s. 143(1) of the Act, dt. 20th Nov., 1987, the second respondent accepting the return which included the claim of status of the assessee as a registered firm, without granting any opportunity to the petitioner, passed the assessment, assessing the petitioner as an unregistered firm on the ground that the declaration in Form 12 was made by the partners of the petitioner firm on 20th Feb., 1987, before the end of the previous year i.e., 31st March, 1987, was not valid for renewal of registration. It is further averred that the above decision was arrived at by the concerned officer on the basis of the decision of the Gujarat High Court in CIT vs . 7bnity Traders : [1974]97ITR81(Guj) It is also stated that the objections have been filed under s. 143(2) to the above assessment order made under s. 143(1)(a) of the Act. In the objection the petitioner has stated that rejection of Form 12 was not valid and no opportunity was granted to the petitioner to cure the defect in the declaration form as provided for under s. 185(3) of the Act. It is also contended that according to the above provisions, the second respondent was statutorily bound to grant opportunity to the petitioner where the declaration furnished by the petitioner firm in pursuance of sub-s. (7) of s. 184 was not in order. It is also contended that on 1Ith Jan., 1988, the second respondent, without affording a personal hearing to the petitioner, stated that the points raised by the petitioner in Form 6A were not maintainable, that the declaration in Form 12 was not defective, but it was only invalid and hence no opportunity of hearing need be given. It is also contended that the decision relied on by the second respondent in CIT vs. Thnity Traders (supra) was concerned with the facts and law relating to the asst. yr. 1967-68 which was prior to the amendment of s. 185(3) by the Taxation Laws (Amendment) Act, 1970 w.e.f. 1st April, 1971, that the case of the petitioner was a bona fide mistake and the decision of the Gujarat High Court Cited above, is not applicable, that the second respondent was statutorily obliged under s. 185(3) to intimate the defect and grant one month time to rectify the same before passing the assessment order for the asst. yr. 1987-88 under consideration instead of treating the Form No. 12 filed as invalid. It is also brought to the notice of this Court that the partnership was continued as a registered firm from the asst. yr. 1971-72 onwards.
2. Learned senior counsel for the Department Mr. S.V. Subramanian, has vehemently contended that there is no need to give opportunity to the petitioner herein as in the opinion of the Department, the declaration in Form 12 was not defective but it was only invalid. Hence, the assessment has been done as if it is an unregistered firm. It is further argued that nothing prevented the petitioner from filing the declaration after 31st March instead of filing it before the end of the financial year. It is also argued that the petitioner is entitled to invoke the provisions of s. 185(3) only if the officers feel there is typographical error or there is defect in the form. Learned senior counsel has further contended that the Department is right in not invoking the provisions of s. 185(3) as they felt that the declaration in Form 12 was invalid but not a defective one. He argued that the decision Cited by the Department clearly applies to the facts of the case and hence the action of the respondents is not questionable in the writ petition.
3. On the other hand, learned senior counsel for the petitioner has argued that the case Cited by the authorities in CIT vs. Trinity Traders (supra) is concerned with the facts and law relating to the asst. yr. 1967-68 which was prior to the amendment of s. 185(3). Hence the authorities were not right in relying upon the said case for deciding the issue on hand. He also contended that whenever there is a defect in the form the assessee could be asked to rectify the same by the authorities by invoking the provisions of ss. 184(7), 185(2) and 185(3) of the IT Act, 1961, ilw r. 22 of the IT Rules. Sees. 184(7), 185 and 185(3) read as follows:
'184(7): Where registration is granted or deemed to have been granted to any firm for any assessment year, it shall have effect for every subsequent assessment year:
Provided that-
(i) there is no change in the constitution of the firm or the shares of the partners as evidenced by the instrument of partnership on the basis of which the registration was granted; and
(ii) the firm furnishes, before the expiry of the time allowed under sub-s. (1) of s. 139 for furnishing the return of income for such subsequent assessment year, a declaration to that effect, in the prescribed form and verified in the prescribed manner, so, however, that where the AO is satisfied that the firm was prevented by sufficient cause from furnishing the declaration within the time so allowed, he may allow the firm to furnish the declaration at any time before the assessment is made.
185. Procedure on receipt of application :
185(2) Where the AO considers that the application for registration is not in order, he shall intimate the defect to the firm and give it an opportunity to rectify the defect in the application within a period of one month from the date of such intimation; and if the defect is not rectified within that period, the AO shall, by order in writing, reject the application.
1850: Where the AO considers that the declaration furnished by a firm in pursuance of sub-s. (7) of s. 184 is not in order, he shall intimate the defect to the firm and give it an opportunity to rectify the defect in the declaration within a period of one month from the date of such intimation; and if the defect is not rectified within that period, the AO shall, by order in writing, declare that the registration granted to the firm shall not have effect for the relevant assessment year. '
Learned senior counsel for the petitioner relied upon number of decisions to substantiate that whenever there is a defect in the form, the assessees could be asked to rectify the same by the authorities by invoking the abovesaid provisions. One such decision is Mathew & Mathew vs. CIT (1987) 60 CTR (Ker) 199: (1987) 161 ITR 9 : ITR, 34R.352, wherein it has been held that filing of declaration in Form No. 12 for continuance of registration is only a statutory mode of proof of the requirement and the requirement is not mandatory. It was further held that infirmity in declaration that it was filed prior to the end of account year is not fatal to the declaration and it is only defective. The firm is entitled to an opportunity for rectification of defect.
4. In this case also, there is no dispute that the assessee-firm had got registration for the asst. yr. 1987-88 and is entitled to continuance of registration for the subsequent period if the requirements of the proviso to subs. (7) of s. 184 are satisfied. It is clear from cl. (i) of the proviso that the requirement for the continuation of registration under sub-s. (7) is that there is no change in the constitution of the firm or the share of the partners as evidenced by the instrument of partnership on the basis of which registration had been granted. Clause (ii) of the proviso, as per which a declaration in the prescribed form and verified in the prescribed manner is to be furnished within the time mentioned therein, prescribes the statutory mode of proof of the requirement of cl. (i) of the proviso. Clause (ii) of the proviso excludes every other mode of proof. But the intent and purpose of cl. (ii) are only to prove the requirements of cl. (i) of the proviso. The earlier requirement of cl. (ii) for filing of the declaration together with the return was altered by the Taxation Laws (Amendment) Act, 1970, that came into force on 1st April, 1971. The present requirement of the clause is only the furnishing of the declaration in the form and manner prescribed before the expiry of the time allowed under sub-s. (1) or (2) of s. 139 for furnishing of the return of income for the subsequent assessment year. It is true that as per sub-s. (7) of s. 184, registration granted to a firm will ensure for every subsequent assessment year if only there is no change in the constitution of the firm or the shares of the partners as evidenced by the instrument of partnership on the basis of which registration was granted. It could be seen that as per proviso to sub-s. (7) of s. 184, declaration is made for the satisfaction of the ITO that the firm continues without any change throughout the previous year relevant to the year of assessment. Sub-s. (3) of s. 185 enjoins on the ITO to intimate any defect in the declaration furnished to the assessee-firm and give it an opportunity to rectify the defect within a period of one month from the date of such intimation. If the defect is not rectified within the said period, the ITO is required by order in writing to declare that the registration granted to the firm shall not have effect for the relevant assessment year. The assessee-firm is thus entitled to an opportunity for rectification of defects, if any, in the declaration furnished by him and it is only on his failure to rectify the defect that the registration can be declared as not effective for the year of assessment. It has been held in Mathew & Mathew vs. CIT (supra) that the decision of the Gujarat High Court in CIT vs. Trinity Traders (supra) does not advert to sub-s. (3) of s. 185 as per which tile assessee-firm is entitled to an opportunity for rectification of defects in the declaration furnished. The amendment of sub-s. (7) that came into force on lst April, 1971, removes the requirement of furnishing the declaration along with the return. The Gujarat High Court has taken the view that the requirement of the sub-section as it stood at the relevant time requiring the declaration to be furnished along with the return was mandatory and not even a substantial compliance will satisfy the requirement of the law. The Kerala High Court did not agree with the reasoning and conclusion of the Gujarat High Court. The purport and reach of sub-s. (7) are for the continuance of registration for every subsequent assessment year provided there is no change in the constitution of the firm or the shares of the partners. The declaration under cl. (ii) of the proviso is the statutory mode of proof of these requirements for the registration to have effect for every succeeding year. The facts to be proved are those stated in cl. (i) of the proviso and any defect in the declaration is capable of rectification as provided for in sub-s. - (3) of s. 185. An infirmity in the declaration that it does not cover the whole of the account period as required by Form No. 12 cannot be held to be fatal to the declaration itself and the infirmity can be treated only as a defect capable of rectification under sub-s. (3) of s. 185. Counsel relies also on the decision of the Madras High Court in Halima Fancy Stores vs . CIT : [1976]104ITR190(Mad) That decision was also concerned with the requirement of the proviso as it then stood to furnish the declaration along with the return. The Madras High Court at p. 194 of the report observed :
'The intention of Parliament was to give effect to the registration in the subsequent year also if there was no change in the constitution of the firm or the shares of the partners and, therefore, the factum of change or no change in the constitution of the firm or the shares of the partners is only relevant for the law to operate. The declaration, as such, does not extend the effect of the registration. Even so when Parliament had imposed that condition for the law to operate, we cannot refrain from giving effect to it merely on the ground that in effect there was no change in the constitution of the firm or the share of the partners. It might be that the declaration is only an evidence that there was no change in the constitution of the firm. But, since the giving, effect to the registration for the subsequent year is conditioned upon such filing in s. 184(7) though, in fact, there is no change in the constitution of the firm or the shares of the partners, unless such a declaration is filed, the benefit of continued effect of the registration could not be given. We are also unable to agree with the learned counsel for the assessee that he might file a declaration at any time before the assessment and the provision requiring the declaration to be filed along with the return of income was not mandatory. The section requires the declaration to be filed along with the return of income.'
The Kerala High Court agreed with the view expressed by the Madras High Court that the intention of Parliament was to give effect to the registration for the subsequent year and the declaration is only a mode of proof that there is no change in the constitution of the firm or the shares of the partners. The Kerala High Court however found it difficult to agree with the reasoning that the furnishing of the declaration along with the return was a mandatory requirement of the law and even an inconsequential breach of such requirement will invalidate the declaration. It has also been held that as per cl. (ii) of the proviso to sub-s. (7) of s. 184, the declaration is to be filed before the expiry of the time allowed under sub-s. (1) or sub-s. (2) of s. 139 for furnishing the return of income. The ITO is empowered to condone the delay and allow the firm to furnish the declaration at any time before the assessment is made. This would clearly indicate that the requirement of the proviso read with r. 22 and Form No. 12 is not mandatory and the assessee firm is entitled to an opportunity for rectification of the defect in the declaration furnished. It was further held that the declaration furnished did not relate to the entire accounting period, it can only be treated as defective and the assessee is entitled to an opportunity for rectification of the defect as provided for in sub-s. (3) of s. 185 of the Act. The Kerala High Court decided question No. 1 in favour of the Revenue and against the assessee and question No. 2 in favour of the assessee and against the Revenue by holding that the declaration filed for continuation of registration in Form No. 12 was only defective as it was filed before the end of the relevant accounting year and the assessee-firm was entitled to an opportunity for rectification of the defect as provided for under sub-s. (3) of s. 185. The Kerala High Court has relied upon the decision of the Patna High Court in CIT vs . Sitaram Bhagwandas : [1976]102ITR560(Patna) and the Allahabad High Court in Nand Singh Taneja & Sons vs . CIT : [1973]91ITR202(All) and Add]. CIT vs . Murhdhar Mathura Prasad : [1979]118ITR392(All) . The Patna and Allahabad High Courts have taken the view that the requirement of the proviso is not mandatory and a defect in the declaration under cl. (i) of the proviso to sub-s. (7) will not invalidate the declaration itself. The Allahabad High Court in Add]. CIT vs. Murlidhar Mathuta Prasad (supra), following its earlier decision in Nand Singh Taneja & Sons vs. CIT (supra) has accepted the view expressed by the Patna High Court in CIT vs. Sitaram Bhagwandas (supra). Basing on the above judgments, the Allahabad High Court has held that the procedural requirements are to be treated only as directory and if there is some defect in the declaration, the assessee is to be given an opportunity for rectification.
5. In view of the above, it could be held that the declaration filed for continuation of registration in Form No. 12 was only defective as it was filed before the end of the relevant accounting year and the assessee-firm is entitled to an opportunity for rectification of the defect as provided for under sub-s. (3) of s. 185. The authorities herein are not right in rejecting the declaration as invalid. Instead, they should have treated it as a defective declaration. Hence, the respondents are directed to afford an opportunity to the assessee to rectify the defect. The writ petition is allowed. No costs.
Consequently, WMP No. 10628 of 1989 is dismissed.