Per Shri A. Kalyanasundharam, Accountant Member - This is an appeal by assessee who is aggrieved by the orders of the authorities below for cancellation of registration to their firm. The piea of the assessee before us was that for and up to assessment year 1973-74 the firm was granted registration and for the year under review the form no. 12 for continuation of registration was filed well within time i.e., 12-6-74.
There was no return of income filed. The ITO was of the view that for granting of registration, return of income is necessary while the reading of the section does not indicate such requirement. Further it was pleaded that the return could not be filed as the firm suffered a loss and thereby dispute between the firm. He pleaded that up to to assessment year 1971-72 the requirement under sec. 184(7) was to file form no. 12 along with the return of income while for and from assessment year 1972-73 the requirement has been modified to filing of such request for continuation of registration at any time before the return of income is filed or within the extended time as allowed under the Act for filing of the return. He further pleaded that under sec.
186 the requirement is that there must have been registration originally granted which is found to be wrong and then only it could be canceled. He further submitted that the Tribunal in the case of Ram Chand 5 Tax World 70 for assessment year 79-80 had clearly observed that for the purpose of registration under sec. 184 there is no requirement that the return of income should also have to be filed. He also relied on Nand Singh Taneja & Sons v. CIT [1973] 91 ITR 202 (All.). The learned Departmental Representative relied on the orders of the authorities below.
2. We have given very careful considerations to the arguments advanced by the parties. The issue for our consideration is whether claim of registration by a partnership firm could be upheld or refused or cancelled notwithstanding the fact that the said firm did not file any return of income at all. According to the assessee, an order granting of registration to the firm being independent of the quantum order would be valid as provisions contained in sec. 184(7), only requires filing of form no. 12 before the time for filing of a return expires, and as there is no requirement of filing of a return of income also.
3. The said plea of the assessee is based on the modification in the language of the second proviso to sec. 184(7) brought in w.e.f. 1-4-71.
Prior to the amendment second proviso to the section 184(7) read as under - "The firm furnishes along with its return of income for the asst. year concerned, a declaration to that effect, in the prescribed form and verified in the prescribed manner." "The firm furnishes, before the expiry of the time allowed u/s 139(1) or (2) (Whether originally fixed or on extension) for furnishing the return of income for such subsequent assessment year, a declaration to that effect, in. he prescribed form and verified in the prescribed manner, so however, that, where the ITO is satisfied that the firm was prevented by sufficient cause from furnishing the declaration within the time so allowed, he may allowed the firm to furnish the declaration at any time before the assessment is made." 4. The plea of the assessee is that since in the amended proviso, the words "along with its return of income" are not there, form 12 filed by it could be considered and order passed u/s 185, though the firm had not filed any return of income. In support of this plea, he placed on record, the order of the Jaipur Bench of the Tribunal dated 15-7-81 in the case of Ramchandra Cutpiece Store, Jaipur where considering the amended proviso, it was held that filing of the return of income is not necessary for granting of registration to a firm.
5. To appreciate how far the plea of the assessee has any validity, it is necessary to go to the basis which brought the amendment by the Firm Amendment Act, 1970 (sic) w.e.f. 1-4-71. The C. B. D. T. had realised the hardship that was being causes in insisting to file the form 12 along with the return of income and this realisation resulted in the above amendment. This has been brought out by C. B. D. T. in the shape of a Circular No. 56, F. No. 156 (27) /70-TPL dt. 19-3-71 and the relevant para 1 of the said Circular is reproduced below :- "This requirement has, in practice, led to hardship where due to any reason the firm was not able to furnish the declaration along with the return of income. One of such reasons will be where some partner or partners were not available for signing the declaration before the date of furnishing the return of income (which may be signed by any one of the partners and not by all of them). With a view to avoiding incovenience and hardship to tax-payers in regard to this matter, clauses (ii) of the proviso to section 184(7) has been substituted by a new clause under which the declaration for continuation of registration may be furnished, not necessarily along with the return of income, but before the expiry of the time allowed for furnishing the return, whether fixed originally or on extension. Further, where the Income-tax Officer is satisfied that the firm was prevented by sufficient cause from furnishing the declaration within the said period, he may allow the declaration to be furnished at any time before the assessment is made." 6. The reading of the abovementioned circular clearly indicates that the amended provision has only stated that form no. 12 could be filed separately and not necessarily along with the return of income. Also the words in the amended proviso only goes to indicate that assessees could file the form 12 at any time before the assessment is made. Thus it is apparently clear that Legislatures never intended entertaining of form no. 12 without the return of income being filed by the firm. Thus on a plain reading of the said proviso, it appears that the plea as raised by the assessee is baseless and without any merit, but the plea has found favour from the Jaipur Bench of the Tribunal, supra. With due respects to the Members, we have only to observe that they did not have an occasion to consider the Boards circular (supra) and also of the requirements of the secs. 182 and 183 which are specifically provided in the IT Act, 1961 as applicable in the case of the firms. We, therefore, have to necessarily consider the issue afresh in the light of various provisions as are contained in secs. 182, 183, 184(7) and 186(2).
7. For sake of convenience the secs. 182, 183, 184(7) and 186(2) are reproduced below :- "182(1) Notwithstanding anything contained in sections 143 and 144 and subject to he provisions of sub-section (3), in the case of a registered firm , after assessing the total income of the firm, - (ii) the share of each partner in the income of the firm shall be included in his total income and assessed to tax accordingly.
(2) If such share of any partner is a loss it shall be set off against his other income or carried forward and set off in accordance with the provisions of section 70 to 75.
(3) When any of the partners of a registered firm is a non-resident, the tax on his share in the income of the firm shall be assessed on the firm at the rate or rates which would be applicable if it were assessed on him personally, and the tax so assessed shall be paid by the firm.
(4) A registered firm may retain out of the share of each partner in the income of the firm a sum not exceeding thirty per cent thereof until such time as the tax which may be levied on the partner in respect of that share is paid by him and where the tax so levied cannot be recovered form the partner, whether wholly or in part, the firm shall be liable to pay the tax, to the extent of the amount retained or could have been so retained." (a) may determine the tax payable by the firm itself on the basis of the total income of the firm; or (b) if, in his opinion, the aggregate amount of the tax payable by the firm if it were assessed as a registered firm and the tax payable by the partners individually if the firm were so assessed would be grated than the aggregate amount of the tax payable by the firm under clause (a) and the tax which would be payable by the partners individually, may proceed to make the assessement under sub-section (1) of section 182 as if the firm were a registered firm : and, where the procedure specified in this clause is applied to any unregistered firm, the provisions of sub-section (2), (3) and (4) of section 182 shall apply thereto as they apply in relation to a registered firm." "184. (7) Where registration is granted to any firm for any assessment year, it shall have effect for every subsequent assessment year : (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- section (1) or sub-section (2) of section 139 (whether fixed originally or on extension) 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 Income-tax Officer 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." "186. (2) If, where a firm had been registered or its registration has effect under sub-section (7) of section 184 for any assessment year, there is, on the part of the firm, any such failure in respect of the assessment year as is mentioned in section 144, the Income-tax Officer may cancel the registration of the firm for the assessment year, after giving the firm not less than fourteen days notice intimating his intention to cancel its registration and after giving it a reasonable opportunity of being heard." 8. The plain reading of secs. 182 & 183, goes to indicate that the Legislatures desired different treatments for registered firm and unregistered firm from the point of view of levy of income-tax only.
Thus granting of registration to a firm has the effect of the levy of tax being made at a lower rate on the firm. Thus the Legislatures intention in including the provisions in secs. 184,185 and 186 is a privilege given to the firm and is not a vested right. In order to enjoy this privilege it is but necessary to comply fully with the requirements of the statute. To put it differently, the right of registration is not either a matter of course or a common law right. It is a benefit conferred on the firms purely with a view to levy income-tax at a lower rate than what would be leviable under normal circumstances. Therefore, it a firm chooses not not file any return of income for a particular asst. year after it had filed its from no. 12, it cannot insist for an order on its form no. 12 as passing of an order would be totally redundant and also against the privations of the Act.
in as much as, its relevance exists or dies with the existence or absence of a return of income followed by an assessment order, more so by an order by assessment. The entire exercise of the IT Act is for levying of income-tax on income of an assessee and the benefit of registration is only a mater of course for charge of tax at a lower rate. It is for this reason, it is observed above that the grant of registration is not a matter of a right but of a privilege which could be enjoyed only when full compliance of the statute exists.
9. This has been so provided in sec. 186(2), which empowers an ITO to cancel the registration to a firm which could be effective for the subsequent years as provided in the sec. 184(7), in a case where the firm files no return even under sec. 139(4) i.e. a belated return at any time before the expiry of time for making of an assessment. The action of the ITO is therefore well within law in invoking sec. 186 and canceling of the registration to the firm and has been rightly upheld by the AAC. We confirm the same.
10. To our mind, the AAC could have been justified in holding that the appeals is not at all maintainable as the assessee could not be said to be aggrieved at all. The reason being the grievance as intended under the Act must be related to the ultimate liability to tax. In the instant case, there is no determination of any liability to tax as there was no assessment framed on the firm and the cancellation of registration has no effect at all in the tax liability of the firm.
11. Our considered opinion, therefore, is that the appeal is without any merit and is accordingly dismissed.