1. The first four grounds of appeal before us are not pressed by the assessee's learned counsel at the time of hearing. The only ground left for our consideration are ground Nos. 5,6 and 7. The 7th ground is general in nature, which requires no adjudication. In respect of ground Nos. Sand 6, we are to hear the parties and examine the facts. The CIT (Appeals) mentioned that the assessee has not preferred a separate appeal under Section 246(l)(j) of the Act. To understand the real controversy, we should narrate the facts of the case in brief.
2. The assessment was made by the ITO under Section 144 as the assessee had not produced books of accounts etc. He took the status as URF as noted in the assessment order. He also passed an order under Section 185 in which he has noted that the assessee filed Form No. 11 A. But in the absence of books of account and also due to non-compliance of the assessee, the ITO was not satisfied that there was a genuine firm during the year. Registration was refused.
3. The assessee took up the matter before the CIT (Appeals) in respect of the quantum, opportunity etc. The assessee raised a point regarding the status. It was contended that the status was wrongly taken as URF.The CIT (Appeals) noticed that registration was not allowed in terms of Section 185(5). He pointed out that appeal is provided against such order under Section 246(1 )(j) and the assessee did not submit any appeal against the said order refusing to grant the benefits of registration. He, therefore, inferred that there was no opportunity available to him to deal with the said order under Section 185. The CIT (Appeals) observed that no doubt Section 246(1 )(c) provides that the assessee can contest the status taken in the assessment. But without being able to upset the order under Section 185 in the present appeal, the order of the ITO under Section 185 being a separate order, would continue to exist no matter what decision is taken with reference to Section 246(l)(c). The CIT (Appeals) observed that the scheme of the Income-tax Act is clear and in the case of the assessee the question of registration should be dealt with separately in the assessment as well as in the appellate stage. He concluded that since the assessee did not file appeal under Section 246(1 )(j) against the order under Section 185, no interference with the order of the ITO is called for in respect of the status. He, therefore, dismissed the appeal by the assessee on this point. Hence this appeal by the assessee.
4. It is vehemently urged by the assessee's learned counsel that the CIT (Appeals) wrongly came to the above conclusion in spite of the fact that the assessee firm was genuine and appropriate application form was filed. It is submitted that if the facts of the case are properly appreciated, it would be seen that the CIT (Appeals) went wrong in not considering the claim of the assessee in the present context. It is urged, therefore, that the claim of the assessee may be allowed and the authorities below may be directed to allow registration to the firm.
5. The learned Departmental Representative supports the order of the CIT (Appeals) vehemently. The points raised by the CIT (Appeals) are highlighted and it is stressed that the provisions of the law are clear and each section has a specific role to play and if the assessee has chosen not to prefer an appeal on the specific point, relief cannot be allowed under any guise.
6. We have heard both the sides at length, who relied on various authorities for our consideration. We have gone through the orders of the authorities below from which it is ascertained that the ITO passed the above order under Section 185 holding that due to non-production of accounts and non-compliance of the assessee, he was satisfied that there was no genuine firm in existence during the year. From the order of the CIT (Appeals), it is seen that the assessee was very much against the status accorded to it as URF, whereas the assessee's claim was that registration should be allowed as per application form No. 11 A, which admittedly was filed within time and was in order. In our opinion, the CIT (Appeals) has taken a technical view of the matter.
True, in the case of Nilamani Ghosh & Partners v. CIT [1977] 106 ITR 281 and CIT v. T. Veeraiah & K. Narasimhulu [1977] 106 ITR 283, the Hon'ble Orissa High Court noted that there was no clear indication in the Explanation that "registered firm" is also a status for the purpose of Section 246(l)(c) etc. and that special provision had been made under Section 246(1)0) and (k) to meet the situation relating to such disputes and reference to Clause (c) of Section 246(1) cannot cover the same controversy and, therefore, the status point of the firm cannot be agitated under Section 246(l)(c). But this view was not approved in the case as Madhur Jalpan v. C/T[1983] 143 ITR 351 (Pat.). Amongst other things, it was held that the expression "status" includes within its sweep a distinction between a registered firm and unregistered firm. It was held that the right of appeal under Section 246(l)(c) against the status would also include status taken as URF, The Hon'ble Patna High Court considered the decisions as ITO v. Vinod Krishna Som Prakash [1979] 117 ITR 594 (All.), Rafeeq Timbers v. CIT. It appears that Hon'ble Karnataka High Court in the case of CIT v. Angadi Bros. [1986] 157 ITR 426/ [1985] 22 Taxman 578, has expressed a similar view.
7. Section 246 provides that an aggrieved party may file an appeal before the A.A.C. A provision granting right of appeal should be construed liberally. This was the view expressed in Mohan Lal Khemka v.CIT [1971] 81 ITR 89 (All.), CIT v. Mahabir Parshad & Sons [1980] 125 ITR 165 (Delhi), Asst. CIT v. Chaturbhuj Radhakishan [1985] 156 ITR 257 (Raj.) and other High Courts. A view was expressed that the statutes pertaining to right of appeal would have to be given a liberal construction since they are remedial in nature. A right of appeal must be determined according to the effect the order has on the aggrieved taxpayer and not merely upon the form or language in which it has been concluded by the officer. This view was expressed in the decision in Jaikishan Gopikishan &Sons v. CIT [1912] MlTR 645'(MP),Katihar Match Works (1954)(P.)Ltd. v. CIT[1975]99ITR 251 (Cal). Similarly, a view was expressed in the case of Chandmull Pannalal v. CIT [1965] 58 ITR 711 (Cal.) and other decisions. In fact, a right of appeal is a statutory right, CIT v. S.C. Shah [1982] 137 ITR 287/[1981] 7 Taxman 314 (Bom.) and Charki Mica Mining Co. Ltd. v. CIT[1978] 111 ITR 193 (Cal.).
8. A right of appeal is not merely a matter of procedure. It is a matter of substantive right against a decision of a lower authority to a superior Tribunal and which right becomes vested in a party when the proceedings are first initiated by the lower authorities. Reference may be made to the decisions as reported in [1953] 4 STC, page 114,122 (SC). In fact, the Hon'ble Delhi High Court has held in the case of Unique Motors & General Insurance Co. v. S.K. Vaiyapuri AIR 1970 Delhi 90 that a right of appeal is a very valuable right and deprivation of that right is not to be lightly assumed. The substantive right of appeal conferred upon the assessee by the statute cannot in any way be curtailed or restricted by the language of rules made under subordinate legislative powers - CCT v. Satanand Giri 1975 Tax LR 203 (Pat.).
9. The Hon'ble Supreme Court in the case of CIT v. Calcutta Discount Co, Ltd. [1973] 91 ITR 8 has, on the facts of that case, held that the Appellate Tribunal should not be unduly influenced by mere procedural technicalities but should deal with the substance of the matter at issue.
10, In the present case before us, as pointed out by the CIT (Appeals), the contention of the assessee was regarding the status taken in the assessment as URF. In our opinion, this contention raised by the assessee in its appeal before the CIT (Appeals) is covered by Section 246(l)(c) which the CIT (Appeals) should have dealt with in the proper spirit of the law. It may be true that the assessee did not file an appeal under Section 246(1)0). which provides, amongst other things, that the assessee may file an appeal against an order under Clause (b) of Sub-section (1) or under Sub-section (2) or Sub-section (3) or Sub-section (5) of Section 185. But as pointed out above, the assessee challenged the status taken as URF and an appeal against such action is provided by Section 246(l)(c). Thus, we could see that the substance of the dispute is regarding the status of the assessee taken in the assessment. The CIT (Appeals) should have dealt with the issue and should not have been unduly influenced by mere technicalities of the procedure on the ground that the assessee had not filed separate appeal under Section 246(l)(j) when the assessee was denied the benefit of registration.
11. In view of this situation, we feel that the CIT (Appeals) was not justified in declining to deal with the grounds of appeal by the assessee against the status of the assessee taken as URF by the Assessing Officer. As indicated earlier, other High Courts have not subscribed to the view expressed by the Hon'ble Orissa High Court in the case as reported in Nilamani Ghosh & Partners (supra). In the circumstances of the case, we set aside the order of the CIT (Appeals) on this point and restore the matter to his file for fresh disposal of the grounds of appeal of the assessee regarding the status taken as URF and to deal with the matter afresh after giving both the sides opportunities of being heard. Accordingly, the claim of the assessee is treated as allowed for statistical purposes.
12. In the result, the appeal by the assessee is allowed for statistical purposes.