Full Judgment Text
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PETITIONER:
MESSRS PRATAPMAL LUXMICHAND
Vs.
RESPONDENT:
COMMISSIONER OF INCOME-TAX, MADHYAPRADESH.
DATE OF JUDGMENT:
08/02/1956
BENCH:
BHAGWATI, NATWARLAL H.
BENCH:
BHAGWATI, NATWARLAL H.
DAS, SUDHI RANJAN
AIYYAR, T.L. VENKATARAMA
CITATION:
1956 AIR 364 1956 SCR 91
ACT:
Registration of firm-Deed of partnership and application for
registration not signed by all partners-Refusal to register
by the Income-tax Officer-Powers of the Appellate.
Assistant Commissioner-Indian Income-tax Act (XI of 1922),
s. 26-A-Indian Income-tax Rules, 1922, rule 2.
HEADNOTE:
The appellant (a firm) consisted of seven partners and a
deed of partnership was executed by all the partners except
one who happened to be in Jail being a security prisoner
under the Defence of India Rules. An application for
registration of the firm under s. 26-A of the Indian Income-
tax Act was made before the Incometax Officer, who, however,
rejected it on the ground that the deed of partnership and
the application for registration were not signed by all the
partners. On appeal, the Appellate Assistant Commissioner
cancelled the order of the Income-tax Officer and directed
him to register the firm after obtaining the signature of
the partner who had not signed before, both on the
application for registration and the deed of partnership.
Held, that under Rule 2(c) of the Indian Income-tax Rules,
1922, framed under s. 26-A(2) of the Indian Income-tax Act,
the Appellate Assistant Commissioner had only the power to
direct registration of the firm if an application duly
signed by all the partners had been presented to him before
the assessment was confirmed, reduced, enhanced or annulled
and that he was not legally
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competent to direct the Income-tax Officer to register the
firm after obtaining the signature of the partner who had
not signed before.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 199 of 1955.
Appeal by special leave from the judgment and order dated
the 17th day of April 1953 of the Nagpur High Court in
Miscellaneous Civil Case No. 53 of 1950.
Nur-ud-din Ahmad and Naunit Lal, for the appellant.
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C. K. Daphtary, Solicitor-General of India, G. N. Joshi
and B. H. Dhebar, for the respondent.
1956. February S. The Judgment of the Court was delivered
by
BHAGWATI J.-This is an appeal with special leave from the
Judgment and Order of the High Court of Judicature at Nagpur
on a reference made by the Income-tax Appellate Tribunal,
Bombay Branch ’A’ under section 66(1) of the Indian Income-
tax Act XI of 1922 whereby the High Court answered the ref-
erred question against the appellant.
The appellant, a firm of Messrs Pratapmal Laxmichand of
Betul consisted of 7 partners, viz., Misrilal Goti, Meghraj
Goti, Panraj Goti, Phulchand, Basantibai, Ratanbai and
Gokulchand Goti. A deed of partnership was executed on the
12th February 1944 by all the partners except Gokulchand
Goti who happened to be in the Seoni Jail being a security
prisoner under the Defence of India Rules. He was unable to
sign the same in spite of all efforts to obtain his
signature in prison. An application for registration of the
firm under section 26-A of the Act for the assessment year
1943-44 was made on the 24th March 1944 personally signed by
the other 6 partners of the firm and was accompanied by the
deed of partnership which also had been signed by those 6
partners. The Special Income-tax Officer, Nagpur, rejected
the application on the ground that the deed itself was not
valid inasmuch as it had not been signed
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by all the partners mentioned in the body and there was no
signature of Gokulchand on the deed and the application. An
appeal was taken to the Appellate Assistant Commissioner
against this decision of the Special Income-tax Officer on
the 24th April 1944. Gokulchand appended his signature to
the deed of partnership in Seoni Jail on the 9th January
1945. The appeal was heard before the Appellate Assistant
Commissioner on the 20th March 1947 and he passed an order
on the 17th February 1948 cancelling the order of the
Special Income-tax Officer and directing him to register the
firm after obtaining the signature of Gokulchand both on the
application for registration and the deed of partnership.
At the instance of the Commissioner of Income-tax, C. P. and
Berar, an appeal was filed against this order of the Appel-
late Assistant Commissioner by the Income-tax Officer, Spl.
I.T. cum E.P.T. Circle, Nagpur, before the Income-tax
Appellate Tribunal. The Tribunal allowed the appeal by its
order dated 11/16 October 1948 observing that the Special
Income-tax Officer was justified in refusing to register the
firm as the application for registration was not signed by
Gokulchand, that Rule 2(c) of the Indian Income-tax Rules,
922, on which the Appellate Assistant Commissioner teems to
have relied did not apply and the Appellate Assistant
Commissioner was not justified in directing the Income-tax
Officer "to register the firm after obtaining the signature
of Seth Gokulchand both in the application for registration
and the deed of partnership". The appellant applied for a
reference to the High Court under section 66(1) of the Act
and the Tribunal referred the following question arising out
of its order for the opinion of the High Court: "Whether on
the facts and in the circumstances of the case the Appellate
Assistant Commissioner was legally competent to direct the
Income-tax Officer to register the firm after obtaining the
signature of Seth Gokulchand both in the application for
registration and in the deed of partnership". When the
statement of the case was being drawn up by the Tribunal,
counsel for the appellant suggested that the words
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appearing in para 6 of the statement, viz., "No application
was submitted to the Appellate Assistant Commissioner
seeking his permission under Rule 2(c) of the Indian Income-
tax Rules" be deleted. He also suggested that the
concluding words in the question referred to the High Court,
viz., "after obtaining the signature of Seth Gokulchand both
in the application for registration and in the deed of
partnership" be deleted. With regard to the latter
suggestion the Tribunal observed that they were unable to
delete the same inasmuch as the words sought to be deleted
were the concluding words appearing in the Appellate
Assistant, Commissioner’s order dated the 17th February,
1948 giving directions to the Income-tax Officer and were
words which were material to the question before the High
Court. With regard to the first suggestion counsel for the
appellant had stated that the appellant had submitted three
applications to the Appellate Assistant Commissioner all
dated 20th March, 1947 and that it would be wrong to state
that no application was submitted to the Appellate Assistant
Commissioner. The allegation made by the appellant was
properly investigated subsequently and the Tribunal was
satisfied that the appellant did not appear to have put in
the application dated 20th March, 1947 as alleged. This
being the position the Tribunal stated that no change in the
statement of case was called for as suggested by the
appellant.
It was on this statement of case by the Tribunal that the
referred question came to be determined by the High Court.
Before the High Court the appellant had applied on the 27th
November, 1950 that the three certified copies of the three
applications dated 20th March, 1947 made by the appellant to
the Appellate Assistant Commissioner with their originals
should be sent for by the High Court from the Incomeax
Tribunal and an order had been made accordingly. he High
Court was of the opinion that the Appelate Assistant
Commissioner should have ordered egistration of the firm
provided there was an application before him duly signed by
all the partners. As,
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however, there was no such application, he could not have
directed the Income-tax Officer to register the firm after
obtaining the signature of Gokulchand on the application and
also in the partnership deed . The High Court accordingly
answered the referred question in the negative.
An application under section 66-A(2) of the Act for a
certificate for leave to appeal to this Court against that
order was dismissed by the High Court but the appellant
obtained special leave to appeal against the same from this
Court on the 6th December, 1954.
The main question that arises for our determination in
this appeal is:-What are the powers of the Appellate
Assistant Commissioner on the hearing of an appeal against
the refusal by the Income-tax Officer to register a firm
under section 26-A of the Act and Rule 2 of the Indian
Incometax Rules, 1922?
Section 26-A of the Act provides:--
" (1) Application maybe made to the Income-tax Officer on
behalf of any firm, constituted under an instrument of
partnership specifying the individual shares of the
partners, for registration for the purposes of this Act and
of any other enactment for the time being in force relating
to income-tax or supertax.
(2) The application shall be made by such person or
persons, and at such times and shall contain such
particulars and shall be in such form, and be verified in
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such manner, as may be prescribed; and it shall be dealt
with by the Income-tax Officer in such manner as may be
prescribed".
Rule 2 of the Indian Income-tax Rules, 1922, which was in
force at the relevant period, in so far as is material for
the purpose of this appeal, provided:
"Any firm constituted under an Instrument of Partnership
specifying the individual shares of the partners may, under
the provisions of section 26-A of the Indian Income-tax Act,
1922 register with the Income-tax Officer the particulars
contained in the said Instrument on application made in this
behalf.
Such application shall be signed by all the partners
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(not being minis) personally and shall be made-
(a) before he income of the firm is assessed for
any year under section 23 of the Act, or
(b).. ........ or
(c) with the permission of the Appellate Assistant
Commissioner hearing an appeal under section 30 of the Act,
before the assessment is confirmed, reduced, enhanced or
annulled, or
(d)
(e)
The decision of the Income-tax Officer in regard to the
invalidity of the deed of partnership inasmuch as it did not
bear the signature of Gokulchand was not challenged by the
appellant at any stage of the proceedings nor in the
statement of case before us. Counsel for the appellant,
however, relying on a passage in the "Law and Practice of
Income-tax by Kanga and Palkhivala", 3rd Ed., at page 754,
urged that it was not necessary that the partnership agree-
ment should be signed by all the partners and if the
agreement had not been signed by one of the partners but
that partner had assented to the agreement and put it
forward along with the other partners for registration, the
agreement would be admissible for registration. In the
first instance, it was not open to the appellant to urge any
point which was not taken in the statement of case and even
if it was open to him to urge that contention we do not
think it necessary to express any opinion on the correctness
or otherwise of the statement above referred to in view of
the construction which we put on Rule 2 of the Indian
Income-tax Rules, 1922.
The Rules were framed under section 26-A(2) of the Act and
bad statutory force. Under Rule 2, the application for
registration of the firm was to be made to, the Income-tax
Officer and the particulars contained in the Instrument of
Partnership specifying the individual shares of the partners
were to be registered with him on an application made in
that behalf signed by all the partners (not being minors)
personally. No such application was submitted to the
Special Income-tax Officer in this case before he
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made his order on the 18th March 1944, and on the materials
as they stood on record then, the order of the Special
Income-tax Officer was perfectly justified. No such
application signed by all the partners of the firm including
Gokulchand was also available before the Appellate Assistant
Commissioner when he heard the appeal on the 20th March
1947. The appellant contended that he had in fact filed in
the office of the Appellate Assistant Commissioner on the
said 20th March 1947 three applications one of which was
such an application signed by all the partners personally
including Gokulchand and it was strenuously urged on his
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behalf that the Appellate Assistant Commissioner passed his
order dated the 17th February 1948 ignoring the said
application which had been filed in his office. It was
urged that, if the Appellate Assistant Commissioner had
before him the said application dated the 20th March 1947
signed by all the partners personally including Gokulchand,
it was his duty to direct a registration of the firm himself
without anything more inasmuch as the deed of partnership
had been signed by Gokulchand on the 9th January 1945 and
the application for registration of the firm dated the 20th
March 1947 bore his signature. The direction given by the
Appellate Assistant Commissioner to the Income-tax Officer
to register the firm was, it was contended, therefore proper
and we were asked to treat the words "after obtaining the
signature of Seth Gokulchand in the application for regis-
tration and in the deed of partnership" as superfluous.
We are not impressed with this argument. As appears
abundantly clear from the terms of the order made by the
Appellate Assistant Commissioner himself and also from the
statement of case prepared by the Tribunal, the application
signed by all the partners personally including Gokulchand
was not before the Appellate Assistant Commissioner. An
application had been made by the appellant before the Tri-
bunal to amend the statement of case by deleting from para 6
thereof the words "no application was submitted to the
Appellate Assistant Commissioner
13
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seeking his permission under Rule 2(c) of the Indian Income-
tax Rules" but the same had been rejected by the Tribunal as
a result of proper investigation conducted by it
subsequently, the Tribunal stating that they were satisfied
that the assessee did not appear to have put in an
application dated the 20th March 1947 as alleged. The
reference was beard by the High Court on this statement of
case prepared by the Tribunal and no steps were taken by the
appellant before the High Court for having the statement of
case amended by the Tribunal or for having a further
statement of case submitted by the Tribunal recording
therein the facts alleged by the appellant. We must,
therefore, decide this appeal on the facts stated in the
statement of case by the Tribunal and on the basis that the
application for registration dated the 20th March 1947
signed by all the partners personally including Gokulchand
was not before the, Appellate Assistant Commissioner.
If that was the position, the only power which the
Appellate Assistant Commissioner bad under Rule 2(c) was to
accord permission to the appellant to make the application
in proper form to the Incometax Officer signed by all the
partners personally including Gokulchand before the
assessment was confirmed, reduced, enhanced or annulled.
The Appellate Assistant Commissioner had, under the Rule, no
power to direct the Income-tax Officer to register the firm
after obtaining the signature of Gokulcband both in the
application for registration and in the deed of partnership
as he did. As a matter of fact the appellant did not ask
for such permission from the Appellate Assistant
Commissioner nor was any revision taken by the appellant
before the Commissioner under section 33-A of the Act
against the said order of the Appellate Assistant
Commissioner. The appellant contented himself with arguing
that the order made by the Appellate Assistant Commissioner
was justified and the sole controversy which arose between
the parties and was the subject matter of the referred
question was whether the Appellate Assistant Commissioner
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was legally competent to direct the Income-
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tax Officer to register the firm after obtaining the
signature of Gokulchand both in the application for
registration and in the deed of partnership. The appellant
attempted no doubt to have the words "after obtaining the
signature of Seth Gokulchand both in the application for
registration and in the deed of partnership" deleted from
the referred question. That attempt, however, failed and no
steps were taken by the appellant before the High Court at
the hearing of the reference to either have the referred
question amended or reframed in order to bring into
prominence his contention in regard to the powers of the
Appellate Assistant Commissioner.
On the question as framed, the only answer which the High
Court could give was that the Appellate Assistant
Commissioner was not legally competent to direct the Income-
tax Officer to register the firm after obtaining the
signature of Gokulchand both in the application for
registration and in the deed of partnership. Rule 2(c)
above-quoted did not empower the Appellate Assistant
Commissioner to do anything of the sort and we are of the
opinion that the answer given by the High Court in the
negative was, therefore, correct.
Counsel for the appellant tried to support his argument by
referring to the provisions of the earlier partnership deeds
between the several partners of this firm in the years 1929
and 1941 which specifically provided that in the event of
retirement, or death of, or relinquishment, of his share by
a partner, the partnership will not be dissolved but will be
continued, in case of death of any of the partners, by such
of the partners as remained and the legal representatives or
nominees of the deceased partner and in the case of
retirement of any of the partners by such of the partners as
remained. We fail to understand what bearing these clauses
have on the determination of the referred question. In the
result, the appeal of the appellant fails and must stand
dismissed with costs.
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