Research › Browse › Judgment

Calcutta High Court · body

1991 DIGILAW 5 (CAL)

Commissioner of Income-Tax v. Toolsidass Jewraj

1991-01-11

A.K.SENGUPTA, Bhagabati Prasad Banerjee

body1991
Judgment Ajit K. Sengupta, J. 1. THIS reference at the instance of the Revenue relates to the assessment year 1982-83. The question of law which has been referred to us is as follows : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the requirement of Rule 24 read with Rule 22(5) of the Income-tax Rules were satisfied and the assessee was entitled to continuation of registration under Section 184(7) of the Income-tax Act, 1961, on the basis of declaration in Form No. 12 filed on July 30, 1982 ?" 2. THE facts are in a narrow compass. In the assessment year 1982-83, the assessee-firm comprised six partners. THE firm was treated as a registered firm under Section 185(1) of the Act. For claiming benefit of continuation of registration, the assessee-firm filed a declaration in Form No. 12 on July 30, 1982. THE said declaration was not signed by one of the partners, namely, Lakshmidass Toolsidass. THE Income-tax Officer granted continuation of registration to the firm. THE Commissioner of Income-tax, however, set aside the said order under Section 263 of the Act as, according to him the declaration in Form No. 12 submitted by the assessee was defective. Pursuant to the said direction, the Income-tax Officer completed the fresh assessment refusing to allow continuation of registration to the assessee-firm. He held that the declaration in Form No. 12 filed on July 30, 1982, was defective as it was not signed by one of the partners, viz., Lakshmidass Toolsidass. On appeal, the Commissioner of Income-tax (Appeals) upheld the action of the Income-tax Officer in refusing to allow continuation of registration to the assessee-firm. THE Tribunal, however, was of the view that the firm was a genuine one and that the requirements of Rule 24 and Rule 22(5) of the Income-tax Rules were satisfied. He, therefore, directed the Income-tax Officer to continue registration under Section 184(7). Rule 24 provides that the declaration to be furnished under Sub-section (7) of Section 184 shall be in Form No. 12 and shall be verified in the manner indicated therein and shall be signed by the persons concerned in accordance with Sub-rule (5) of Rule 22. Sub-rule (5) of Rule 22 provides that the application shall be signed personally by all the partners in the firm as constituted on the date of application. Sub-rule (5) of Rule 22 provides that the application shall be signed personally by all the partners in the firm as constituted on the date of application. It is only in the case of any partner who is absent from India or a lunatic or an idiot that the application may be signed by a person duly authorised in this behalf or, as the case may be, by a person entitled under the law to represent him. Form No. 12 also indicates that the declaration for continuation of registration under Section 184(7) should be signed by the partners personally. 3. IT is true that, in the instant case, one of the partners, Lakshmidass Toolsidass, since deceased, did not sign the prescribed declaration. The question is whether, on the facts of this case, the omission on the part of the said Lakshmidass Toolsidass, since deceased, to sign the prescribed declaration would affect the continuation of registration of the firm. This question has to be considered in the light of the facts found by the Tribunal. Admittedly, at the material time, the firm was not dissolved. Clause 12 of the partnership deed provides that any partner who habitually misconducts himself in running the business of the firm may be expelled from the firm if a majority of the partners so agree and decide. According to the assessee-firm, the said Lakshmidass Toolsidass, since deceased, was neglecting to attend the office as well as the business of the firm. He was given due notice of the meeting which decided to expel him from the partnership. The said deceased partner did not attend the said meeting. The entire matter arising from the dispute between the said deceased partner and the remaining partners and the subsequent expulsion of the said Lakshmidass Toolsidass from the partnership was the subject-matter of a suit, being Suit No. 354 of 1982 pending in this court. On the application of the assessee-firm in the said suit, an interim order was made restraining the deceased Lakshmidass Toolsidass from interfering in any way with the business of the partnership firm, and in particular the operation of the bank account of the firm and from asserting or representing or holding himself out as a partner of the said assessee-firm. IT is not the case of the Department that the partnership firm was not genuine. IT is not the case of the Department that the partnership firm was not genuine. In fact, the registration already granted to the firm has not been cancelled. The Income-tax Officer has only refused continuation of registration to the firm solely on the ground that the declaration was not signed by all the partners. In our opinion, in view of the order of injunction restraining Lakshmidass Toolsidass, since deceased, from acting or holding out as a partner of the assessee-firm, he could not be treated as an existing partner for the purpose of signing the prescribed declaration. As indicated earlier, the declaration for continuation of registration has to be signed by the existing partners who are the persons concerned in the continuation of registration. Lakshmidass Toolsidass, since deceased, was expelled from the partnership firm and as such he could not have signed the declaration as a partner thereof until such expulsion was set aside. Secondly, there was an order of injunction on the said Lakshmidass Toolsidass since deceased, restraining him from acting or holding himself out as a partner of the firm. Therefore, the prescribed declaration was signed by all the existing partners. Since the deceased Lakshmidass Toolsidass has been expelled from the partnership-firm, the question of obtaining the signature of his legal representative under Section 185(3) cannot arise. Rule 22(5) has to be construed reasonably. IT cannot operate in an impossible situation like the one before us, where one partner has been expelled and further the injunction of the High Court restrains him from exercising his right as a partner. In our view, the prescribed declaration in terms of Rules 24 and 22(5) must be signed by those partners who are, admittedly, partners of the firm at the material time and not by a person who has been expelled from the partnership in accordance with the provisions of the partnership deed and who is otherwise also prevented from acting as a partner. In our view, therefore, the conditions prescribed for continuation of registration under Section 184(7) in this case have been satisfied and the Tribunal was right in holding that the assessee-firm was entitled to continuation of registration. 4. FOR the reasons aforesaid, we answer the question in this reference in the affirmative and in favour of the assessee. There will be no order as to costs.