Jeevan Reddy, J.:— By a partnership deed dated January 1, 1957, fourteen persons, including a minor, Sri Kameswara Rao, agreed to carry on the business of running buses and lorries in partnership. The minor was represented by his mother and guardian, and he was treated as a full-fledged partner, liable for losses, among other things. Registration of this partnership firm was applied for, for the assessment year 1958-59, and for the next assessment year 1959-60, renewal was applied for. According to the law as it was understood then, such a partnership was not invalid. The ITO granted registration, and also renewal, by his order dated March 18, 1960. The Supreme Court held in Commissioner Of Income Tax, Bombay v. Dwarkadas Khetan & Co. , [1961] 41 ITR 528—a decision rendered on December 1, 1960—that a partnership deed in which a minor is admitted as a full partner, is not valid and cannot be registered under s. 26A of the Indian I.T Act, 1922. The decisions of the Madras High Court and the other High Courts to the contrary were overruled. Pursuant to this decision, the ITO proposed to cancel the registration granted by him for the assessment years 1958-59 and 1959-60, invoking his power of rectification under s. 154. Meanwhile, the minor, Sri Kameswara Rao, became a major on October 27, 1958, and opted to continue as a partner, as contemplated by s. 30 of the Partnership Act. A rectification deed was executed on October 29, 1958, recording the said fact. Though this fact was brought to the notice of the ITO when he proposed to exercise his power of rectification, the ITO cancelled the registration for the assessment year 1958-59, as also the renewal granted for the assessment year 1959-60. On appeal, however, the AAC took the view that the ITO was not competent to cancel the registration under s. 154 and accordingly set aside his order. The Revenue filed an appeal before the Income-tax Appellate Tribunal contending that, in view of the Supreme Court decision, it must be held that the partnership deed executed on January 1, 1957, was invalid and could not have been registered under s. 26A of the (1922) Act and that the said error constituted an error apparent on the face of the record liable to be rectified under s. 154. It was argued that s. 186(1) (of the 1961 Act) was not available in such a case inasmuch as a cancellation can be effected under that section only on one ground, viz., that there was “no genuine firm in existence as registered”. The Tribunal, however, dismissed the appeal holding that the power under s. 154 did not extend to rectifying an order granting registration to a firm. The words “any other order” occurring in s. 154 were sought to be construed ejusdem generis with the preceding words “order of assessment or of refund” and, on that basis, it was held that the said words could not take in every type of order passed by the ITO. Another principle pressed into service by the Tribunal in support of the same conclusion is “special excludes general”. The Tribunal held that the power to cancel the registration granted to a firm is contained in s. 186, which is a special provision; and if so, the general power under s. 154 is not available for the purpose of cancelling the registration of a firm, once granted. It was of the opinion that the Legislature has designedly confined the power of cancellation of the registration of a firm, once granted, only to one ground, viz., non-genuineness; and, therefore, the cancellation cannot be effected on any other ground. May be that an erroneous order granting registration can be corrected by the Commissioner under s. 263, or probably the ITO may himself invoke s. 147; but, in any event—the Tribunal observed—the power under s. 154 was not available for such a purpose. So far as the assessment year 1959-60 is concerned, the Tribunal referred to the further fact that the erstwhile minor became a major on October 27, 1958, and opted to continue as a full-fledged partner, which was recorded by a rectification deed, dated October 29, 1958, and the further fact that an independent application for registration of the firm was made for this assessment year. It, therefore, held that so far as the assessment year 1959-60 is concerned, there, is absolutely no ground for cancelling the renewal.
2. Thereupon, the Department applied for and obtained this reference under s. 256(1) of the 1961 Act. The question referred for our opinion is:
“Whether, on the facts and in the circumstances of the case, the cancellation of registration could be made under section 154 of the Income-tax Act, 1961?”
3. Sri M.S Murthy, the learned standing counsel for the Department, assailed the correctness of the interpretation placed by the Tribunal upon-the words “any other order” in s. 154. He contended that there is no scope for applying the rule of ejusdem generis to give a restricted meaning to the said words. According to him, the words “any other order” must be given their full effect, and must be held to cover all types of orders. He contended further that the decision of the Supreme Court in Commissioner Of Income Tax, Bombay v. Dwarkadas Khetan & Co. , [1961] 41 ITR 528, which overruled the decision of the Madras High Court, does constitute a valid and sufficient ground for invoking the power of rectification under s. 154. Even with respect to the assessment year 1959-60, learned counsel submitted, the position cannot be different, because no fresh partnership was entered into by the partners after the erstwhile minor, Sri Kameswara Rao, attained majority. According to the learned counsel, the rectification deed executed on October 29, 1958, is not sufficient compliance with the requirements of s. 26A.
4. On the other hand, the learned counsel for the assessee, Sri T. Shanker Rao, supported the reasoning and the conclusion of the Tribunal. He contended that, if the words “any other order” ins. 154 were conceived to take in every type of order, there was no necessity for Parliament to use the words “any order of assessment or of refund”, preceding the said words. Counsel contended further that, in any event, for the assessment year 1959-60 there is no basis for cancelling the registration, in view of the fact that the erstwhile minor attained majority, and opted to continue as a full-fledged partner, which was also recorded by a rectification deed. In Jakka Devayya and Sons v. CIT, [1952] 22 ITR 264, a Bench of the Madras High Court held that a deed of partnership executed between three persons, of whom one was a minor and was represented by his father-in-law, was not invalid in law and that, in such a case, it must be deemed that the minor has been admitted to the benefits of the partnership firm by the two adults. Accordingly, they held that such a firm is entitled to registration under s. 26A of the 1922 Act. This was also the view taken by certain other High Courts/while the Calcutta High Court took a contrary view. (It must be remembered that the law laid down by the Madras High Court was held to be binding on, and followed in the State of Andhra Pradesh—See M. Subbarayudu v. State, AIR 1955 Andhra 87 (FB)). In view of this decision, the ITO granted registration for the assessment year 1958-59, and renewal for the assessment year 1959-60, notwithstanding the fact that one of the partners was a minor, who was shown as a full-fledged partner, and made liable, inter alia, for the losses as well. The Supreme Court, however, overruled this decision in Commissioner Of Income Tax, Bombay v. Dwarkadas Khetan & Co. , [1961] 41 ITR 528 (SC), approving the decision of the Calcutta High Court; and it is then that the ITO sought to invoke his power of rectification under s. 154.
5. Section 54, in so far as it is relevant, reads as follows.—
“154. (1) With a view to rectifying any mistake apparent from the record—
(a) the Income-tax Officer may amend any order of assessment or of refund or any other order passed by him;
(b) the Appellate Assistant Commissioner or the Commissioner (Appeals) may amend any order passed by him under section 250 or section 271;
(c) the Commissioner may amend any order passed by him in revision under section 263 or section 264.
(1A) Where any matter has been considered and decided in any proceeding by way of appeal or revision relating to an order referred to in sub-section (1), the authority passing such order may, notwithstanding anything contained in any law for the time being in force, amend the order under that sub-section in relation to any matter other than the matter which has been so considered and decided.
(2) Subject to the other provisions of this section, the authority con cerned—
(a) may make an amendment under sub-section (1) of its own motion, and
(b) shall make such amendment for rectifying any such mistake which has been brought to its notice by the assessee, and where the authority concerned is the Appellate Assistant Commissioner or the Commissioner (Appeals), by the Income-tax Officer also.
(3) An amendment, which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee, shall not be made under this section unless the authority concerned has given notice to the assessee of its intention so to do and has allowed the assessee a reasonable opportunity of being heard…………
(7) Save as otherwise provided in section 155 or sub-section (4) of section 186, no amendment under this section shall be made after the expiry of four years from the date of the order sought to be amended.”
6. We will now refer to the provisions relating to the registration of firms, and the cancellation thereof. Section 184 provides for the application for registration of a firm. The application has to be made to the ITO by a firm, provided the partnership is evidenced by an instrument, and the individual shares of the partners are specified in that instrument. Such an application has to be signed by all the partners, and has to be made before the end of the previous year for the assessment year, in respect of which the registration is sought. The application has to be made in the prescribed form, containing the prescribed particulars. Registration once granted shall enure for every subsequent assessment year, provided there is no change in the constitution of the firm, and the firm furnishes, before the prescribed date, a declaration in the prescribed form containing the prescribed particulars. Sub-section (1) of s. 185 prescribes the inquiry to be made by the ITO on receipt of an application for registration of a firm; In so far as it is relevant for the present purpose, it reads:
“185. (1) On receipt of an application for the registration of a firm, the Income-tax Officer shall inquire into the genuineness of the firm and its constitution as specified in the instrument of partnership, and—
(a) if he is satisfied that there is or was during the previous year in existence a genuine firm with the constitution so specified, he shall pass an order in writing registering the firm for the assessment year;
(b) if he is not so satisfied, he shall pass an order in writing refusing to register the firm.”
7. Sub-sections (2) and (3) of s. 185 provides that if the application received is defective in any particulars, the ITO shall give an opportunity for its rectification, and if not rectified in spite of such opportunity, he shall reject the application. Section 186, which provides for cancellation of registration, reads as follows:
“186. (1) If, where a firm has been registered, or its registration has effect under sub-section (7) of section 184 for an assessment year, the Income-tax Officer is of opinion that there was during the previous year no genuine firm in existence as registered, he may, after giving the firm a reasonable opportunity of being heard and with the previous approval of the Inspecting Assistant Commissioner, cancel the registration of the firm for that assessment year:
Provided that no such cancellation shall be made after the expiry of eight years from the end of the assessment year in respect of which registration has been granted or has effect.
(2) If, where a firm has 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.
(3) Where the registration of a firm is cancelled for any assessment year, the Income-tax Officer shall amend the assessments of the firm and its partners for that assessment year on the footing that the firm is an unregistered firm.
(4) The provisions of section 154 shall, so far as may be, apply to the amendments of the assessments of the firm and its partners under subsection (3) of this section, the period of four years specified in subsection (7) of that section being reckoned from the date of the order cancelling the registration.”
8. A reading of s. 186 shows that the power of cancellation conferred by it is confined only to one ground, viz., the genuineness. In other words, only where the ITO, after notice to the affected firm, comes to the opinion that “during the previous year there was no genuine firm registered”, he shall cancel the registration. On no other ground can the power of cancellation be invoked. Without a doubt, genuineness and validity are two distinct things. This is also the view taken by a Bench of this court in R.C No. 84 of 1970, dated November 22, 1971 (Commissioner Of Income-Tax v. Balaji Pictures., [1983] 144 ITR 807 (AP) (Appx) (infra)), where the Bench observed (at p. 807):
“It is clear that under r. 6B, the ITO was empowered to cancel the certificate of registration only if he was satisfied that the firm was not a genuine firm in existence. The learned counsel for the Department submitted that a firm which included a full-fledged minor partner was not a firm in the eye of law and, therefore, action could be taken under r. 6B. We are not prepared to agree with the submission of the learned counsel. The use of the expression ‘genuine’ puts the matter beyond doubt. We are of opinion that r. 6B applies only to firms which do not exist in fact as distinguished from firms which may exist in fact but may be considered as non-existent in law. We are supported in our view by the decision of Obul Reddi and Venkateswara Rao, JJ., in R.C No. 83 of 1968”. (Rule 6B of the Indian I.T Rules, 1922, corresponds to s. 186(1) of the 1961 Act).
9. We are unable to agree with the Tribunal that the words “any other older occurring in s. 154(1)(a) should be construed ejusdem generis with the words “any order of assessment or of refund”. Firstly, we are of the opinion that the words “assessment” and “refund” do not constitute a class; and, secondly, having regard to the scheme and the object behind the Act, we see no reason to give a restricted meaning to avowedly unrestricted words used in the statute. The words “any other order” are clear, and brook no ambiguity. It is not only in the interests of justice but also in the interests of assessee, as well as the Revenue that manifestly erroneous orders are not allowed to stand. We see no reason to cut down the natural and plain meaning of the words, which course may, in some cases, work to the disadvantage of the assessees also. In Smt Lila Vati Bai v. State Of Bombay, AIR 1957 SC 521, it was contended that the words “or otherwise” in s. 6 of the Bombay Land Requisition Act of 1948— the relevant portion whereof read as follows: “ceases to be in occupation upon termination of his tenancy, eviction, assignment or transfer in any other manner of his interest in the premises or otherwise…”—should be read ejusdem generis. This argument was rejected by the Supreme Court in the following words (p. 528):
“The rule of ejusdem generis sought to be pressed in aid of the petitioner can possibly have no application. The Legislature has been cautious and thorough-going enough to bar all avenues of escape by using the words ‘or otherwise’. Those words are not words of limitation but of extension so as to cover all possible ways in which a vacancy may occur,…. The Legislature, when it used the words ‘or otherwise’, apparently intended to cover other cases which may not come within the meaning of the preceding clauses, for example, a case where the tenant's occupation has ceased as a result of trespass by a third-party. The Legislature, in our opinion, intended to cover all possible cases of vacancy occurring due to any reasons whatsoever. Hence far from using those words ejusdem generis with the preceding clauses of the explanation, the Legislature used those words in an all-inclusive sense.”
10. This decision, in our opinion, clearly answers the argument based upon ejusdem generis, as also the argument of Mr. T. Shankar Rao, learned counsel for the assessee, that if Parliament intended s. 154(1)(a) to cover all types of orders, there was no reason for it to specify two types of orders, viz., order of assessment and order of refund, therein. Merely because s. 154(1)(a) refers to an order of assessment, and to an order of refund, there is no reason to hold that the following general words should be confined to a limited field. It may also be seen that cls. (b) and (c) of s. 154(1) confer a similar power upon the AAC/Commissioner of Appeals, and upon the Commissioner; and there, the words used are “any order passed by him”. No reason is shown why the ITO's power of rectification should be limited, whereas the powers of the other authorities mentioned in cls. (b) and (c) are wide enough to cover every order passed by them. We are also unable to agree with the Tribunal that, by applying the rule of “special excludes general” it should be held that the only ground upon which registration once granted can be cancelled, is non-genuineness and that, on no other ground, can it be cancelled. We see no reason to import such a theory to cut down the plain meaning and scope of the words used in s. 154(1)(a). No decision has been brought to our notice taking such a view. If anything, sub-s. (4) of s. 186 gives an indication that both ss. 186 and 154 can operate simultaneously.
11. In this context, we do not think it irrelevant to point out that some High Courts have construed s. 186 to include even cases of illegality. In Bhagat Shyam & Co. v. CIT, [1980] 123 ITR 164, the Allahabad High Court has held, in a similar case, that registration can be cancelled under s. 186 itself. In that case, the registration was first granted by the ITO for the assessment year 1963-64, which benefit continued up to the assessment year 1968-69. The Commissioner cancelled the registration for 1968-69 under s. 263 of the Act. Thereafter, the ITO cancelled the registration for the assessment years 1965-66 to 1967-68, under s. 186 on the ground that, though the minors had attained majority on different dates in the previous years ending March 31, 1964, no fresh partnership deed was drawn up thereafter. The Allahabad High Court held that, in the circumstances, it must be held that a change had taken place in the constitution of the firm necessitating the drawing up of a fresh instrument of partnership and moving an application for grant of a fresh registration and further that, in the circumstances, the cancellation under s. 186 was valid.
12. Similarly, the Gauhati High Court in Mahabir Prasad Kishanlal & Co. v. Commissioner Of Income-Tax, Assam., [1976] 102 ITR 466, held that where a partnership deed sought to make the minors full partners, it is illegal and that the ITO has jurisdiction to cancel the registration of the firm, once granted, under s. 186(1) of the Act.
13. In the case before us, indeed, the action of the ITO will be justified both under s. 154(1)(a) as well as under s. 186(1). Merely because the ITO purported to act under s. 154, there is no bar to relate it to the power under s. 186(1), if necessary, and to sustain it on that basis. Both procedure-wise and limitation-wise, the action taken can be sustained under s. 186(1) as well, if held applicable. Looked at from either angle, we are of the opinion that the ITO had power to cancel the registration on the ground that the partnership itself was illegal in the eye of law. We must, however, uphold the contention of Mr. Shankar Rao and the finding of the Tribunal that, in so far as the assessment year 1959-60 is concerned, there is absolutely no ground warranting the cancellation of the registration. As stated above, the erstwhile minor, Sri Kameswara Rao, attained majority on October 27, 1958, and elected to continue as a full-fledged partner, as contemplated by s. 30 of the Partnership Act, which fact was recorded by a rectification deed dated October 29, 1958. This fact was also brought to the notice of the ITO, within the prescribed time, and all the papers filed before him. For this assessment year, there was not only an application for renewal, but there was a fresh application for grant of registration. In this view, it cannot be said that the partnership deed, as modified by the rectification deed, was in any manner illegal, so far as the accounting year relevant to the assessment year 1959-60 is concerned. Of course, the partnership was undoubtedly illegal so far as the accounting year relevant to the assessment year 1958-59 is concerned.
14. For the above reasons, our answer to the question referred is that the cancellation of registration made under s. 154 of the Act is competent and valid, in so far as the assessment year 1958-59 is concerned; but is incompetent and unsustainable, in so far as the assessment year 1959-60 is concerned. The reference is ordered accordingly. No costs.