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Ganga Motor Service v. Commissioner Of Income-Tax And Others.
Judgment Summary — Ganga Motor Service (Civil Writ Jurisdiction Cases)
Factual and Procedural Background
Two interdependent writ applications between the same parties were disposed of together. The petitioner in both matters is Messrs. Ganga Motor Service, a partnership firm engaged in bus plying.
The firm was originally constituted by a partnership deed dated 5 April 1957 with four partners and was registered under the Income-tax Act, 1922 (old Act) up to assessment year 1961-62. With effect from 1 April 1961, one partner, Lagandeo Singh, retired; the remaining three partners continued the business and executed a fresh deed effective 1 June 1961 (deed dated 24 August 1961), which was filed as an annexure.
After the Income-tax Act, 1961 (new Act) came into force from 1 April 1962, the petitioner filed on 30 June 1962 an application for registration under the new Act in Form No. 11 before the Income-tax Officer (ITO), Ward "B", Patna, accompanied by a copy of the 24 August 1961 deed. The ITO rejected the application on 17 February 1964 on grounds that it was filed after the accounting period and was not accompanied by the original deed or a certified copy.
The petitioner appealed to the Appellate Assistant Commissioner (AAC), who allowed the appeal and directed registration on 1 July 1966 (annexure "3"). The department appealed to the Income-tax Appellate Tribunal (ITAT). The Tribunal held the application was not barred by limitation but allowed the appeal and remanded the matter to the ITO by order dated 4 April 1968 (annexure "4").
After remand, the ITO again rejected the registration application by order dated 18 January 1969 (annexure "5"). The petitioner appealed to the AAC, who dismissed the appeal as incompetent on 26 August 1970 (annexure "6")—a dismissal the petitioner did not challenge. The petitioner then filed a revision to the Commissioner of Income-tax; the revision was rejected on 20 February 1971 by the Additional Commissioner (annexure "8"). Civil Writ Jurisdiction Case No. 615 of 1971 (also later referred to as No. 651 of 1971 in the record) was filed to quash annexures "5" and "8".
A second writ (Civil Writ Jurisdiction Case No. 1501 of 1971) concerned a later assessment year (1966-67) and was common ground to be dependent on the result of the first writ. The facts in the first application were not controverted by a counter-affidavit; a counter-affidavit was filed in the second matter.
Legal Issues Presented
- What is the proper statutory form for filing the petitioner's application for registration under the new Act for assessment year 1962-63 — Form No. 11 or Form No. 11A?
- Whether there was a change in the constitution of the firm during the relevant "previous year" (1 April 1961 to 31 March 1962) that would necessitate filing in Form No. 11A?
- Whether the Income-tax Officer was obliged under section 185(2) of the new Act to intimate defects in the application (including defects in the copy of the partnership deed) and afford the petitioner an opportunity to rectify them before rejecting the application?
- Whether the Income-tax Officer could revisit the question of the proper form for registration notwithstanding the ITAT's prior order?
Arguments of the Parties
Petitioner's Arguments (Mr. K.N. Jain)
- The ITAT's order established that the application for registration filed in Form No. 11 should be treated as properly on that form, and therefore the Income-tax Officer could not go into the question of whether Form No. 11A should have been used.
- Alternatively, under section 185(2) of the new Act the income-tax authorities were bound to intimate any defect and allow the petitioner an opportunity to rectify the defect in the application for registration (specifically, to permit certification of the copy of the partnership deed).
Revenue's Arguments (Mr. Shambhu Sharan)
- The proper form for filing the application was Form No. 11A and not Form No. 11; the difference between Forms 11 and 11A is material, so the defect could not be cured.
- The defect alleged was not merely formal or clerical; section 185(2) was intended only to remove formal defects and did not permit curing a substantive defect of form.
- The Income-tax Officer was entitled to consider whether the application was on the proper form and the ITAT's order did not preclude him from examining that question.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Krishna Flour Mills v. Commissioner of Income-tax, [1962] 44 ITR 501 (SC) | Prohibition on doubting the genuineness of a firm on mere suspicion; requiring proper inquiry before rejecting on genuineness grounds. | The court relied on this authority to reproach the ITO's approach of doubting the execution/date of the partnership deed on mere suspicion and to hold that the ITO ought to have inquired into the genuineness instead of jumping to conclusions. |
| Abdul Shakoor & Co. v. Commissioner Of Income-Tax, Lucknow, [1968] 69 ITR 467 (All) | Decision under the old Act concerning opportunity to produce deed/requirements under prior legislation. | The court found this decision inapplicable to the present facts because it arose under the old Act, which lacked the specific provision of section 185(2) in the new Act; accordingly the decision offered no assistance to the department. |
| Kanhaiya Lal Motilal v. Commissioner of Income-tax, [1969] 72 ITR 507 (All) | Noticed section 185(2) of the new Act and its provisions regarding intimating defects and permitting rectification. | The court regarded this later Bench decision of the Allahabad High Court as lending support to the court's interpretation that section 185(2) requires intimation of defects and an opportunity to rectify them. |
| Amur Singh Gowamal and Sons v. Commissioner of Income-tax, [1976] 105 ITR 857, 862 (Pat) | Interpretation that registration under the 1922 Act does not continue for assessment year 1962-63; a fresh registration under section 184(1) of the new Act was required for 1962-63. | The court cited this Bench decision to reject the misconception that prior registration under the old Act carried forward for assessment year 1962-63, supporting the requirement of fresh registration under the new Act. |
Court's Reasoning and Analysis
The court proceeded by examining the statutory framework of the new Act (sections 184, 185 and related sub-sections) and the Income-tax Rules, 1962 (in particular rule 22 and its sub-rules), and then applied those provisions to the facts.
1) Form No. 11 vs Form No. 11A — timing and change in constitution:
- Rule 22(4) makes applicable the provisions of rule 22(2) where the application is made after the relevant previous year; rule 22(2)(i) prescribes Form No. 11 where no change in constitution or shares occurred during the previous year, while rule 22(2)(ii) prescribes Form No. 11A where changes did occur.
- The court analysed whether there had been a "change in the constitution of the firm or the shares of the partners" during the relevant previous year (1 April 1961 to 31 March 1962). The ITO had treated the retirement of Lagandeo Singh as a change occurring during that previous year and hence held Form 11A was required.
- Examining the partnership deed (annexure "1"), the court found that the deed stated Mr. Singh "retired from the partnership with effect from April 1, 1961" and that he was a partner only up to 31 March 1961. Thus the retirement took effect at the end of the financial year 1960-61, and there was no change in the constitution during the relevant previous year (1 April 1961 to 31 March 1962).
- Consequently, rule 22(4) brought into play rule 22(2)(i): Form No. 11 was the correct form for an application filed on 30 June 1962 in these facts, and the ITO's view that Form No. 11A was required was incorrect.
2) Authenticity/date of the deed and requirement of inquiry:
- The ITO doubted the existence/execution date of the deed because a certified copy had not been filed and because the deed had not been registered under the Indian Registration Act; the ITO made adverse inferences from the absence of a date below signatures and from the stamp-vendor's endorsement.
- The court observed the ordinary presumption that a document is deemed executed on the date it bears (a rebuttable presumption) and held that the ITO lacked material or any inquiry to displace that presumption. The court emphasised that the ITO should have inquired into the genuineness (including examining attesting witnesses), particularly because the original instrument was available after the remand.
- Invoking Krishna Flour Mills, the court rejected the practice of doubting genuineness on mere suspicion and held the ITO was in error in concluding the deed did not exist on the date of filing.
3) Section 185(2) — obligation to intimate defects and permit rectification:
- Section 185(2) provides that the Income-tax Officer shall not reject an application merely because it is not in order, but shall intimate the defect to the firm and give opportunity to rectify the defect within one month.
- The court rejected the revenue's narrow construction that this provision only permits correction of purely clerical defects in the application itself. The court held that the statutory language is meant to relieve assessees of hardship and to allow rectification of defects that prevent the application from being "in order", including defects in the copy of the partnership deed (for example, absence of the partners' certification).
- The court noted that section 184(5)'s proviso expressly permits a certified copy to be accepted where the original cannot be produced, and therefore partners could themselves rectify a defect by certifying the copy; such rectification falls squarely within the opportunity to be given under section 185(2).
- The court distinguished Abdul Shakoor & Co. as a decision under the old Act, not governing the new Act's specific provision; the court also found support in the Allahabad High Court decision of Kanhaiya Lal Motilal which had noticed section 185(2).
4) Misconception about continuity of old registration:
- The court rejected the ITO's and Additional Commissioner's misconception that registration under section 26A of the old Act might continue to cover assessment year 1962-63; citing Amur Singh Gowamal and Sons, the court held a fresh registration under section 184(1) of the new Act was required for 1962-63.
Having reached these conclusions, the court held the impugned orders were unsustainable: the ITO should have allowed the petitioner an opportunity to certify the copy of the partnership deed and then dispose of the registration application in light of the court's findings.
Holding and Implications
Holding:
Both writ applications are allowed; the impugned orders are quashed.
More specifically, the court quashed the orders contained in annexures "5" and "8" (Civil Writ Jurisdiction Case No. 615/651 of 1971) and, consequentially, the orders in annexures "1" and "3" of Civil Writ Jurisdiction Case No. 1501 of 1971. The court directed that the Income-tax Officer shall afford the petitioner an opportunity to rectify the defect by certifying the copy of the instrument of partnership filed with the application and thereafter dispose of the registration application in accordance with the observations made by the court.
Implications:
- Direct effect on the parties: the petitioner's application for registration must be reconsidered after the ITO permits the petitioner to rectify the defect (certification of the copy of the partnership deed) and conducts any necessary inquiries into genuineness.
- The court rejected the narrow construction of section 185(2) advocated by the revenue and affirmed that the provision requires intimation of defects and an opportunity to rectify, including defects in accompanying certified copies of partnership deeds.
- No order as to costs was made by the court in the circumstances of the case.
1. These two writ applications between the same parties are interdependent and are being disposed of together.
2. In both the writ applications the prayer is for quashing the orders of the income-tax authorities. In the first case the orders sought to be quashed are contained in annexures “5” and “8” while in the other case they are contained in annexures “1” and “3”.
3. Messrs. Ganga Motor Service (petitioner in both the cases) is a partnership firm and carries on the business of bus plying. The firm was first constituted under the partnership deed dated the 5th April, 1957, with four partners and was granted registration as a partnership firm under the provisions of the Indian Income-tax Act, 1922 (hereinafter referred to as “the old Act”), till the assessment year 1961-62. With effect from the 1st April, 1961, Lagandeo Singh, one of the four partners of the firm, retired from the partnership and the remaining three partners under a mutual agreement continued the partnership business and a fresh partnership deed of the remaining three partners effective from the 1st June, 1961, was executed on the 24th August, 1961, a copy of which has been filed as annexure “1” to the first writ application. (Reference to the annexures hereafter will be to the annexures to Civil Writ Jurisdiction Case No. 615 of 1971). It is common ground that under both the partnership deeds the “financial year” had been and has been the “accounting year”. After the Income-tax Act, 1961 (hereinafter referred to as “the New Act”), came into force with effect from the 1st April, 1962, the petitioner, on the 30th June, 1962, filed an application for registration of the firm as a partnership firm under the new Act in Form No. 11 as prescribed under the Income-tax Rules, 1962 (hereinafter referred to as “the 1962 Rules”), along with a copy of the deed of partnership dated the 24th August, 1961, before the Income-tax Officer, Ward “B”, Patna. The Income-tax Officer rejected the application on the 17th February, 1964, as it was filed after the “accounting period” and the application was not accompanied by the original deed or the certified copy thereof. Against that order, the petitioner filed an appeal before the Appellate Assistant Commissioner of Income-tax, who allowed the appeal and directed registration of the firm by order dated the 1st July, 1966 (annexure “3”). Against that order, the department went up in appeal before the Income-tax Appellate Tribunal. The Tribunal came to the conclusion that the petitioner's application for registration was not barred by limitation and the finding of the Assistant Commissioner of Income-tax in this respect was correct. The Tribunal, however, allowed the appeal and set aside the orders passed by both the income-tax authorities below and remanded the case to the Income-tax Officer, vide its order dated the 4th April, 1968 (annexure “4”). After the remand, the Income-tax Officer again rejected the application for registration by his order dated the 18th January, 1969 (annexure “5”), which is one of the orders sought to be quashed. Against that order, the petitioner filed an appeal before the Appellate Assistant Commissioner of Income-tax, who dismissed the appeal as being incompetent, as no appeal lay against that order, by his order dated the 26th August, 1970 (annexure “6”). It may be mentioned that no grievance has been made on behalf of the petitioner against the said appellate order. The petitioner thereafter filed a revision against the order of the Income-tax Appellate Assistant Commissioner before the Commissioner of Income-tax (respondent No. 1). The said revision application was rejected on the 20th February, 1971, by the Additional Commissioner of Income-tax (annexure “8”). Thereafter, Civil Writ Jurisdiction Case No. 651 of 1971 has been filed for quashing the orders contained in annexures “5” and “8”.
4. The other writ application (Civil Writ Jurisdiction Case No. 1501 of 1971) relates to a subsequent assessment year, i.e, 1966-67, and it is common ground that the success or otherwise of that writ application is dependent on the success or otherwise of the first writ application. It may be mentioned that the facts stated in the first application have not been controverted by any counter-affidavit, although a counter-affidavit has been filed on behalf of the department in the other case.
5. Mr. K.N Jain, learned counsel appearing on behalf of the petitioner, has submitted that in view of the order of the Tribunal, it was not open to the Income-tax Officer to go into the question that the application should have been in Form No. 11 A, the matter having proceeded in the first instance, on the footing that the application for registration filed in Form No. 11 was on proper form, which in his submission also was the proper form. In the alternative, learned counsel also submitted that under section 185(2) of the new Act, the income-tax authorities were bound to afford an opportunity to the petitioner to rectify the defects, if any, in the application for registration and their failure to do so vitiates the impugned orders.
6. Mr. Shambhu Sharan, learned standing counsel appearing on behalf of the department, on the other hand, urged that the proper form for filing the application for registration was Form No. 11A and not Form No. 11, and the defect being not of a formal character, could not be permitted to be remedied. According to the submission of the learned counsel, provisions of section 185(2) of the new Act were only meant for removing formal defects and the defect as to form was not a formal defect, the two forms being different in material particulars. He also urged that it was open to the Income-tax Officer to go into the question as to whether application for registration was on proper form, and the order of the Tribunal did not preclude him from going into that question.
7. The principal question that arises for consideration in the case is as to what is the proper form in which the petitioner's application for registration should have been filed, whether Form No. 11 or Form No. 11 A. The legal position in this regard needs to be examined under the new Act.
8. The application for registration in the instant case relates to the assessment year 1962-63, which it is common ground, is governed by the provisions of the new Act. The previous year for the assessment year 1962-63 in the case of the petitioner would be from the 1st April, 1961, to the 31st March, 1962, which is its accounting year. To have the benefit of a “registered firm” for the assessment year 1962-63, the petitioner had to be a “registered firm” under the new Act. A “registered firm” under sub-section (39) of section 2 of the new Act “means a firm registered under the provisions of clause (a) of sub-section (1) of section 185 or under that provision read with sub-section (7) of section 184”.
9. The significance of registration of a partnership firm under the Income-tax Act lies in the fact that after registration the firm would be liable to assessment of income-tax at a lower rate than what otherwise would be in case of an unregistered firm. Under the old Act, applications under section 26A, signed by the partners, for registration had to be made to the Income-tax Officer on behalf of any firm “constituted” by an instrument of partnership, specifying the individual shares of the partners. The original or a certified copy of the instrument of partnership was also to be filed. According to rule 6 of the Rules framed under the old Act, fresh applications for renewal, even in cases where there was no change in the constitution of the firm, had to be filed every year. As certain anomalies and difficulties were noticed in the old Act in regard to registration, changes have been made in this regard in the corresponding provisions of the new Act, as embodied in sections 184, 185 and 186 and in the Rules framed under the new Act, to remedy them. Now, an application for registration of a firm “evidenced” by an instrument of partnership specifying individual shares of the partners, signed by its partners or even their agent in certain specified cases can be filed before the Income-tax Officer having jurisdiction to assess the firm, as provided under sub-sections (1), (2) and (3) of section 184 of the new Act. The time, mode and manner of filing such an application and the renewal of registration have been mentioned in sub-sections (4), (5), (6), (7) and (8), which may usefully be quoted:
“(4) The application shall be made before the end of the previous year for the assessment year in respect of which registration is sought:
Provided that the Income-tax Officer may entertain an application made after the end of the previous year, if he is satisfied that the firm was prevented by sufficient cause from making the application before the end of the previous year.
(5) The application shall be accompanied by the original instrument evidencing the partnership, together with a copy thereof:
Provided that if the Income-tax Officer is satisfied that for sufficient reason the original instrument cannot conveniently be produced, he may accept a copy of it certified in writing by all the partners (not being minors), or where the application is made after the dissolution of the firm, by all the persons referred to in clause (b) of sub-section (3), to be a correct copy or a certified copy of the instrument; and in such cases the application shall be accompanied by a duplicate copy of the original instrument.
(6) The application shall be made in the prescribed form and shall contain the prescribed particulars.
(7) Where registration is granted to any firm for any assessment year, it shall have effect from every subsequent assessment year:
Provided that—
(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, along with its return of income for the assessment year concerned, a declaration to that effect, in the prescribed form and verified in the prescribed manner.
(8) Where any such change has taken place in the previous year, the firm shall apply for fresh registration for the assessment year concerned in accordance with the provisions of this section.”
10. The procedure for dealing with such an application is mentioned in section 185 of the new Act, which lays down that on the receipt of the application, the Income-tax Officer shall enquire into the genuineness of the firm and its constitution as specified in the instrument of partnership, and, if he is satisfied about the genuineness of the firm, he shall register the firm. If he is not so satisfied, he shall refuse registration. A provision has been made in the new Act that an application for registration cannot be rejected merely because it is not in order and the assessee has to be given an opportunity to rectify the defect. [section 185(2) of the new Act, to be quoted later].
11. In exercise of the powers conferred under section 295 of the new Act, the Central Board of Revenue framed rules, called the Income-tax Rules, 1962, and Part V of the Rules relates to registration of firms and consists of rules 22 to 25. Relevant for our consideration is rule 22, which lays down that an application for registration of a firm for the purpose of the Act shall be made in accordance with the provisions of sub-rules (2) to (5), the relevant portions of which are quoted below:
“(2) Where the application is made before the end of the relevant previous year—
(i) and where no change in the constitution of the firm or the shares of the partners has taken place during the previous year before the date of the application—
(a) the application shall be made in Form No. 11, and
(b) it shall be accompanied by the original instrument evidencing the partnership at the date of the application together with a copy thereof. A certified copy of the instrument together with a duplicate copy thereof may be attached to the application if, for sufficient reason, the original instrument cannot be produced;
(ii) and where any change or changes in the constitution of the firm or the shares of the partners have taken place during the previous year before the date of the application—
(a) the application shall be made in Form No. 11A; and
(b) it shall be accompanied by the original instrument or instruments evidencing the partnership as in existence from time to time during the previous year up to the date of the application together with copies thereof. A certified copy of the instrument or instruments together with a duplicate copy thereof may be attached to the application if, for sufficient reason, the original instrument or instruments cannot be produced.”
“(4) Where the application is made after the end of the relevant previous year—
(i) and where no change in the constitution of the firm or the shares of the partners has taken place during the said previous year and up to the date of the application, the application shall be made in accordance with the provisions of sub-clauses (a) and (b) of clause (i) of sub-rule (2);
(ii) and where any change or changes in the constitution of the firm or the shares of the partners have taken place during the said previous year and/or after the end of the previous year but before the date of the application—
(a) the application shall be made in Form No. 11A; and
(b) it shall be accompanied by the original instrument or instruments evidencing the partnership as in existence from time to time during the previous year and up to the date of the application together with copies thereof. A certified copy of the instrument or instruments together with a duplicate copy thereof may be attached to the application if, for sufficient reason, the original instrument or instruments cannot be produced.”
[Sub-rules (3) and (5) are not relevant for our purpose.]
12. Sub-section (4) of section 184, as mentioned above, lays down that an application for registration has to be made before the end of the “previous year” for the “assessment year” in respect of which registration is sought. As the new Act itself came into force from the 1st April, 1962, it is obvious that no such application could be filed by the end of the previous year of the assessment year 1962-63, i.e, during the year 1961-62. To remove this anomaly, the Central Board of Revenue issued a circular allowing the assessees extra time to file applications for registration, in the first instance, up to the 31st July, 1962, which was later extended up to the 30th September, 1962. The petitioner, in the instant case, filed application for registration on the 30th June, 1962, which was within the extended time, as found by the Income-tax Tribunal (annexure “4”). The application for registration having been filed after the end of the relevant previous year Sub-rule (4) of rule 22 of the Rules, quoted above, will be attracted. Sub-rule (4) is in two parts. It lays down that where there has been no change in the constitution of the firm or the shares of the partners during the previous year up to the date of the application, the application shall be in accordance with the provisions of sub-clauses (a) and (b) of clause (i) of sub-rule (2), in Form No. 11, and, in case of change or changes, it will be according to the provisions contained in clause (ii) of Sub-rule (4) made in Form No. 11 A.
13. The question for consideration is whether there has been any change in the constitution of the firm or the shares of the partners during the previous year, that is to say, between the 1st April, 1961, and the 31st March, 1962, in relation to the assessment year 1962-63. The Income-tax Officer in this regard has observed as follows:
“At the beginning of the accounting year relevant to the assessment year 1962-63, that is, on and from 1st April, 1961, Sri Lagandeo Singh walked out of the partnership and…So, on the facts as set forth, there was a change in the constitution of the firm as defined in section 187 of the Act and not the coming of an at once fresh partnership firm into existence. In the situation, the prescribed form in which the assessee should have applied for registration was Form No. 11-A, not Form No. 11.”
14. Section 187 of the new Act relates to a situation when at the time of the assessment it is found that a change has occurred in the constitution of the firm and provides that in such a case the assessment shall be made of the firm as constituted at the time of making the assessment. Probably, the Income-tax Officer thought that the change in the constitution of the partnership firm took place on the 1st April, 1961, so during the “accounting year”, i.e, from the 1st April, 1961, to the 31st March, 1962, and that is why he has referred to section 187 of the Act. This inference on the part of the Income-tax Officer is wholly unwarranted, as is apparent from annexure “1”, the deed of partnership, the relevant portion of which may usefully be quoted:
“Whereas Sri Lagandeo Singh aforesaid retired from the partnership with effect from April 1, 1961, and the parties hereto agreed to continue the business in partnership of one another, and,
“Whereas the parties hereto are accordingly since April 1, 1961, carrying on and will in future carry on the aforesaid business in partnership with one another on terms and conditions stated hereinbelow.”
15. From the above quotation it is apparent that “with effect from April 1, 1961”, which we have underlined*, Shree Lagandeo Singh retired from the partnership, that is to say, he was a partner of the firm only up to the 31st March, 1961, and not for any moment on or after the 1st April, 1961. He retired with effect from the end of the financial year 1960-61. Thus, there was no change in the partnership during the previous year of the relevant “assessment year” 1962-63 and with effect from the 1st April, 1961, the partnership was of three partners only. There being no change in the constitution of the partnership during the “previous year” as erroneously held by the Income-tax Officer, the instant case will be also governed by Sub-rule (4) of rule 22 of the Rules, which makes the provisions of sub-rule (2)(i)(a), (b), applicable to such a case, in which case Form No. 11 will be the proper form of application for registration, as has been done in the instant case.
16. The other ground given by the Income-tax Officer for rejecting the application for registration is the non-filing of a certified copy of the partnership deed along with the application for registration. The Income-tax Officer himself has condoned it, as there was a note in the body of the application that the original would be presented at the time of the hearing, but from the non-filing of the certified copy of the instrument along with the application for registration, he has doubted the very existence of the deed of partnership on the date on which the application was made, i.e, on the 30th June, 1962, the reason being that the deed of partnership was not registered under the Indian Registration Act, to which he has added the absence of the date below the signatures of the partners. He has attached no authenticity to the endorsement as to the date on the back of the stamp-paper on which the instrument of partnership was drawn up. The deed of partnership (annexure “1”) is dated the 24th August, 1961, and, above the signatures of the partners and witnesses, it is mentioned:
“In witness whereof the parties hereto have signed these presents the day month and year, first above written.”
17. From the order of the Income-tax Officer it appears that the endorsement of the stamp-vendor on the back of the stamp-paper also bore the same date, if not earlier. The ordinary presumption is that a document would be deemed to have been executed on the date it bears, of course it is a rebuttable presumption. Without any material having been brought on the record or any inquiry into the matter it was not open to the Income-tax Officer to say that the document was not executed on the 24th August, 1961, the date it bears. Section 185 of the new Act enjoins an inquiry into the genuineness of a firm or its constitution. If the Income-tax Officer had any doubt, he should have inquired into the matter. No such inquiry into the genuineness or otherwise of the firm seems to have been made and he appears to have jumped to the conclusion on mere suspicion. In the case of Krishna Flour Mills v. Commissioner of Income-tax, [1962] 44 ITR 501 (SC) the Supreme Court has strongly deprecated the practice of doubting the genuineness of a firm on mere suspicion. What applies to the genuineness of a firm applies with equal force to an instrument of partnership being executed on a particular date. It would be relevant to point out that no such doubt was cast about the existence of the partnership when the application for registration came up for consideration before the Income-tax Officer in the first instance. The original instrument of partnership was filed before the Income-tax Officer in the course of the fresh proceeding for assessment year 1962-63, as mentioned in paragraph 25 of the other writ application (Civil Writ Jurisdiction Case No. 1501 of 1971), which position has been accepted in the counter-affidavit. The instrument seems to have been filed in pursuance of the remand order of the Tribunal (annexure “4”). The Income-tax Officer could have examined the attesting witnesses and inquired into the matter as to when it was executed, if he had any doubt about it, the document being before him. In our considered opinion, therefore, the Income-tax Officer was clearly in error in holding that the instrument of partnership was not in existence on the date of the filing of the application for registration, i.e, the 30th June, 1962.
18. Faced with this difficulty, learned standing counsel for the income-tax department tried to support the order of the Income-tax Officer on another ground that a certified copy of the instrument of partnership having not been filed along with the application for registration, the application was rightly rejected. On behalf of the petitioner, however, it has been urged that the Income-tax Officer was bound to grant time in case the application for registration was defective in view of the mandatory provisions of section 185(2) of the Act, which reads as follows:
“(2) The Income-tax Officer shall not reject an application for registration merely on the ground that the application is not in order, but shall intimate the defect to the firm and give it an opportunity to rectify the defect in the application within a period of one month from the date of such intimation.”
19. Section 184 of the Act itself provides for accepting a certified copy which is a copy of the original document certified in writing by all the partners to be a correct copy or certified copy of the instrument. It is contended on behalf of the petitioner that if the Income-tax Officer found that the copy was not certified, he could not have rejected the application and was bound to intimate this defect and give opportunity to the applicant to rectify the same by the partners certifying the copy of the document. If the defect was not removed within the period of one month, as provided in sub-section (2) of section 185, quoted above, sub-section (3) of that section provided that the application could be rejected by the Income-tax Officer. Hardly any such opportunity has been given to the petitioner. Learned counsel for the department submitted that this opportunity is meant to remove a defect in the application itself and that also a defect of clerical nature. We do not think there is any substance in this submission of the learned counsel for the department. It is well known that not only courts but quasi-judicial tribunals also have inherent powers to allow clerical mistakes in application filed before them to be corrected. The legislature in its wisdom could not have inserted a provision like the one contained in sub-section (2) of section 185 of the new Act, if it was meant to correct merely clerical mistakes. To relieve the assessees of hardship on account of there being defect in the application for registration, the legislature, in our considered opinion, has made a specific provision that such defect must be intimated to the assessee and he should be allowed an opportunity to make his application in order. The enabling provision for allowing an opportunity to the assessee for rectifying the “defect” and making the application “in order” does not admit of any narrow construction, as urged by the learned standing counsel for the department, that removal of such defect should be confined to the application alone and will not include rectifying defect in the copy of the deed of partnership accompanying the application for registration. Provision has been made for permitting a certified copy of the partnership deed to be filed along with the application for registration. A certified copy of the deed of partnership is a true copy of the deed certified by the partners themselves, as laid down under the proviso to sub-section (5) of section 184 of the new Act. The partners could, therefore, themselves rectify the defect in the copy of the deed of partnership, as they could in the application for registration itself. The decision in the case of Abdul Shakoor & Co. v. Commissioner Of Income-Tax, Lucknow*., [1968] 69 ITR 467 (All), relied upon by the learned standing counsel, is not at all applicable to the facts of the present case and is of no assistance to the department. That case is under the old Act, in which there was no such provision. In that case as a matter of fact, an opportunity was allowed to the assessee to produce the deed of partnership, but no document was produced. On the other hand, the interpretation put by us on sub-section (2) of section 185 of the Act gains some support from a later Bench decision of the Allahabad High Court in the case of Kanhaiya Lal Motilal v. Commissioner of Income-tax, [1969] 72 ITR 507 (All) in which section 185(2) of the new Act has been noticed.
20. The Income-tax Officer and the Additional Commissioner of Income-tax both were labouring under a misconception of the legal position that the registration of a firm under section 26A of the old Act for the assessment year 1961-62 or earlier might continue for the assessment year 1962-63 with which the new Act was concerned and a fresh registration for the first time under section 185 of the new Act was not necessary, in view of clauses (2) and (3) of the Income-tax (Removal of Difficulties) Order, 1962. This view is wholly wrong and clauses (2) and (3) of the said Order, read with sections 297 and 298 of the new Act does not admit of any such construction. The view we have taken gains support from a Bench decision of this court in the case of Amur Singh Gowamal and Sons v. Commissioner of Income-tax, [1976] 105 ITR 857, 862 (Pat) (Tax Case No. 46 of 1969—decided on the 23rd November, 1973) where, after referring to the provisions of section 184(1) of the new Act, Untwalia C.J (as he then was) observed as follows:
“Reading the provisions aforesaid in the background of the provisions contained in section 184(7), it is clear that a registration granted under the 1922 Act cannot have the effect of continuing the registration for the assessment year 1962-63 to which the 1961 Act became applicable. For that year an application for registration of the firm for the purposes of the 1961 Act has got to be made in accordance with section 184(1) and the fact of registration under this Act has got to be noted under sub-section (4) of section 185. Until that is done for the assessment year 1962-63, subsection (7) does not come into operation for that year; it comes into operation for the subsequent assessment year beginning from 1963-64.”
21. It is, therefore, manifest that the order of the Income-tax Officer as well as that of the Additional Commissioner of Income-tax contained in annexures “5” and “8”, respectively, cannot be sustained and are hereby quashed. The result of our order will be that the Income-tax Officer will afford an opportunity to the petitioner to rectify the defect by certifying the copy of the instrument of partnership filed along with his application for registration, and, thereafter, dispose of the application for registration in the light of the observations made above.
22. The orders contained in annexures “1” and “3” of the other writ application (Civil Writ Jurisdiction Case No. 1501 of 1971) have also to be quashed, being consequential to the quashing of the orders in Civil Writ Jurisdiction Case No. 615 of 1971.
23. In the result, both the writ applications are allowed but, in the circumstances of the case, there will be no order as to costs.
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