COMMISSIONER OF INCOME TAX, KANPUR versus NITYA NANO DEVKINANDAN

Citation: [1997] SUPP. 1 S.C.R. 575 · Decided: 08-07-1997 · Supreme Court of India · Bench: S.C. AGRAWAL · Disposal: Appeal(s) allowed

Judgment (excerpt)

COMMISSIONER OF INCOME TAX, KANPUR 
v. 
NITYA NANO DEVKINANDAN 
JULY 8, 1997 
[S.C. AGRAWAL AND D.P. WADHWA, JJ.] 
Income Tax Act, 1961-Sections 184(7), 185(3), (4), 263-
Revision-Order u/s. 185(4)-Scribing of certificate u/s. 185(4) of the Act that 
A 
B 
the [inn stands registered for subsequent years-Whether results in an order, C 
revisable u/s. 263 of the Act-Held, Yes. 
The respondent, assessee firm was allowed registration u/s. 185 of 
the Income Tax Act, 1961 for the assessment year 1967·68 and continued 
to be treated as a registered firm upto the assessment year 1973-74, when 
a show cause notice u/s. 263 of the Act was issued, requiring the assessee D 
firm to show cause as to why the registration granted to it u/s. 184(7) in 
respect of the assessment years 1972-73 and 1973-74 should not be can· 
celled. It was stated that in 1966 when the assessee firm submitted the 
application for registration for the assessment year 1967-68 in Form 11-A, 
there was discrepancy regarding shares of different partners as men· 
tioned in the pa1·tnership deed and the shares of the partners shown in the E 
application for 1-egistration made in Form ll·A; that in each of the years 
relevant to the assessment years 1967·68 to 1973-74 the account books of 
the assessee firm showed that the profits in the firm had not been dis· 
tributed amongst its partners in accordance with the shares mentioned in 
Form No. ll·A and, therefore, various orders passed by the Income Tax F 
Officer whereunder the assessee firm was granted registration for the 
assessment year 1967-68 and was treated to be continuing as a registered 
firm for the subsequent years were erroneous and prejudicial to the 
interest of the Revenue. The Commissioner, therefore, in exercise of his 
powers u/S. 263 of the Act, cancelled the renewal of registration granted to 
the assessee firm for the assessment years 1972-73 and 1973-74. In appeal, G 
the Tribunal held that according to Sec. 184(7) registration of the firm was 
to remain effective for the years subsequent to the year 1967-68 automat· 
ically and there was no order in regard to initial registration continuing 
to be effective in the subsec1uent years which could be revised by the 
Commissioner u/S. 263 of the Act and that profits of the firm in various H 
575 
576 
SUPREME COURT REPORTS [1997] SUPP. 1 S.C.R. 
A years had been divided amongst its partners in accordance with the shares 
mentioned in the partnership deed on the basis of which the firm was 
granted registration for the assessment year 1967-68 and neither registra· 
tion of the assessee firm for that year nor its being continued to be treated 
as registered for subsequent years could be said to be erroneous merely 
B for the reason that there was discrepancy in the shares of the partners as 
mentioned in the application made in Form 11-A. The matter was referred 
for opinion of the High Court by the Income Tax Appellate Tribunal. The 
High Court affirmed the view of the Tribunal holding that in the matter 
of continuation of the registration for the assessee firm no order had been 
passed by the Income Tax Officer which could be the subject matter of 
C revision u/S. 263 of the Act as he only appends a certificate on the 
instrument of the partnership that the firm stands registered. This appeal 
had been filed against the judgment of the High Court. 
Allowing the appeal, this Court 
D 
HELD: 1.1. For the purpose of treating the registration of a firm as 
continuing for a subsequent assessment year the Income Tax Officer is 
required to apply his mind to the declaration that is furnished by the firm 
under Section 184(7) of the Income Tax Act, 1961 and to examine whether 
the declaration is in accordance with the provisions of the Act and the 
E rules framed thereunder and after satisfying himself that it is so, he has 
to record the certificate on the instrument of partnership or on the 
certified copy submitted in lieu of the original instrument to that effect 
that the registration shall have effect for the relevant assessment year. In 
cases where the Income Tax Officer finds that the declaration is not in 
p 
accordance with the provisions of the Act and the rules framed thereunder 
he has to pass an order declaring that the registration granted to the firm 
in any assessment year shall have no effect for the relevant assessment 
year. At that stage the Income Tax Officer has to apply his mind and take 
a decision whether to record a cer

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