ORDER
C.L. Sethi, J.M.
1. The assessee is in appeal against the order dt. 10th Jan., 1995 of the CIT(A) in the matter of on assessment made under sections 143(3) and 185 of the IT Act,1961 of the asst. yr. 1991-92.
2. Ground Nos. 1 to 3 are directed against the CIT(A)’s order restoring the issue of registration of the firm to the file of the AO. The AO did not grant continuation of registration to the firm under Section 184(7) of the Act as he held that the Form No. 12, which was stated to have been filed on 28th June, 1991, was not signed by all the partners of the firm. The AO noted that the Form No. 12 was not available on record but it was claimed by the assessee that it had filed the same on 28th June, 1991 vide receipt No. 84, with a view to enquire the genuineness of Form No. 12 as to whether the same was signed by all the partners. The AO issued letters to all the partners to intimate if they had signed the Form No. 12 for the asst. yr. 1991-92. All the partners except one partner, namely Smt. Sarala Thard, confirmed that they had signed the Form No. 12. Smt. Sarala Thard, one of partners, intimated vide her letter dt, 16th April, 1994 that she had not signed Form No. 12. The AO therefore, brought the fact of non-signing Form No. 12 by Smt. Sarala Thard to the notice of the assessee, who thereupon submitted before the AO that mere denial by her regarding her signature on the Form No. 12 was not sufficient as she had now retired from the firm. It was submitted by the assessee that she should be summoned under Section 131 to identify her signature on Form No. 12. The assessee also requested the AO to supply it a copy of the letter dt. 16th April, 1994 written by the Smt. Sarala Thard. The AO however, did not find it necessary to issue summons under Section 131 to her. The AO therefore, refused continuation of registration by saying that the assessee has not produced any evidence to the effect that said Smt. Sarala Thard had signed the Form No. 12, and thus Form No. 12 which was stated to have been filed on 28th June, 1991, was not signed by all the partners.
3. Being aggrieved, the assessee preferred an appeal before the CIT(A), who held that the AO had refused continuation of registration on the basis of statement of Smt. Sarala Devi without examining her and without giving the other partners an opportunity of cross-examination. The CIT(A), therefore, restored the issue to the AO for fresh consideration after proper enquiry and examination as stated in his order. Being dissatisfied, the assessee is in appeal before us.
4. We have heard the rival contentions of the parties. We have gone through the orders of the authorities below. We have perused the written submissions submitted by the assessee. We have also deliberated upon the decisions cited at the Bar. It is an undisputed fact that the Form No. 12 was not available on record. Admittedly the assessee has not submitted any duplicate Form No. 12 before the AO during the course of assessment proceedings. Further, we find that Smt. Sarala Thard was a partner of the firm during the year under consideration, and as well as was also a partner at the time of filing Form No. 12, which is alleged to have been submitted on 28th June, 1991. The AO, therefore, was justified on making enquiry regarding signatures of Smt. Sarala Thard on Form No. 12 as Hon’ble Karnataka High Court in the case of Addl. CIT v. S.V. Ratnaswamy & Sons (1977) 106 ITR 154 (Kar) held that the declaration in Form No. 12 was liable to be made only by the partners who constituted the firm as on the date of making of the said application; and the enquiry must necessarily be directed to the ascertainment as to the parties who would be adversely affected if there is a non-compliance of registration of the firm; and it is these partners, who constituted the firm at the time of making such declaration, who would be adversely affected in consequence of a non-continuance of the registration. The contention of the assessee’s learned counsel that AO’s enquiry should have been restricted to the partners constituting the firm on the date of enquiry, i.e., 10th Feb., 1994, made by the AO is misconceived as much as it is clear from the aforesaid decision of Karnataka High Court, on which assessee has placed reliance, that enquiry should be confined to the partners, who constituted the firm at the time of making declaration for granting registration.
5. We further find that there is a force in the submission made by the learned counsel for the assessee that non-signing of declaration by one partner would make the declaration defective but not totally infirm or non est in law and therefore, the AO could not have straightaway denied the continuation of registration to the assessee-firm, but AO was bound to give an opportunity to the assessee to remove the defect.
6. In view of that matter and in the facts and circumstances of the case and in the light of foregoing discussions made by us, we are of the considered opinion that the CIT(A) was justified in directing the AO to decide the issue afresh after proper enquiry examining Smt. Sarala Thard and giving the other partners or the assessee-firm an opportunity of cross-examination of Smt. Sarala Thard. We would like to observe that the AO shall also provide an opportunity to the assessee-firm to remove, the defect in the declaration filed by the assessee-firm if so desired by the assessee-firm.
7. Therefore, the order of CIT(A) on this issue is upheld with our observation as made above.
8. Ground No. 4 is related to the disallowances out of telephone expenses. The AO disallowed telephone charges to the extent of Rs. 10,000 in Head Office a/c and Rs. 5,000 in Calcutta Branch a/c. On appeal CIT(A) upheld the disallowances of Rs. 5,000 in absence of log book, but he failed to adjudicate the issue related to disallowances of Rs. 10,000 in the Head Office a/c. Being situated thus, the assessee is in appeal before us.
9. Having considered the rival contentions of parties and having perused the orders of the authorities below, we hold that the disallowances of Rs. 5,000 in Branch a/c is based on no positive or cogent material and such is liable to be deleted. We therefore, delete the said addition of Rs. 5,000 on account of telephone charges in Branch a/c.
10. With regard to the disallowances of Rs. 10,000 out of telephone charges in Head Office a/c, we find that the CIT(A) did not decide this point though a ground to that effect was taken by the assessee. We further find that the AO has disallowed the amount of Rs. 10,000 on estimate without bringing any material in that behalf. We, therefore, set aside this issue to the file of AO to decide it afresh on the basis of materials and evidence that may be produced by the assessee. The AO shall provide adequate opportunity of being heard to the assessee.
11. In the result, the appeal filed by the assessee is partly allowed.
N.S. saini, AM.
1. I have the benefit on going through the proposed order of my learned brother in this case. Despite my best efforts and great persuasion to myself I have not been able to agree with the conclusions as arrived at by the learned JM. The reason of the same are incorporated in the present order of mine which is as under :
As the facts of the case has already been incorporated by the learned brother, hence I refrain from repeating the same except to the extent that the CIT(A) has found in this case that Smt. Sarala Devi had retired from the assessee’s partnership firm on 31st March, 1992 and the AO had refused the registration on the basis of the statement of said Smt. Sarala Devi without examining her and without giving the other partners an opportunity for cross-examination. The above finding of CIT(A) was not in dispute before us. After observing as above, the CIT(A) restored the matter of continuation of registration to the file of AO with the direction to reconsider the same after proper enquiry and examination as stated above. The assessee being aggrieved by this direction has come in appeal before us.
2. In my considered opinion to make an assessment is a quasi judicial proceeding. In discharge of their duties, the AO receive a good deal of information which is not all evidence according to the accepted norms of law. Consequently, it is only fair and just that the accuracy or otherwise of such information be ascertained by giving the assessee an opportunity to prove that the officer arbitrariness will certainly not ensure fairness. If giving more opportunity to show-cause and to explain would satisfy the principles of natural justice, the notice to show-cause become an empty formality signifying nothing, for after issuing the notice of show-cause, the authority can decide according to his whims and fancy. The judicial process does not end by making known to the person the proposal against him and giving him a chance to explain. It extends further to judicial consideration of his representation and the materials and a fair determination of the question involved vide [M. Appukutty v. STO (1966) 17 STC 380 (Ker)). It is trite law that cross-examination is the sine qua non of due process of taking evidence and no adverse inference can be drawn against a party unless the party is put on notice of the case made out against him. He must be supplied the contents of all such evidence, so that he can prepare to meet the case against him. This necessary also postulates he should cross-examine the witness hostile to him vide [CIT v. Eastern Commercial Enterprises (1994) 210 ITR 103 (Cal)). In cases where the assessing authority has collected some information from third party, then the assessee is entitled to apply for cross-examination of such person for the purpose of eliciting the truth or for providing that the information furnished by such persons is not genuine [vide Mukund Singh v. Presiding Officer, ST Tribunal (1997) 107 STC 300 (Punj)). If, in spite of application under Section 131 having been made by the assessee, IT authority does not properly exercise his powers under section for enforcing attendance of a witness, he shall not be justified in fastening the blame at the door of the assessee and in disbelieving his version of the facts for that reason [vide Nathuram Premchand v. CIT (1963) 49 ITR 561 (All)).
3. It is a cardinal rule of interpretation of statute that while interpreting the provision, textual as well as contextual perspective both should be given equal primacy and attempt should be made to synchronise textual meaning with the object and purpose of the statute. The Hon’ble Karnataka High Court in the case of Addl. CIT v. S.V. Ratnaswamy & Sons (1977) 106 ITR 154 (Kar) explaining the object behind the enactment that declaration is Form No. 12 under Section 184(7) is to be filed under the signature of the partners who constitutes the firm on the date of making of declaration, explained that it is these partners who constitutes the assessee-firm now would be adversely affected in consequence of a non-continuance of registration, The High Court also pointed out that the enquiry must necessarily be directed to the ascertainment as to the parties who would be adversely affected if there is a non-continuance of the registration of the firm. In other words, the partners who are already retired from the firm will not be affected or troubled by non-grant of continuance of registration to the assessee-firm. Thus, drawing an analogy from the above decision, it is my considered opinion as Smt. Sarala Devi retired from the firm on 31st March, 1992 and was not constituting the assessee-firm in March, 1994 when the assessment of the firm was taken up by the AO. She would now not be affected or troubled if the continuance of registration is not granted to the assessee-firm. In the above circumstances, in my considered opinion, the AO was not justified in treating the statement of Smt. Sarala Devi as sacrosant without examining her and without allowing the other partners to cross-examine her.
4. It is observed that no reason has been given, in the order of assessment for assuming the statement of Smt. Sarala Devi as true and correct and for ignoring the statement of the assessee-firm as false and incorrect. The Hon’ble Punjab & Haryana High Court in the case of Chiranjilal Steel Rolling Mills v. CIT (1972) 84 ITR 222 (P&H) held that the AO has a power to collect evidence from any source but it is his duty to put it to the assessee before making it basis of assessment. If the assessee denies the information collected by him, it is the duty of the officer to satisfy himself by making independent enquiry from sources considered reliable by him so as to decide whether the information passed on him is true or not. If, as a result of his own independent enquiry he comes to the conclusion that the information received by him is true, he is at liberty to act thereupon after disclosing it to the assessee and affording to him a reasonable opportunity of rebutting it. But he has no right to burden the assessee with an extra amount of tax on a vague information given to him without verifying its truthfulness or reliability. In view of the above also, in the instant case as the assessee denied the truthfulness of the information furnished in the statement of Smt. Sarala Devi, the AO has no right to use the said statement without verifying independently its truthfulness and reliability. Thus, the use of the said statement was not legally permissible.
5. In the case of the ITO v. Cloth Distributor (1989) 34 TTJ (Ahd) 115 the Hon’ble Ahmedabad Bench of this Tribunal has held that if the assessee has been unjustly denied an opportunity to cross-examine the witness whose testimony the ITO intended to rely against the assessee such an evidence cannot be read against the assessee. From the facts on record it is observed that the statement of Smt. Sarala Devi was relied upon by the AO without examining her and without giving the other partners an opportunity of cross-examination. Further, from the records it is also evident that the request of the assessee to summon Smt. Sarala Devi under Section 131 of the Act was also turned down by the AO. In the circumstances, respectfully following the above decision of the Hon’ble Ahmedabad Bench of the Tribunal and considering the fact and circumstances of the case in totality, in my considered view the statement of Smt. Sarala Devi could not have been read at all by the AO against the assessee-firm. And an order passed by the AO by still drawing an adverse inference from such a statement cannot be sustained in law and the same is liable to be quashed. My above view also finds support from the decision of Hon’ble Kerala High Court in the case of MO. Thmakutty v. CIT (1958) 34 ITR 501 (Ker).
6. Further, in the instant case no doubt about the genuineness of the assessee partnership firm or its constitution in the relevant year was entertained by the AO. It is not in dispute that the firm was in existence since 1985 and has all along been granted registration. The constitution of the firm during the year under consideration remained the same as in earlier years and in the immediately subsequent year. It is also an admitted fact that even in the immediately subsequent year the firm was granted the continuation of registration. Further, as required under Section 184(7) of the Act, the assessee-firm has also filed declaration in the Form No. 12 within the due date. It was the duty of the Department to keep properly the documents filed by the assessee. There is no reliable and relevant material on record to show that the said Form No. 12 was not verified in the manner as required by law. In the circumstances, in my considered opinion the lower authorities were not justified in not granting continuation of registration to the assessee-firm for the year under consideration.
7. Even otherwise also the allegation of the Revenue about the non-signing of the declaration in Form No. 12 by one partner will not make the declaration form filed in accordance with law as totally infirm or non est in law. The same will be a technical defect, which could have been cured. Section 185(3) of the Act enjoins a mandatory duty upon the AO to intimate the defect to the firm and give it an opportunity to rectify the defect therein within a period of one month from the date of intimation, Without affording such an opportunity, it was not open to the AO to refuse grant of continuation of the registration to the assessee-firm. The above opinion is also supported by the decision in the case of Arora Bros. v. CIT [sic–CIT v. India Sea Foods]; (1991) 192 ITR 515 (Ker), CIT v. Ghosh & Sons (1986) 159 ITR 459 (Cal), Vijay Cloth Stores v. CIT (1989) 176 ITR 50 (Pat) and Brijrattanlal Bhoop Kishore v. CIT (1992) 136 ITR 722 (All). In the instant case no such opportunity was given to the assessee-firm by the AO, the order of the AO suffers from this defect also. Further, admittedly the Form No. 12 was not available in the office of AO so that defect could be cured therein by returning the same to the assessee. Hence, in my considered opinion, the AO should have directed the assessee to file a fresh declaration in Form No. 12 and should have condoned the delay so caused in filling of the declaration. The above view also finds support from the decision of the Hon’ble Hyderabad Bench of the Tribunal in the case of ITO v. Sandhya Finances (1992) 43 TTJ (Hyd) 133 : (1992) 40 ITD 424 (Hyd).
8. However, as it has already been held by me that non-grant of continuation of registration to the assessee-firm for the year under consideration was not proper, I set aside the orders of the lower authorities on this point and direct the AO to grant continuation of registration to the assessee-firm for the year under consideration. Thus, this ground of appeal is allowed.
9. The next ground of the appeal was directed against the disallowance of Rs. 15,000 out of telephone charges.
10. The AO disallowed Rs. 10,000 out of telephone expenses of the head Office of the assessee-firm and Rs. 5,000 out of telephone expenses of the Calcutta Branch Office of the assessee-firm on the ground that the expenses under this head were very high.
11. I fully agree with my learned Brother in respect of deletion of the disallowance of Rs. 5,000 relating to the Branch Office of the assessee-firm.
12. In respect of the disallowance of Rs. 10,000 relating to head office it has been found that the disallowance was made by the AO on estimate without bringing any material in this behalf.
In view of this finding and as the reason given by the AO for disallowance of telephone expenses of Rs. 10,000 in head office and Rs. 5,000 in Branch Office were similar and we have already deleted the disallowance of Rs. 5,000 in respect of Branch Office. In my considered opinion, a different view in respect of the disallowance of Rs. 10,000 relating to head office cannot be taken. Hence, the disallowance of Rs. 10,000 is also hereby deleted.
13. In the result, the appeal filed by the assessee is allowed.
REFERENCE UNDER S. 255(4) OF THE IT ACT, 1961
N.S. Saini, A.M.
1. In this appeal there is difference of opinion between the members. In view thereof, the issue is referred to the Hon’ble President of the Tribunal under Section 255(4) of the IT Act, 1961, for opinion of the Third Member on the issues which are framed as under :
(1) Whether, on the facts and circumstances of the case, the AO after bringing to the notice of the assessee the statement of Smt. Sarala Thard, considered the submissions and representation of the assessee in a judicious manner for fair determination of the issue involved?
(2) Whether, on the facts and circumstances of the case, the AO was justified in treating the statement of Smt. Sarala Thard which was made by her after her retirement from the assessee-firm, as sacrosanct without examining her and without allowing the assessee-firm to cross-examine her?
(3) Whether, on the facts and circumstances of the case, there was any material on record for the AO to assume the statement of Smt. Sarala Thard as true and correct and for further implying that the statement of the assessee was incorrect or false.
(4) Whether, on the facts and circumstances of the case, as the assessee has denied the truthfulness of the information furnished in the statement of Smt. Sarala Thard the AO was justified in law in using the said statement against the assessee without verifying independently the truthfulness of the said statement and without bringing on record any material to show that the said statement was true and correct?
(5) Whether on the facts and circumstances of the case, the AO was justified, after refusing the request of the assessee for summoning Smt. Sarala Thard under Section 131 of the Act to still take the statement of Smt. Sarala Thard against the assessee?
(6) On the facts and circumstances of the case, in view of the decision Addl. CIT v. S.V. Ratnaswamy Sons (1977) 106 ITR 154 (Kar) and Chiranjilal Steel Rolling Mills v. CIT (1972) 84 ITR 222 (P&H) was there any reliable and in view of ITO v. Cloth Distributors (1989) 34 TTJ (Ahd) 115 was there any relevant material on record to show that the declaration filed by the assessee in Form 12 was not verified in the manner as required by the law?
(7) Whether in view of the admitted fact that declaration in Form No. 12 filed by the assessee is not available in the record of the AO, the defect therein, if any, can be cured by the assessee?
(8) On the facts and circumstances of the case the CIT(A) after finding that the statement of Smt. Sarala Thard was relied upon by the AO without examining her and without allowing the assessee to cross-examine her whether the CIT(A) was justified in restoring the matter back to the file of the AO so as to allow the AO to play the second innings on the same set of fact?
(9) Whether after finding that disallowance to telephone charges of Rs. 10,000 was made by the AO on estimate without bringing any material in that behalf, still the issue is to be set aside to the file of the AO for reconsidering the matter and thereby allowing him to play a second innings on the same set of facts or the disallowance so made is to be deleted?
(10) Whether, on the facts and circumstances of the case, as disallowance of telephone expenses of Rs. 5,000 out of the expenses of the Branch office was deleted by us, the disallowance of telephone expenses out of the expenses of the head office is to be deleted or set aside?
C.L. Sethi, J.M.
1. A difference of opinion having emerged between the JM and the AM, who heard this appeal, we hereby state the points on which we differ and refer the matter to the Hon’ble President of the Tribunal for further appropriate action :
(1) Whether, on the facts and in the circumstances of the case, and when there is an undisputed finding that the AO had refused the continuance of registration to the assessee-firm for the asst. yr, 1991-92 on the basis of the statement of one of its partners, viz., Smt. Sarala Devi, who later retired on 31st March, 1992, without examining her and without giving the other partners an opportunity for cross-examination. The CIT(A) was justified in restoring the issue to the AO for fresh consideration after proper enquiry and examination?
(2) Whether, on the facts and in the circumstances of the case, the order of the CIT(A) be upheld by restoring the matter to the AO to decide the issue afresh after proper enquiry and examining Smt. Sarala Thard and giving the other partners of the assessee-firm an opportunity of cross-examination of Smt. Sarala Thard with a further observation that the AO shall also provide an opportunity to the assessee-firm to remove the defect in the declaration filed by the assessee if so desired by the assessee-firm as proposed by the JM?
(3) Whether, on the facts and in the circumstances of the case, the order of the CIT(A) be set aside, and the AO be directed to grant continuation of registration to the assessee-firm for the year under consideration as proposed by the AM?
(4) Whether, on the facts and in the circumstances of the case, the disallowance of Rs. 10,000 on account of telephone expenses be deleted even when it is found that this matter was not dealt with and decided by the CIT(A) though a ground to that effect was taken before him by the assessee or the matter be set aside to the AO for fresh adjudication on the basis of materials and evidence that may be produced by the assessee.
V. Dongzathang, President (As Third Member)
1. There being a difference of opinion between the Member of the Bench, various points of difference have been referred to me under Section 255(4) of the IT Act, 1961.
2. On careful perusal of the various points raised, it is seen that the main issue is in regard to continuation of registration to the assessee for asst. yr. 1991-92. The main question is whether the order of the CIT(A) be set aside and restored to the AO for fresh consideration, after proper enquiry and examination or registration to the assessee-firm for the year under consideration should be granted.
3. The assessee is a firm. It is a whole-sale-cum-retail dealer in various types of hardware goods, Return of income was filed on 26th March,1993. The assessee claimed the status of registered firm by filing Form No. 12 on 28th June, 1991 vide receipt No. 84. A thorough search was made by the dealing clerk concerned of the ITO Ward-3 from whom the file was received by the AO on transfer. The same could not be traced out. Since there was evidence of filing of Form No. 12, the AO wrote to all the partners to intimate, if they had signed the Form No. 12 for the asst. yr. 1991-92 which is under consideration. Except Smt. Sarala Thard, all the partners confirmed the signing of the Form No. 12 Smt. Sarala Thard, however, intimated vide her letter dt. 16th April, 1994 that she had not signed the Form No. 12 for the asst. yrs. 1991-92 and 1992-93. The AO, therefore, brought to the notice of the assessee in regard to the denial of signing of the Form No. 12 by one of the then partners Smt. Sarala Thard. The assessee contended that the Form No. 12 was duly signed by Smt. Sarala Thard, who has retired by now. It was, therefore, contended that she should be summoned under Section 131 to identify her signatures in Form No. 12. The authorized representative also requested the AO to supply copy of the letter written by Smt. Sarala Thard denying her signature. The AO, however, held that having supplied copy of the letter of Smt. Sarala Thard to the learned authorized representative, there is no question of summoning Smt. Sarala Thard under Section 131 to identify her signature. The AO, therefore, held that in the absence of any evidence produced by the assessee to show that Smt. Sarala Thard had signed the Form No. 12, he refused to grant continuation of registration for the year under consideration.
4. Aggrieved by the said order, the assessee took up the matter in appeal before the CIT(A). The learned CIT(A) considered the submission and it was found by him that Smt. Sarala Devi retired from the partnership firm on 31st March, 1992 which was not disputed. The AO had refused registration on the basis of statement of Smt. Sarala Devi, without examining her and without giving the other partners an opportunity of cross-examination. He, therefore, restored this point before the AO for fresh consideration after proper enquiry and examination, as stated above.
5. The assessee is still aggrieved and came up in appeal before the Tribunal contending that the learned CIT(A) was not justified to restore the matter of continuation of registration under Section 184(7) of the Act to the AO. He ought to have held the status of petitioner as registered firm. Having complied with the requirement of Section 184(7) of the IT Act, 1961 the status of the petitioner should have been taken as a registered firm.
6. The Tribunal heard both the parties and considered the submissions carefully. The learned JM was of the view that the CIT(A) was justified in directing the AO to decide the issue afresh after proper enquiry examining Smt. Sarala Thard and giving the other partners or the assessee firm an opportunity of cross-examination of Smt. Sarala Thard. It was further directed that the assessee should be provided an opportunity to remove the defect in the declaration filed by the assessee-firm, if so desired by the assessee.
7. On the other hand, the learned AM was of the view that the continuation of registration should be granted to the assessee. According to him the correctness of the statement of Smt. Sarala Thard was not verified and in the absence of such verification, adverse inference could not be taken against the assessee. Secondly, the genuineness of the partnership firm or its constitution in the relevant year was not doubted. The firm was in existence since 1985 and has all along been granted registration. Even in any case the non-signing of the declaration in Form No. 12 by one of the partners will be a technical defect which could be cured. The claim of continuation of registration could not be rejected without giving opportunity to the assessee to rectify the defect. In that view of the matter it was held by him that non-grant of continuation of registration to the assessee-firm for the year under consideration was not proper. He, therefore, set aside the order of the lower authorities on this point and directed the AO to grant continuation of registration to the assessee-firm for the year under consideration.
8. It is on this difference of opinion that the matter was referred to me under Section 255(4) of the Act. At the hearing before me, Shri Sanjay Mody learned authorized representative appeared for the assessee and Shri B.B. Dev learned Senior Departmental Representative appeared for the Revenue. They were heard at length.
9. A careful perusal of the orders of the AO, the CIT(A) and the Members of the Tribunal and on further consideration of the rival submissions made in this behalf, it is apparent that both the views expressed by the Members are possible views. One cannot be faulted if any of the views is taken. However, the aim of litigation is to settle the issue once for all and reduce further litigation. To this end, the case has to be examined.
10. The facts are not disputed. The assessee filed a return of income on 26th March, 1993 claiming the status of registered firm. Form No. 12 for continuation of registration was filed on 28th June, 1991. The fact of filing of the application for continuation of registration in Form No. 12 is not doubted. The genuineness of receipt No. 84 issued by the IT Office is also not in question. The only problem is that the said application in Form No. 12 was not available in the office of the ITO. In such a case the benefit of doubt should automatically go to the assessee who has duly filed the application in Form No. 12 and for which it was holding the receipt No. 84 of 28th June, 1991. If there is any doubt about the genuineness of the receipt obtained by the assessee from the IT Office, then only there can be some doubt or suspicion about the fact of the filing of application for continuation of registration in Form No. 12. Since the AO did not doubt the genuineness of the receipt in token of the filing of application in Form No. 12, the benefit of doubt is to be given to the assessee and the assessee should not be allowed to suffer due to the inefficiency of the office staff.
11. The AO has issued letters to the partners to confirm the signing of the Form No. 12 for the assessment year under consideration. Admittedly all the partners, except Smt. Sarala Thard confirmed the signing of the application in Form No. 12 for the year under consideration. Smt. Sarala Thard, however, denied that she had signed the said application in Form No. 12. The original Form No. 12 was submitted on 28th June, 1991. The letter of enquiry by the AO was sent on 10th Feb., 1994 i.e., 3 years after the filing of the application in Form No. 12 on 28th June, 1991. Smt. Sarala Thard denied having signed the application in Form No. 12. There is, however, no denial about her being partner at that relevant time. She did not also deny that she received the share of profit and also whatever receivable at the time she retired from the firm w.e.f.lst April, 1992. Not only that the AO completed the assessment for the subsequent asst. yrs. 1992-93 on 23rd March, 1995 and allowed continuation of registration in spite of the letter of Smt. Sarala Thard denying signing of the application in Form No. 12 for asst. yrs. 1991-92 and 1992-93. From the above facts, it is clear that the genuineness of the partnership firm was not doubted and it is also not doubted that the partnership was run on the basis of the partnership deed and the profit, etc. were distributed on the basis of the partnership deed. The only default even if it is proved is only on account of the non-signing of the Form No. 12 by Smt. Sarala Thard. The question whether she had signed or not is neither proved by her letter nor by the AO. The mere assertion of Smt. Sarala Thard by her letter dt. 16th April, 1994 does not prove that she did not sign the Form No. 12 on 28th June, 1991. In fact the credibility of Smt. Sarala Thard is more doubtful as she was no more a partner of the firm by the time she wrote the letter. In such a case also the benefit of doubt has to go in favour of assessee. Thirdly, the Revenue authorities considered this very issue in the next assessment year and the matter was considered at the level of the Dy. CIT and it was held that the firm was genuine and the Form No. 12 filed by the assessee was acceptable. On identical facts, the Revenue is not justified in taking a different view for the different assessment years. The AO, therefore, was not justified in denying the continuation of registration for the year under consideration.
12. Even assuming that the matter was restored back to the AO, ultimately the same result will be achieved as the AO will be dutybound to give opportunity to the assessee to rectify the deficiency in Form No. 12, Smt. Sarala Thard will not be in a position to refuse to sign the Form No. 12 when she was the partner, sharing the profit and obtaining the benefit from the partnership at the relevant time as a partner. It will, therefore, be unnecessary prolonging the litigation to send back the matter to the AO.
13. Having regard to the above, I concur with the view taken by the learned AM on this point.
14. At the Bar the decision of Hon’ble Rajasthan High Court in case of Prem Agencies v. CIT (1988) 173 ITR 110 (Raj) was cited for the proposition that when the matter was remanded to the ITO without the first appellate authority not deciding the case on merit then the Tribunal has no jurisdiction to decide the case on merits. In this regard, it is pointed out that the ground raised before the Tribunal was in regard to the denial of the status of registered firm and, therefore, it is within the power of the Tribunal to decide on this issue itself. However, this is not the point referred to me.
15. With regard to the other decisions cited on behalf of both the parties, I am of the view that they are not necessary for deciding the issue in view of the findings given above. I, therefore, do not consider it necessary to discuss those decisions at this juncture.
16. With regard to the remaining point regarding disallowance of Rs. 10,000 on account of telephone expenses in the head office, and Rs. 5,000 in the Branch office, it is the finding of the learned JM that the learned CIT(A) did not deal with this issue, though the ground was taken up before him. He, therefore, considered it fair and reasonable to set aside the matter and restored it to the file of the AO for fresh adjudication on the basis of the materials and evidence that may be produced by the assessee. It is also seen that both the Members agreed that the disallowance was made by the AO merely on estimated basis. In such a case, it is fair and reasonable that the matter should go back to the AO for deciding the issue afresh after considering the evidence that may be produced by the assessee. I, therefore, agree with the learned JM on this point.
17. The matter will now go back to the regular Bench for decision, according to majority opinion.
By The Bench
1. The learned President, Shri V. Dongzathang as Third Member by his opinion dt. 8th April, 2003 concurred with the view of the AM on the issue of registration of the assessee-firm and answered the question in affirmative. In accordance with majority view, the issue of registration stands decided in favour of the assessee and against the Revenue.
2. With regard to the remaining point regarding the disallowance of Rs. 10,000 on account of telephone expenses in head office and Rs. 5,000 in Branch office, the learned President, Shri V. Dongzathang, as Third Member by his opinion dt. 8th April, 2003 has concurred with the views of the JM on this issue. In accordance with majority view, the matter is sent back to the AO for deciding the issue afresh after considering the evidence that may be produced by the assessee.
3. In the result, the appeal of the assessee is partly allowed as stated above.