JUDGMENT
Thanikkachalam, J.
1. In pursuance to the order of this Court dt. 27th October, 1981, the Tribunal referred the following question of law for the opinion of this Court under s. 256(2) of the IT Act, 1961 :-
“Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in directing the ITO to grant continuation of registration, even though form No. 12 was not really signed by all the partners ?”
2. The assessee-firm was constituted originally under a deed of partnership dt. 1st January, 1964 and was reconstituted as per the deed. dt. 16th August, 1973. The assessee-firm consisted of three partner viz., 1) Shri Chidambarathanu 2) Smt. J. Parvathy and 3) Shri G. Sivarajan. Partners No. 2 and 3 are the daughter and son of the first partner. This firm was granted registration in prior years. For the asst. yr. 1977-78 corresponding to the previous year ended 15th August, 1976 an application for continuation of registration was filed on 30th June, 1977 in form No. 12. It was not signed by all the three partners. Since the partner Shri Chidambarathanu died on 17th March, 1977, his widow Smt. Rajammal had signed the declaration as his legal heir. Partner No. 2, Smt. J. Parvathy had also signed the declaration. But the third partner Shri C. Sivarajan, had not signed it since his whereabouts were not known and he was absconding. Smt. Parvathy had, therefore, signed the declaration on his behalf also. On enquiry, the ITO was satisfied that Chidambarathanu had died and that Sri Sivarajan, was not to be found. He held that the declaration in form No. 12 was not in order since it was not signed by the three partners and, therefore, registration could not be continued. On appeal, the AAC accepted the declaration and directed the continuation of the registration. Aggrieved, the Revenue filed an appeal before the Tribunal. The Tribunal found that the firm had been dissolved at the close of the accounting year ended 15th August, 1976 and the business was continued as a proprietary concern of Chidambarathanu till his death. The Tribunal also found that since the declaration was to be filed after the close of the accounting years, after the dissolution of the firm only the partners that were available on that date of declaration namely, 30th June, 1977 could possibly sign the declaration. Since it was not disputed that by that date Chidambarathanu had died and Sivarajan could not be traced. The Tribunal found that the Revenue was insisting on an impossible condition since the rules only required that the declaration should be given by the partners, obviously referring only to the existing partners.
3. The Tribunal confirmed the order of the AAC following the decision reported in Addl. CIT vs. S. V. Rathnaswamy & Sons (1977) 106 ITR 154 (Kar) : TC 34R.335.
4. Learned Jr. standing counsel for the Department submitted that it is not correct on the part of the Tribunal to state that declaration is not by the existing partners as on the date of filing form No. 12 would be sufficient to comply with the provisions for getting renewal of registration under s. 184(7) of the Act. According to the learned standing counsel, as per the provisions of r. 22(5), all the partners should sign form No. 12 for seeking continuation of registration. Learned standing counsel pointed out that the erstwhile firm consisted of three partners. One of the partners Shri Chidambarathanu died on 17th March, 1977 and his widow Smt. Rajammal had signed the declaration as his legal heir. The second partner Smt. Parvathy signed the declaration in favour of herself and also for her brother who is said to be absconding. Therefore, according to the learned standing counsel Form No. 12 was not signed by all the partners of the erstwhile firm. The learned standing counsel pointed out that the rules applicable for seeking fresh registration would also be applicable for seeking renewal of registration under Form No. 12. According to the learned standing counsel, it is not correct to state that the conditions prescribed for obtaining fresh registration under s. 184(1) of the Act would not be applicable for seeking continuation of registration under s. 184(7) of the Act. Learned counsel for Department submitted that the conditions prescribed under s. 22(5) should be strictly complied with. The erstwhile firm came to an end on 15th August, 1976, as per cl. xiii of the partnership deed. Form No. 12 was filed on 30th June, 1977. Therefore, on the date of submission of Form No. 12, for continuation of registration, one of the partners was dead and the other partner was absconding. In fact the form was signed by one of the partners namely Smt. J. Parvathy for herself on behalf of her brother C. Sivarajan who is also another partner said to be absconding. On behalf of the deceased partner Chidambarathanu, his wife signed form No. 12 as his legal heir. Therefore, it was submitted by the learned standing counsel that on the basis of form No. 12 filed on 30th June, 1977, the continuation of the registration is not possible. According to the learned standing counsel when the ITO noticed the deficiencies in form No. 12, an opportunity was given to the persons who filed Form No. 12 to rectify the mistake, but the mistake was not rectified. Therefore, it was submitted that in as much as Form No. 12 filed for continuation of registration was not in accordance with r. 22(5) of the IT Rules, continuation of registration cannot be granted.
5. In support of his contention, learned standing counsel, for the Department relied on the decisions reported in Subba Rao vs. CIT (1970) 77 ITR 341 (Mys) : TCC 34R.845; Sri Rammohan Motor Service vs. CIT ; and Bengal Decorators vs. CIT . According to the learned standing counsel for the Department, the decision reported in (1977) 106 ITR 154 (Kar) : TC 34R.335, cited supra would not be applicable to the facts of this case and therefore, the order passed by the Tribunal confirming the grant of continuation of registration is not correct.
6. On the other hand, the learned counsel appearing for the assessee submitted that only for obtaining fresh registration under s. 184(1), all the conditions prescribed thereunder should be followed. For the purpose of seeking continuation of registration under s. 184(7) of the Act all the conditions prescribed for obtaining fresh registration under s. 184(1) need not be complied with. According to the learned counsel for the assessee, the persons available as on the date of filing form No. 12 would be sufficient to apply for continuation of registration under s. 184(7). According to the learned counsel, one of the partners was absconding and, therefore, the assessee should not be insisted upon for complying with what is impossibility of performance. Signing Form No. 12 by the legal heir of the deceased Chidambarathanu and the signing of Parvathy for herself and on behalf of her brother who is absconding would amount to sufficient compliance for seeking continuation of registration. According to the learned counsel for the assessee, the genuineness of the firm was not disputed by the Department. Learned counsel for the assessee pointed out that the persons concerned for signing form No. 12 would mean persons concerned as on the date of filing form No. 12. In the present case, the person concerned available on the date of filing form No. 12 were the legal heir of the deceased partner Chidambarathanu and the second partner Smt. Parvathy who signed the declaration form for herself and on behalf of his absconding brother. Therefore, when the persons concerned as on the date of filing form No. 12 applied for continuation of the registration under s. 184(7), the Department cannot refuse to grant continuation of the registration. According to the learned counsel for the assessee, the decision of the Karnataka High Court (1977) 106 ITR 154 (Kar) applied on focus to the facts of this case. For these reasons, it was submitted that the Tribunal was correct in confirming the order of the AAC in granting continuation of registration.
7. The fact remains that for the asst. yr. 1977-78, the return was filed on 1st July, 1977 signed by Shri C. Durairaj and the Form No. 12 was filed on 30th June, 1977 signed by Smt. S. Rajammal, legal heir of her late husband Shri Chidambarathanu and by J. Parvathi, who is another partner signing form No. 12 for herself and on behalf of her absconding brother. A fresh return was said to be filed on 21st December, 1977 with the signature of Smt. J. Parvathy, the 2nd partner. Shri Chidambarathanu died on 16th March, 1977. Sivarajan, who is the third partner in the erstwhile firm left the place and he was said to be absconding. His profits are credited in his account. It was seen that the account of this partner was not operated throughout the accounting year except for an entry for income tax payment. Therefore, Form No. 12 was not signed by one of the partners. Registration is only a privilege which a firm gets on satisfying certain conditions prescribed under ss. 184 and 185 and rr. 22(5) and 24 of the IT Rules. There is no provision for anyone else to sign on behalf of a partner in the renewal application form. Under r. 22(5) the renewal application form should be signed by all the partners as stated in the partnership deed. Since there was defect in form No. 12 filed in the present case, the ITO gave a notice under s. 185(2) for modification of the mistake. That mistake was not rectified. One of the partners Chidambarathanu died on 17th March, 1977. For the asst. yr. 1977-78, the previous year ended on 15th August, 1976. The application for continuation of registration was filed on 30th June, 1977 in form No. 12. The Tribunal was informed that the partnership came to a close on the last date of the accounting year namely 15th August, 1976 as provided under cl. 13 under which the first partner Shri Chidambarathanu was empowered to terminate the partnership by giving notice in writing to the other partners.
From 16th August, 1976 onwards, the business was carried on by Sri Chidambarathanu as a proprietary concern till his death on 17th March, 1977. The above facts appear in the deed of partnership dt. 16th August, 1973 and the deed of partnership dt. 10th June, 1977 was executed after the death of Sri Chidambarathanu. Therefore, the assessee firm which claimed continuation of registration came to an end on 15th August, 1976, i.e., the last date of the accounting year. Thereafter the business was carried on as a proprietary concern by Chidambarathanu till his death. On the date of application for continuation of the firm i.e., on 30th June, 1977, only one partner viz., Smt. J. Parvathi alone was available. Her father Chidambarathanu had expired and he was represented by his wife Smt. Rajammal. The third partner, C. Sivarajan, is said to be absconding and in his behalf his sister J. Parvathi signed in the declaration form No. 12.
8. The point for consideration is, whether Form No. 12, filed, signed by Smt. Rajammal on behalf of her deceased husband and by J. Parvathi, signed for herself and on behalf of her brother, would be sufficient for the purpose of compliance under s. 184(7) of the Act, to seek for continuation of registration ?
9. Registration of a firm is provided under s. 184 of the IT Act, 1961. The registration once granted would continue provided certain conditions are fulfilled. Those conditions are stated in sub-s. (7) to s. 184. Sub-s. (7) of s. 184 runs as under.
“(7) Where registration is granted to any firm for any assessment year, it shall have effect for 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 furnished, before the expiry of the time allowed under sub-s. (1) or sub-s. (2) of s. 139 (whether fixed originally or on extension) for furnishing the return of income, for such subsequent assessment year, a declaration to that effect, in the prescribed form and verified in the prescribed manner, so, however, that where the ITO is satisfied that the firm was prevented by sufficient cause from furnishing the declaration at any time before the assessment is made”
The manner of the application for registration is provided in sub-s. (3) of s. 184 which is to the following effect;
“(3) The application shall be made to the ITO having jurisdiction to assess the firm, and shall be signed (a) by all the partners (not being minors) personally; or (b) in the case of a dissolved firm, by all persons (not being minors) who were partners in the firm immediately before its dissolution and by the legal representative of any such partner who is deceased.
Explanation : In the case of any partner who is absent from India or is a lunatic or an idiot, the application may be signed by any person duly authorised by him in this behalf, or, as the case may be, by a person entitled under law to represent him”. Sec. 187 of the Act deals with the change in the constitution of a firm and sub-s. (2) of s. 187 explains the change in the constitution of a firm for the purpose of the section. The said sub-section is to the following effect,
“(2) For the purpose of this section, there is a change in the constitution of the firm-(a) if one or more of the partners cease to be partners or one or more new partners are admitted, in such circumstances that one or more of the persons who were partners of the firm before the change continue as partner or partners after the change; or (b) where all the partners continue with a change in their respective shares or in the shares of some of them”
10. Learned counsel for the assessee contended that the submission of Form No. 12 for continuation of registration signed by the wife of deceased partner Chidambarathanu and Smt. J. Parvathi signed for herself and on behalf of her absconding brother would be sufficient to seek continuation of registration, under s. 184(7) of the Act. According to the learned counsel, these are the persons who were available for signing Form No. 12 to seek for continuation of registration. It was submitted that the signature of the absconding partner cannot be insisted, since it is impossible to get the signature of the absconding partner. It was further submitted that the conditions prescribed for obtaining fresh registration cannot be insisted on for seeking continuation of registration. Reliance was placed upon the decision of the Karnataka High Court in the case of Addl. CIT vs. S. V. Rathnaswamy & Sons (supra). According to the facts arising in that case during the relevant year there were six partners. After the end of the relevant previous year and on 1st July, 1969, a fresh partnership deed is said to have been drawn up by amongst 5 of the said six partners, excluding S. R. Ramachandra, one amongst the original six partners, whose whereabouts had not been known since 1st November, 1968. The firm as originally constituted had been granted registration under s. 184 of the Act for the earlier years. On 10th August, 1970 the firm filed along with its return of income for the asst. yr. 1970-71 a declaration envisaged in proviso (ii) to sub-s. (7) of s. 184 of the Act in the prescribed form signed by the said continuing partners who constituted the firm as on that date and also by one Parvathamma, claiming to be the legal representative and mother of the said S. R. Ramachandra, whose whereabouts were not known. On the basis of this declaration, the ITO granted continuance of registration of the firm for the asst. yr. 1970-71.
11. In the said case the Tribunal accepting the contention of the assessee took the view 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 declaration and that as the said application was made on 10th August, 1970, when only five amongst the original partners, excluding the said S. R. Ramachandra, were the continuing partners, the declaration in Form No. 12 signed by them was sufficient compliance with the requirement of the law and that the fact that one more person, Parvathamma, had also signed the form was a mere surplusage which did not ipso facto, detract from the validity and efficacy of the declaration which was otherwise in accordance with law. On a reference, the Karnataka High Court held,
“What emerges from a reading of the provisions of sub-s. (1) of s. 187 and of sub-s. (7) of s. 184 together is that the concept of a “registered firm as an assessable entity under the Act has, subject to certain conditions an element of durability as such assessable entity for the subsequent years also and that the furnishment of a declaration contemplated by the second proviso to sub-s. (7) of s. 184 of the Act is by the ‘firm’ alone, which in turn, could only mean its partners as constituted at the time of making such declaration. It is these partners who would be adversely affected in consequence of a non-continuance of the registration”.
It was further held that the above reasoning points inescapably and irresistibly to the conclusion that the ‘Persons concerned’ referred to in r. 24 are the partners of the firm as constituted at the date of making the declaration under the second proviso to sub-s. (7) of s. 184 of the Act. The conclusion as to the validity of the declaration made in the present case reached by the Tribunal, therefore, becomes supportable, though, however, on a different reasoning.
12. Our attention was drawn to the decision of the Mysore High Court in the case of Subba Rao vs. CIT (supra). According to the facts arising in the above said case, the learned counsel for the assessee made two submissions :
(1) The clear language of s. 184(7) of the Act does not provide for the requirement of signature by the partners personally. This omission to provide for requirement on the part of the legislature is not unintentional as can be gathered by contrasting this provision with the provisions of s. 184(3), which specifically provides for the requirement of signature of all the partners personally. This being the position, any provision made in this behalf in the rules, namely, r. 22(5) r/w r. 24 also does not in clear terms enjoin that a declaration should be signed by all the partners personally. It is also argued that the words ‘persons concerned’ occurring in r. 24 will have to be construed as referring to “persons who are authorised” to act on behalf of a firm, meaning that, in the absence of such authorisation, any partner could so act. Therefore, it is only such persons concerned who will have to comply with the requirements of r. 22(5) as enjoined by r. 24 of the Rules.
(2) While sub-ss. (1) to (6) of s. 184 of the Act provide for the making of an application for registration of a firm for the purpose of the Act, sub-s. (7) of that section merely provides that where registration is granted to any firm for any assessment year, it shall have effect for every subsequent assessment year, provided the conditions specified therein are satisfied. It is, therefore, urged that the provisions of sub-s. (7) of s. 184 were intended to be less stringent than the provisions of s. 184(3), which enjoins that an application made for registration of a firm shall be signed by all the partners, excluding minors, personally. It is, therefore, submitted that even if the legislature intendment was that the partners should sign personally, for the purposes of continuation of registration under s. 184(7) of the Act, such a requirement will only be directory in character. It, therefore, follows that what is required is substantial compliance with the requirements of s. 184(7) of the Act r/w rr. 22(5) and 24 of the Rules.
13. While answering these two points the Mysore High Court held that “if the arguments of Sri Bhat that any person who is authorised to act on behalf of the firm could sign the declaration is assumed to be right, such authorisation should necessarily be in favour of more than one person in order to satisfy the requirement of verification as enjoined in Form No. 12. Further, it follows that no single partner could act in order to make the declaration in accordance with form No. 12. Therefore, any single person or partner authorised to act cannot satisfy the requirements of such verification”.
14. The Mysore High Court also observed that ‘they cannot accept the interpretation placed by Sri Bhat on the words ‘persons concerned’ occurring in r. 24 of the Rules. Under r. 22(5) of the Rules, persons other than partners could also sign an application for registration of a firm for the purposes of the Act in certain circumstances specified therein. The words “Persons concerned” occurring in r. 24, in our opinion, are referable to such persons as are specified in r. 22(5). It follows from this conclusion of ours that the rule enjoins that persons other than partners can sign only in exceptional circumstances specified in r. 22(5). It is also clear from r. 22(5) that the principal requirement is that all the partners should sign personally.”
15. It was also observed by the Mysore High Court as follows :
“The next argument of Sri Bhat that the requirement of signature by all partners is directory in nature cannot also be accepted. The basis for this argument is that s. 184(7) of the Act merely provides for the continuation of registration of the firm which had been granted earlier, and, therefore, furnishing of a declaration is more or less a formal matter. This will nevertheless be so, even if the rule provides for an additional requirement will also be directory in nature.
16. Thus the arguments advanced before us by the learned counsel for the assessee are answered in the abovesaid decision of the Mysore High Court cited supra.
17. Our attention was also drawn to the decision of the Supreme Court reported in Khanjan Lal Sewak Ram vs. CIT , wherein while considering the provisions of s. 26A, r. 6, para 36 of the Indian IT Rules, 1922, the Supreme Court held that the application for renewal of registration made by the assessee did not comply with the conditions prescribed in paragraph 3 of r. 6 of the Indian IT Rules, 1922, and the firm was not entitled to renewal of registration for the asst. yr. 1948-49.”
18. So also, the Supreme Court, in Sri Ram Mohan Motor Services vs. CIT (supra) while considering the provisions of ss. 26A and 59 of the Indian IT Act, 1922 and Indian Partnership Act, 1932. Sec. 30 held that before a person can claim the benefit of s. 26A he must strictly comply with the requirements of that section and in view of sub-s. (2) of that section he is also required to comply with the requirements of the relevant rules. Substantial compliance with the rules is not sufficient.
19. In the case of Rao Bahadur Ravulu Subba Rao vs. CIT , the Supreme Court while considering the provisions of s. 26A of the Indian IT Act, 1922 held that before a person can claim the benefit of s. 26A, he must strictly comply with the requirements of that section. In view of sub-s. (2) of that section, he is also required to comply with the requirements of the relevant rules. Failure to comply either with the requirements of sub-s. (1) or sub-s. (2) of s. 26A disentitles the applicant to the benefit of that section. The same view was taken by the Supreme Court in N. T. Patel & Co. vs. CIT (1961) 42 ITR (SC) TC 33R.903.
The decision of the Supreme Court in Khanjan Lal Sewak Ram vs. CIT (supra) lends support to the above said conclusion.
20. As already seen, according to the facts arising in this present case, one of the partners of the erstwhile firm, who is said to be absconding has not signed Form No. 12. Hence, Form No. 12 filed by the assessee in the present case is not in strict compliance with the provisions contained in r. 24 r/w r. 22(5). Thus, considering the facts arising in this case, in the light of judicial pronouncements, cited supra, we would prefer to follow the judgment of the Supreme Court and that of the Mysore High Court cited supra instead of the decisions of the Karnataka High Court reported in (1977) 106 ITR 154 (Kar) cited supra.
21. For the foregoing reasons, we answer the question referred to us in the negative, and in favour of the Department. No costs.