SANJAY CONSTRUCTION CO. VS COMMISSIONER OF INCOME-TAX
1999 P T D 889
[225 I T R 693]
[Gujarat High Court (India)]
Before N.J. Pandya and S.D. Pandit, JJ
SANJAY CONSTRUCTION CO.
Versus
COMMISSIONER OF INCOME-TAX
Income-tax Reference No. 168 of 1983, decided on 12/09/1996.
Income-tax.
----Firm---Registration---Condonation of delay---Firm constituted by deed of partnership, dated 19-7-1975---Deed providing that partnership will not come to end by death or insolvency of any partner but firm to continue with heir of such partner---Death of partner---Widow of* deceased partner and remaining partners executing fresh deed of partnership after end of previous year---Application filed in Form No. 11-A and an application for condonation of delay under S. 184(4)---Delay due to widow confining herself to solitude after the death of the deceased as per custom of the community --Delay in filing application for registration to be condoned---Indian Income Tax Act, 1961, S.184(4) & (5)---Indian Income-tax Rules, 1962, Forms Nos. 11 & 11-A.
The assessee-firm was constituted by a partnership deed, dated July 19, 1975. The partnership deed provided that the partnership business would not come to an end by the death or insolvency of any partner but the partnership firm would continue with the heir of such deceased partner. One of the partners of the firm died on March 2, 1977, and the remaining partners and the widow of the deceased partner executed a fresh deed of partnership on May 19, 1977, and filed an application before the Income-tax Officer on July 30, 1977, in Form No.11-A and an application for condonation of delay under section 184(4) of the Income Tax Act, 1961. The assessee-firm claimed before the Income-tax Officer that according to the custom of the community the widow of the deceased partner was confined to solitude and was not meeting anybody or doing anything for three months after the death of the deceased and, consequently, the deed of partnership could not be executed prior to May 19, 1977. Under the provisions of subsection (5) of section 184, the deed of partnership must be accompanied by the application in Form No. 11-A as there was delay in executing the deed of partnership. The Income-tax Officer came to the conclusion that as the previous year relevant to the assessment year 1977-78 had come to an end on March 31, 1977, and as the partnership in question had taken place on May 19, 1977, and the application in Form No. 11-A was filed on July 30, 1977, the said application could not be allowed for the registration of the firm in the assessment year 1977-78, that, the new partnership deed ought to have come into existence prior to March 31, 1977, and therefore, the delay in filing the application for registration could not be condoned. The Appellate Assistant Commissioner, and the Tribunal, confirmed the order of the Income-tax Officer. On a reference:
Held, that the partnership deed could not be executed on account of the peculiar circumstances, namely, that the widow who became the partner of the firm had confined herself to solitude on account of the death of her husband and she was not talking and meeting anybody and as the death of her husband had taken place only on March 2, 1977, the new partnership could not be executed before the end of the previous year, i.e., on or before March 31, 1977. Therefore, there was reasonable cause for non-execution of the partnership deed and, consequently, there was sufficient cause for condoning the delay caused in preferring the application under section 184(4) as well as under section 185(5) of the Act. Therefore, the Tribunal was not justified in not condoning the delay in filing the application for registration.
Collector, Land Acquisition v. Mst. Katiji (1987) 167 ITR 471; 62 Comp. Cas. 370; 71 FJR 143; 66 STC 228 (SC) and Ramamohan Motor Service v. CIT (1979) 120 ITR 434 (AP) ref.
D.A. Mehta, R.K. Patel and B.D. Karia for K.C. Patel for the Assessee.
Manish R. Bhatt for the Commissioner.
JUDGMENT
N.J. PANDYA, At the instance of the assessee, the Tribunal; Ahmedabad Bench, has referred the following three questions to this Court for decision under section 256 of the Income Tax Act, 1961:
"(1) Whether, .on the facts and in the circumstances of the case, the Tribunal was justified in holding that the Income-tax Officer was empowered to accept a belated application on submission of cause being shown only in the case when such application alongwith the deed of partnership is filed within the end of the previous year in question?
(2) Whether the Tribunal was justified in law in interpreting the provisions of sections 184(3), 184(4) and 184(5) and on arriving at the finding that the assessee was not entitled to get the delay condoned it having filed application in Form No. 11 -A on July 30, 1977, with a new deed of partnership executed on May 19, 1977, though made effective since March 3, 1977, both the dates falling beyond the end of the previous year which ended on March 31, 1977?
(3) Whether, on the facts and id the circumstances of the case, the Tribunal was right in holding that the delay in drawing up the document of partnership was not contemplated by the provisions of section 184(4) of the Act and whether it was justified in law in confirming the order of refusal of registration to the assessee-firm?"
The assessee is, Sanjay Construction Co., a partnership firm registered under the Indian Partnership Act as well as the Income-tax Act. The first partnership deed had taken place on July 19, 1975, and the said partnership deed contained the following clause:
"The partnership business shall not come to an end by death or insolvency of any partner but the partnership-firm shall continue with the heir of such partner. If he (heir) so desires he shall be taken as partner in the firm in the same proportion to his/her (deceased/insolvent partner's) respective share."
One of the partners of the said partnership, Shri Mafatlal, expired on March 2, 1977. His widow was the only heir left behind him and the remaining partners and the said widow executed a fresh partnership deed on May 19, 1977, and, thereafter, they applied to the Income-tax Officer on July 30, 1977, in Form No.11 and application for condonation of delay under section 184(4) of the Income Tax Act, 1961, was also filed. The claim of the assessee was that the deceased partner has left behind him only a widow and as per the custom of the community, the widow was not meeting anybody or doing anything for nearly three months after the death of the deceased and, consequently, the deed of partnership could not be executed prior to May 19, 1977, and as per the provisions of subsection (5)of section 184, the deed of partnership must be accompanied by the application in Form No.11-A as there was delay on their part in filing the said application.
The Income-tax Officer came to the conclusion that, as the assessment year 1977-78 has come to an end on March 31, 1977, and as the partnership in question has taken place on May 19, 1977, and the application in Form No. 11-A is filed on July 30, 1977, the said application could not be allowed for the registration of the firm in the assessment year 1977-78. According to him, the new partnership deed ought to have come into existence prior to March 31, 1977, and only in case the partnership had taken place prior to March 31, 1977, there was a question of condoning the delay. Being aggrieved by the said decision of the Income-tax Officer, the assessee went in appeal before the Appellate Assistant Commissioner, Surat, by way of Appeal No.SC/IG-3 of 1980-81 and it was dismissed by the said appellate authority by order, dated November 4, 1980, who confirmed the view taken by the Income-tax Officer. Thereupon, the assessee went before the Tribunal by way of ITA 2388/Ahd-80 and unfortunately for the assessee, the Tribunal also took the same view and concurred with the finding recorded by the two authorities below. Hence, at the instance of the assessee, this reference has come before us.
We have already quoted above the terms of the original deed of partnership, dated July 19, 1975, executed by the original partners of the assessee-firm, which clearly mentions that the partnership business would not come to an end on account of death of any of the partners. The new partnership deed executed by the partners of the original partnership deed and the widow of Mafatlal Shah contains, inter alia, the following contents:
"Widow Babuben Mafatlal Shah, an adult Jain, working and residing at Surat (hereinafter referred to as the party of the Sixth per). "
If these contents of the new partnership deed in question are read alongwith the contents of the original partnership deed, namely, that the partnership business shall not come to an end by the death of a partner and the partnership firm shall continue with the heir of such partner, then there is no difficulty in coming to the conclusion that the partnership business was continued even though the death of one of the partners had taken place. In the circumstances, there could not be any doubt regarding the genuineness or the existence of the partnership in question and this position is accepted by the Tribunal by making the following observations in paragraph 4 of its judgment:
"There is no dispute about the genuineness of the firm but the dispute centres round, as pointed out earlier, the question whether the delay in filing the application in Forms Nos.11 and 11-A could be condoned on the facts of the case."
Therefore, there is no dispute about the genuineness of the firm and the only question to be considered is as to whether the delay in filing the application for registration of the firm was to be condoned in the circumstances of the case or not?
We have carefully gone through the orders passed by the Tribunal as well as the two authorities below, but we are unable to find that the claim of the assessee that the widow of the deceased partner on account of the community custom was confining herself and was not talking with anybody for three months is rejected by any of them for any reasons stated in the order. They have not at all considered the claim of the assessee for the reasonable cause for condoning the delay caused in filing the application. They have concentrated only on the question as to whether the delay could be condoned in view of the fact that the deed of partnership has come into existence after the end of the assessment year and the application in Form No.11 and the delay condonation application in Form No.11-A were filed after the end of the assessment year.
The apex Court in the case of Collector, Land Acquisition v. Mst. Katiji (1987) 167 ITR 471; 62 Comp Cas 370; AIR 1987 SC 1353 has considered the question of condonation of delay under the provisions of section 5 of the Limitation Act, 1963. In that case, it has been laid down by the apex Court that the Court should adopt a liberal approach and while laying down so, their Lordships have made the following observations (head-note of (1987) 167 ITR 471):
"When substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have a vested right in injustice being done because of a non-deliberate delay. "
There is no presumption that delay is occasioned deliberately on account of culpable negligence or on account of mala fide. A litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk.
It must be grasped that the judiciary is respected not on account of its power to legalise injustice on technical grounds, but because it is capable of removing injustice and is expected to do so. If the above principles laid down by the apex Court are taken into consideration, then it was incumbent on the authorities below to consider the claim made by the assessee for condoning the delay and they ought not to have gone on the mere technicality that the deed of partnership as well as the application for registration and application for delay condonation were filed after the assessment year had come to an end. If the provisions of section 184 are read as a whole, it would be clear that under that section, the income-tax authority is entitled to give registration to a partnership firm even after its dissolution. Neither section 184 nor any other section of the Income-tax Act prevents a partnership deed being executed, which would come into force from the date prior to the date of deed. Section 184(4) and its proviso read as under:
" 184. (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. "
If the above provision and particularly the proviso to section 184(4) is considered, then it would be quite clear that the Income-tax Officer can allow an application for registration of the firm even from the date of the end of the previous assessment year if sufficient reasons are shown to him. It is pertinent to note that neither the Income-tax Officer nor the Appellate Assistant Commissioner nor the Tribunal has recorded a finding of fact that there was no sufficient ground for condoning the delay in filing the application in question.
The learned advocate, Mr. Bhatt, appearing for the Revenue, has placed reliance in the case of Ramamohan Motor Service v. CIT (1979) 120 ITR 434 (AP) to justify the orders passed by the income-tax authorities and the same authority was relied on by the Tribunal in its judgment. But if the facts of the case before us and the facts of the case before the Andhra Pradesh High Court are taken into consideration, it would be quite clear that the said case has no bearing on the facts before us. In that case, the partnership was executed in the year, 1955, and the said partnership had come to an end on December 31, 1961, and thereafter, the new partnership took place on June 28, 1962, and on June 30, 1962, the applications in Forms Nos. 11 and 11-A were filed. In that case, it was found that the original partnership was an invalid partnership from December 31, 1961, till the new partnership took place on June 28, 1962. It was also found that even in the new partnership a minor was taken as a partner and it was also an invalid partnership. In that case, sufficient cause for condoning the delay was not made out by the assessee. In the circumstances, in that case, the claim of the assessee was rejected. But none of those facts are existing in the instant case.
From the material on record, it is quite clear that the partnership deed in question could not be executed on account of the peculiar circumstances, namely, that the widow who became, the partner of the firm had confined herself to solitude on account of death of her husband and she was not talking and meeting anybody and as the death of her husband had taken place only on March 2, 1977, the new partnership could not be executed before the end of the previous year, i.e., on or before March 31, 1977. Therefore, there was reasonable cause for non-execution of the partnership deed and consequently there was sufficient cause for condoning the delay caused in preferring the application under section 184(4) as well as section 184(5) of the Income-tax Act. We are, therefore, of the opinion that the Tribunal as well as the authority below them were not justified in rejecting the claim of the assessee. We, therefore, answer questions Nos. l and 2 and 3 in the negative and in favour of the assessee and against the Revenue. The parties are directed to bear their own costs.
C.M.A./1759/FC ??????????????????????????????????????????????????????????????????? Reference answered.