JUDGMENT R.K. Agrawal, J.
1. The Tribunal, Allahabad, has referred the following questions of law under Section 256(1) of the IT Act, 1961 (hereinafter referred to as "the Act"), for opinion to this Court :
"1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the omission to sign the declaration under Section 184(7) on Form No. 12 by two out of five partners was treatable as a defect within the meaning of Section 185(3) of the IT Act, 1961 ?
2. If the answer to question No. 1 be in the affirmative, whether the Tribunal was also justified in taking the view that the said defect could be removed even beyond 28th Feb., 1980, i.e. beyond one month of the service of the notice dt. 25th Jan., 1980, pointing out the defect ?"
2. Briefly stated, the facts giving rise to the present reference are as follows.;
The assessee was a registered firm till the asst. yr. 1978-79 when renewal of registration was granted to it under Section 184(7). For the asst, yr. 1979-80 in question, the assessee filed an application in Form No. 12 on 26th June, 1979, signed by only three partners even though the firm consisted of five partners. The ITO, thereupon, issued a notice dt. 25th Jan., 1980, to the assessee to show cause as to why the declaration form may not be rejected and its status be taken as that of an unregistered firm. The said notice was served on the assessee on 29th Jan., 1980. The assessee in its reply dt. 3rd Oct., 1980, explained that the signature of the remaining two partners were left by an oversight. It filed a revised Form No. 12 also on the same day signed by all the five partners. However, the ITO took the view that under Section 185(3), the omission to sign the Form No. 12 was not covered. He also took the view that in any case, the omission could be made good by 28th Feb., 1980, i.e., within one month of the service of the notice on the assessee but not afterwards. Accordingly, he rejected the assessee's application and took its status as that of an unregistered firm. The assessee being aggrieved, came up in appeal before the AAC. It was contended on behalf of the assessee that the ITO should not have ignored the declaration filed by the assesses-on 3rd Oct., 1980, and that the delay in filing the revised Form No. 12 should have been condoned. It was explained that the fresh declaration in Form No. 12 could not be filed earlier because of the non-co-operation of the two retiring partners who signed the deed after great persuasion by their relatives, and friends. It was also pointed out that two partners, namely, Sarvasri Krishna Prakash and Ram Kishore had retired from the firm w.e.f. 21st Sept., 1979. The signature of the partners Sarvasri Vipin Chandra and Navin Chandra were stated to have been left by an oversight. It was said that the fresh declaration was delayed because the retiring partners refused to sign the fresh deed, The AAC accepted the contention raised on behalf of the assessee and allowed the registration. The Revenue being aggrieved preferred an appeal before the Tribunal. The Tribunal was of the opinion that in view of Sub-Sections (2) and (3) of Section 185 of the IT Act, 1961, the registration could not be refused on account of defects in the application for registration which could be cured and that an opportunity should be afforded to the firm to remove the defect, if. any. The Tribunal noticed that the assessee had shown that the fresh declaration in Form No. 12 could not be made earlier than 3rd Oct., 1980, on account of the fact that the partners Krishna Prakash and Ram Kishore were not willing to sign the revised declaration and that it was only after great persuasion by relatives that they signed the declaration. It also noticed that those partners had retired from the firm w.e.f. 21st Sept., 1979, and that the notice dt. 25th Jan., 1980, also did not specify any time during which the defects were to be removed by the assessee. Accordingly, it held that the AAC was quite justified in taking the view that the assessee was prevented by a sufficient cause from filing the revised declaration in time. In the result, the appeal filed by the Department was dismissed.
3. We have heard Sri A.N. Mahajan, the learned standing counsel for the Revenue. Nobody has put in appearance on behalf of the respondent- assessee.
4. The learned counsel for the Revenue submitted that Form No. 12 filed by the respondent-assessee on 26th June, 1979, was signed by only three of the five partners, a defect which was pointed out by the ITO by means of notice dt. 25th Jan., 1980, was not rectified within one month. Therefore, the assessing authority had rightly rejected the application for continuation of the registration of the firm and treated it as unregistered firm. He relied upon a decision of the Madras High Court in the case of Anil Sound Caps v. CIT, (1983) 141 ITR 457 (Mad).
5. Having heard the learned counsel for the parties, we find that the respondents had filed the application in Form No. 12 on 26th June, 1979, signed by only three out of five partners. On a notice issued on 25th Jan., 1980, to the respondent to show cause as to why the form may not be rejected and its status be taken as that of an unregistered, firm, the respondent submitted the reply only on 3rd Oct., 1980, and filed revised Form No. 12 containing the signatures of all the five partners. The explanation given was that fresh declaration in Form No. 12 could not be filed earlier because of the non-co- operation of the two retiring partners who retired w.e.f., 21st, Sept., 1979, and had signed the deed after great persuasion by the relatives and friends. Under Section 185(3) of the Act, the assessing authority if he finds that the declaration furnished by a firm in pursuance.of Sub-Section (7) of Section 184 of the Act was not in order, he has to intimate the defect to the firm and to give it an opportunity to rectify the defect within a period of one month from the date of such intimation and if the defect is not rectified within that period, the assessing authority shall, by an order in writing, declare that the registration granted to the firm shall not have effect for the relevant assessment year.
However, we find that under cl. (ii) of the proviso to Sub-Section (7) of Section 184 of the Act, the assessing authority has been empowered to allow a firm to furnish a declaration for continuation of registration at any time before the assessment is made where he is satisfied that the firm was prevented by sufficient cause from furnishing the declaration within the time allowed under Sub-Section (1) of Section 139 of the Act. In the present case, it is not in dispute that the declaration in Form No. 12 filed by the respondent did not contain the signature of the remaining two partners, The respondent had filed a fresh declaration in Form No. 12 only on 3rd Oct., 1980, and had explained the reasons for filing it so late. The provisions of cl. (ii) of the proviso to Section 184(7) and Section 185(3) of the Act are to be read in a manner so as not to deprive a genuine firm from being entitled for continuation of registration if other conditions are fulfilled. At best, the declaration in Form No. 12 filed on 3rd Oct., 1980, should have been treated as a fresh declaration form under Sub-Section (7) of Section 184 of the Act and the AAC had rightly allowed the continuation of the registration to the firm. In the case of Anil Sound Caps (supra), the Madras High Court has held as follows :
"It may be seen that there are two distinct steps to be taken in the case of an application for registration. A firm may for the first time apply for registration and in such a case Sub-Sections. (1) to (6) of Section 184 would apply. Where registration is granted to a firm for any earlier assessment year, that registration would have effect for every subsequent year provided the two conditions prescribed by Sub- Section (7) of Section 184 were complied with, namely, (i) the filing of a declaration that there was no change in the constitution of the firm or the shares of the partners, and (in any circumstance) filing it within the period prescribed by Sub-Sections. (1) and (2) of Section 139. There is also power on the part of the ITO to condone the delay in filing the declaration for the first time if there was sufficient cause for doing so. In the case of the declaration being defective, Sub-Section (3) of Section 185 requires the ITO to intimate the firm about the existence of the defect and the deed for its rectification within a period of one month. As contrasted with Sub-Section (7) of Section 184, there is no power to condone the delay available under Sub-Section (2) or Sub-Section (3) of Section 185."
In this background the Madras High Court held that under Sub-Section (3) of Section 185 of the Act, the ITO has no power to condone the delay in removing the defects. As already held hereinbefore, the declaration form submitted on 3rd Oct., 1980, should be treated as a fresh declaration and the delay ought to have been condoned which has rightly been done by the AAC. The Tribunal while dealing with the matter has held as follows :
"5. We have considered the rival submissions as also the decisions referred to above. Sub-Sections. (2) and (3) of Section 185 of the IT Act, 1961, regarding grant of registration to a firm show that the registration should not be refused on account of defects in the application for registration which may be cured and that an opportunity should be afforded to the firm to remove the defect, if any. Therefore, the only question to be seen in the present case is whether there was sufficient cause for the assessee to file the revised declaration in Form No. 12 with delay. The assessee had duly shown that the fresh declaration Form No. 12 could not be made earlier than 3rd Oct., 1980, on account of the fact that the partners Krishna Prakash and Ram Kishore were not willing to sign the revised declaration and that it is only after great persuasion by relatives that they signed the declaration. This is further established from the fact that they had retired from the firm w.e.f. 21st Sept., 1979. The notice dt, 25th Jan., 1980, had also not specified any time during which the defects were to be removed by the assessee. Accordingly, we hold that the AAC was quite justified in taking the view that the assessee was prevented by a sufficient cause from filing the revised declaration in time."
6. From a reading of the aforesaid order, it is clear that the Tribunal has not recorded any specific finding that the omission by some of the partners to sign' the declaration under Section 184(7) of the Act on Form No. 12 is a defect within the meaning of Section 185(3) of the Act. In view of the conclusion arrived at on the question No. 1, it is not necessary to go into the question No. 2. In this view of the matter, the reference is answered accordingly. However, the parties shall bear their own costs.