JUDGMENT B.P. Jeevan Reddy, C.J.
1. The petitioner is a partnership firm. It applied for and obtained registration under Section 184 of the Income-tax Act for the year 1970-71. This registration was continued year after year till 1975-76. In that year, however, the registration was cancelled on the ground that there is no genuine partnership in existence within the meaning of Section 185(1)(a). The main grounds upon which the registration was cancelled are the following :
2. According to the deed of partnership, there are three partners and a minor is admitted to the benefits of partnership. Though the share of each of the partners is specified and it is stated that the minor shall not be liable for any losses, the deed allocates the loss only among the three major partners leaving a balance of 10% unprovided for. In other words, the deed does not make it clear as to what will happen to 10% of losses in case the firm incurred losses.
3. The order of cancellation was questioned by the assessee in appeal before the Appellate Assistant Commissioner who allowed the appeal and granted registration. The Department carried the matter in appeal to the Tribunal which was dismissed by the Tribunal, by its order dated September 24, 1979. It appears that, for the next assessment year 1976-77, the very same objections were raised and registration refused. The assessee appealed and his appeal was allowed by the Appellate Assistant Commissioner by his order dated December 27, 1979. The Department did not choose to question the same by way of an appeal. After all this was over, the impugned show-cause notice was issued on March 9, 1980, proposing to cancel the registration for all the assessment years commencing from 1971-72 to 1976-77. Validity of the said notice is questioned here.
4. Ordinarily, we would not have interfered with the show-cause notice and would have directed the petitioner to approach the authority, furnish an explanation and pursue the remedies provided by the Act, but in this case we are satisfied that the show-cause notice amounts practically to uncalled for harassment of the petitioner. A perusal of the order of the Tribunal relating to the assessment year 1975-76 clearly shows that on these very grounds the registration was cancelled by the Income-tax Officer and it was set aside in appeal by the Appellate Assistant Commissioner, whose order was upheld by the Tribunal in appeal. Same were the grounds for which the refusal of registration for the year 1976-77 was set aside in appeal by the Appellate Assistant Commissioner. After all these proceedings are over, the issuance of the show-cause notice proposing to cancel the registration even for the two years for which the matter had become final, is clearly uncalled for and unwarranted. Mr. Markandey Katju, learned counsel for the Department, contended that the principle of res judicata does not apply to tax proceedings and that at least in so far as the assessment years 1971-72 to 1973-74 are concerned, the notice is good and the petitioner must be relegated to the Income-tax Officer to submit his explanation. It, is not so much the question of res judicata. The more relevant aspect is that on these very facts, the Tribunal has opined that registration cannot be refused. If so, it would be an exercise in futility for the petitioner to submit his explanation and follow the remedies as provided by law.
5. In our opinion, it is a fit ease where the court should interfere even at this stage.
6. The writ petition is allowed and the notice under Section 186 is quashed. No costs.