Law: Income Tax Act, 1922

Section: 23(4)

Law: Income Tax Act, 1922

Section: 23(4)

Section 251, read with sections 144 and 146 of the Income-tax Act, 1961 of 1960 [Corresponding to sections 31(3), read with sections 23(4) and 27 of the Indian Income-tax Act, 1922] - Commissioner (Appeals) - Powers of - Assessment year 1956-57 - Whether, where AAC had confirmed order of ITO refusing to reopen under section 27 of 1922 Act and upheld best assessment under section 23(4) of 1922 Act, still he was competent to examine merits of ITO's refusal to register assessee-firm under section 23(4) of 1922 Act - Held, yes FACTS The assessee was a firm of three partners under a deed of partnership dated 20-8-1947. Registration had been granted to the firm from 1948-49 till assessment year 1955-56. For the assessment year 1956-57, the assessee filed an application for renewal of registration in time. The ITO passed an order under section 23(4) of 1922 Act and refused renewal of the registration on the grounds that the notices issued under section 22(2) and 22(4) of 1922 Act were not complied with by the assessee. The assessee made an application under section 27, which was rejected by the ITO. The assessee appealed against it. The AAC did not interfere with the order of the ITO. The assessee also appealed to the AAC against the order refusing renewal of registration. The AAC found that there had undoubtedly been default in compliance with the notice under section 22(2) of 1922 Act; but sufficient time had not been granted to the assessee for complying with the notice issued under section 22(4) of 1922 Act. The AAC held that since the firm had been granted registration from 1948, the invocation of the penal provisions of section 23(4) of the 1922 Act for refusing renewal of registration was improper and directed the granting of renewal of registration. The department preferred an appeal to the Tribunal contending that the AAC having come to the conclusion that the assessee had committed default in compliance with the notice under section 22(2) of the 1922 Act, the assessment under section 23(4) of the 1922 Act had been properly made and it was up to the ITO to invoke the penal provisions of that section and refuse registration and, in the circumstances, the AAC's…

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