Circular No. 105-Income Tax dated 23-2-1973

927. Requirement of filing declaration under section 184(7), as amended by Taxation Laws (Amendment) Act, 1970, within time allowed under section 139(1)/(2) for furnishing return of income – ITOs to be liberal in condoning delay for assessment year 1970-71 and earlier years where, even after 1-4-1971, declaration had been filed along with return

1. Prior to the amendment of section 184(7) by the Taxation Laws (Amendment) Act, 1970, a firm, which had been granted registra­tion for any assessment year, could get the benefit of the registration for a subsequent year provided, inter alia, that the firm furnished along with the return of income a declaration in Form No. 12. After the amendment of section 184(7), which is effective from April 1, 1971, the firm has to furnish Form No. 12 within the time allowed under section 139(1)/(2) for furnishing the return of income.

2. The Board, in the Explanatory Notes on provisions of the Taxation Laws (Amendment) Act, 1970, have observed that the amendment will apply not only in relation to the assessments for the year 1971-72 and subsequent years but also for the assessment year 1970-71 or any earlier year where the question of registration or continuation thereof is considered on or after April 1, 1971. If, therefore, an assessee-firm files returns of income for 1970-71 or earlier years within the time limit under section 139(4)(a) and also files Form No. 12 for continuation of registration after April 1, 1971, the firm would not be eligible for the benefits or registration because the form would not have been filed within the time allowed under section 139(1)/(2). A strict interpretation of this nature is likely to cause genuine hardship to such firms. Section 184(7), proviso (ii), however, empowers the Income-tax Officers to allow to furnish the declara­tion at any time before the assessment where he is satisfied that the firm was prevented by sufficient cause from furnishing the declaration in time. In view of the hardship that is likely to be caused, the Board desires that the Income-tax Officers should be liberal in condoning the delay for 1970-71 and the earlier as­sessment years, where, even after April, 1971, the declaration had been filed along with the return of income and condone the delay.

Circular : No. 105 [F. No. 225/86/71-IT(A-II)], dated 23-2-1973.

JUDICIAL ANALYSIS

EXPLAINED IN – In Anil Sound Caps v. CIT [1983] 141 ITR 457 (Mad.), the above circular was commented upon with the following observations:

“…That circular ex facie contains the procedure to be adopted in cases where section 184(7) is attracted. Section 184, as already seen, deals with cases of filing of declaration (for continuation) by the assessee within the time allowed stating that there was no change in the constitution of the firm or in the shares of the partners. It is with reference to the filing of such a declaration that the ITO is given power to condone the delay if he was satisfied that the firm was prevented by suffi­cient cause from furnishing the declaration within the time allowed under the law. The circular does not prima facie deal with cases arising under section 185. Therefore, even assuming that we have to consider the circular in interpreting the provi­sions of the Act, we are not satisfied that the assessee can derive any assistance from the said circular. However, we would not stand in the way of the assessee getting any benefit if the Board is satisfied, on being moved by the assessee, that the circumstances of this case would warrant the application of the said circular.” (p. 461)

EXPLAINED IN – In CIT v. Ramkisan Tapade & Co. [1993] 70 Taxman 133 (Bom.), the court observed that by its Circular Nos. D.O.F.No. 1(38)-63/TPL, dated 9-7-1963 and 105 dated 23-2-1973 the Board has instructed the ITOs not to refuse continuation of registration merely on the ground of delay in applying for renewal. When section 184(7) was amended with effect from 1-4-1971 the Board again issued instruc­tions in this regard on 23-2-1973 vide its Circular No. 105 dated 23-2-1973. In the said circular it was observed that a strict interpretation of the above provision was likely to cause genuine hardship in many cases. In that view of the matter and in view of the specific power conferred on the ITO to allow the assessee-firm to furnish the declaration at any time before the assessment was made where he was satisfied that the firm was prevented by sufficient cause from furnishing the declaration in time, the Board desired the ITOs to be liberal in condoning the delay. The instructions of the Board are clear. The object is to instruct the ITOs not to refuse continuation of registration merely on the ground of delay and to take a liberal approach in the matter.