1981 PLP (Trib (PTD)

MIAN ABDUL KHALIQ (MEMBER). ‑.. These three departmental appeals relating to assessment years 1974‑75, 1975‑76 and 1976‑77 assail a combined order passed by the A. A. C. of Income‑tax, A. Range, Peshawar.

2. The brief facts of the case are that the assessee‑respondent constituted a firm by execution of a partnership deed on 251.7‑1973. This firm was registered with the Registrar of Firms under section 58‑A of the Partnership Act on 28‑1‑1974. For the charge year 1974‑75 on 29‑7‑74 the assessee applied for registration under section 26‑A of the Income‑Tax Act. The assessee's accounting period ended on 30‑6‑1974. For the succeeding two years applica tions for renewal of registration were filed in time. For the charge year 1974‑75, the Income‑tax Officer did not doubt the genuineness of the assessee firm and all the required formalities having been duly complied with registration was allowed on 3‑10‑1974. Renewal of regis tration was allowed for the succeeding year 1975‑76 on 4‑3‑1976. On 12‑11‑1976 the Income‑tax Officer issued notice under sub‑clause (4) of section 26‑A of the Income‑tax Act for cancellation of regirtration granted for the charge years 1974‑75 and 1975‑

76. In the notice the reason assigned by the Assessing Officer was that registration application for the charge year 1974‑75 filed on 29‑7‑74 was beyond the prescribed time limit as the assessee's accounting period had ended on 30‑6‑1974. Being dissatisfied from the assessee's reply, the Income‑tax Officer on 15‑12‑1976 cancelled registration and renewal of registration granted to the assessee‑firm for the charge years 1974‑75 and 1975‑76 holding that registration earlier allowed being against provisions of income‑tax Rule 2, was illegal. For the charge year 1976‑77 the assessee's claim of renewal of registrarion was refused on 15‑12‑1976 as the registration granted for the earlier two years stood already cancelled. Statuts of U.R.F. was assigned for all the years. In appeal the A.A.C. modified the Income‑tax Officer's order holding that under sub‑clause (4) of section 26‑A of the Income‑tax Act, the Income‑tax Officer was not empowered to cancel the registration on the ground that original registration application filed for the charge year 1974‑75 was barred by time. The genuineness of the assessee‑firm having not been doubted by the Income‑tax Officer at the time of grant of registration the A.A.C. allowed, registration for all the three years under review.

3. The D.R. contended that the A.A.C. erred in law in allowing regis tration to the assessee‑firm as for the charge year 1974‑75 the Income‑tax Officer did not find any justification for a firm consisting of two partners viz. father and son being involved in it. The D.R. further contended that the genuineness of investment of one of the partners i.e. Mr. Abdur Rashid was very much doubtful and in the absence of genuineness of the partner and his capital contribution, the A. A. C. fell in error in granting registration for the years under consideration. The assessee‑respondent's A.R. submitted that the contentions now raised by the D. R. having not teen pleaded before the officers, below, cannot be allowed to be urged at the arguments stage. It was further contended by the assessee's A.R. that genuineness of the assessee‑firm cannot be said to be doubtful merely because of alleged late sub mission of original registration application.

4. After hearing the parties, we do not find any merit in these appeals. The submissions made by the D.R. are just narration of grounds of appeal whereas no such plea was raised before the A.A.C. and the Income‑tax Officer. The contentions of the D.R. do not arise out of the A.A.C.'s order and a new plea has been raised. Stand of the D.R. being contrary to the basis adopted by the Income‑tax Officer for cancellation cannot be entertained. The Tribunal is a final forum of appeal on law and facts. The submission of the D.R. require appraisal of facts only. It is well‑settled principle by now that facts not thrashed out at the lower level cannot be permitted to be agitated at the arguments stage in a final Court of appeal unless established that the assessee was prevented by a sufficient cause. In this view of the matter, we refuse to entertain the new objection of the D.R. Before the A.A.C. the assessee had assailed the Income‑tax Officer, order dated 15‑12‑1976 passed under section 26‑A(4) of the Income‑tax Act, for the charge years 1974‑75 and 1975‑

76. There is no dispute between the Income tax Officer and the assessee regarding filing of registration application for the charge year 1974‑75 on 29‑7‑74 and registration of the assessee‑firm with the Registrar of Firms on 29‑1‑1974. Due to ignorance of law the Income‑tax Officer, on 3‑10‑74 while granting registration for the first year under con sideration did not notice that the assessee's registration application filed on 29‑7‑74 was time barred having been filed after the expiry of the accounting period. The mistake was also not realized while granting renewal of registra tion for the charge year 1975‑

76. The Income‑tax Officer observed in his order dated 15‑12‑1976, that the assessee's registration application was in time. It was also held by the Income‑tax Officer that the assessee‑firm was genuine and all the legal formalities regarding registration stood duly complied with. For the charge year 1975‑76 renewal of registration was allowed as the firm was already registered for the earlier year. The Income‑tax Officer resorted to cancellation of registration not for doubting the genuineness of the firm rather the matter was taken up on the issue or registration application being time‑barred.

5. The question for determination is the scope and extent of provision of sub‑clause (4) of section 26‑A of the Income‑tax Act. Under this provision registration already granted can be cancelled only if it is found that registra tion was granted without there being a genuine firm in existence. If in the order passed under section 26‑A (3) genuineness of the firm is not doubted, provisions of section 26‑A (4) are not attracted. The relevant conditions for determining genuineness of a firm are constitution of a firm under a valid and genuine instrument of Partnership specifying shares of the partners making of an application on behalf of such persons in the prescribed form etc. Genuineness of a firm and procedure relating to registration are two separate things. It cannot be said that if an application is not filed in time the firm is not genuine. On the other hand, if a firm is genuine but application is not made in time, the firm can be granted registration if the Income‑tax Officer is satisfied that the applicant was prevented by a sufficient cause. In the instant case, in the notice issued under section 26‑A (4) of the Income‑tax Act, the Income‑tax Officer did not mention a word to doubt the genuineness of the assessee‑firm. In other words, it can be safely assumed that genuineness of the firm was not at all, doubted. This conclusion gets full support from the fact that even after the impugned orders, the Income‑tax officer had assigned the status of U.R.F. If by ignorance of law, as the fact is, the Income‑tax Officer did not notice at the time of grant of registration that the assessee's registration application was time barred no case was made out for cancellation of registration under sub‑clause (4) of section 26‑A of the Income‑tax Act. The delay in filing of the assessee's registration application shall be deemed to have been impliedly condoned. Scope of sub‑clause (4) of section 26‑A did not empower the Income‑tax Officer to cancel the registra tion already granted on the ground that original registration was erroneously granted on a time‑barred application. The genuineness of the assessee‑firm having not been doubted no case could be made out by the Assessing Officer for cancellation of the registration already granted to the assessee‑firm for the first two years under consideration. The A.A.C. rightly allowed registration for the years under review. For the third year registration was allowable to the assessee‑firm automatically, there being no change in the constitution of the firm.

6. As a result of the above discussion, all the three departmental appeals being devoid of any merits stand dismissed. Appeals dismissed.