Circular No. 289

926. Whether renewal of registration can be refused merely because renewal had been refused in the immediately preceding year on technical grounds

What this is

Circular No. 289 was issued by the Central Board of Direct Taxes on 29 December 1980. Its subject is 926. Whether renewal of registration can be refused merely because renewal had been refused in the immediately preceding year on technical grounds.

What it does

Accepts that renewal of a firm's registration cannot be refused for a year merely because renewal was refused in the immediately preceding year on technical grounds, so long as there is no change in the constitution of the firm or in the shares of the partners. In such a case a declaration in Form No. 12 suffices and a fresh application in Form No. 11 is not to be insisted upon. The Board records its acceptance of the judgment of the Patna High Court in Purusottam Lal Kishorilal v. CIT [1978] 115 ITR 377, which followed S.P. Pandey v. CIT [1974] 96 ITR 515 and CIT v. Sitaram Bhagwandas [1976] 102 ITR 560.

Why it was issued

The Board considered whether, after a technical refusal in the preceding year, renewal could be granted on a Form No. 12 declaration or whether Form No. 11 had to be filed, and decided to accept the High Court's view.

Who it reaches

Registered firms seeking renewal of registration
Firms whose renewal was refused on a technical ground in an earlier year
Income-tax Officers dealing with Form No. 11 and Form No. 12

The instrument, as the Board published it

The words below are the department’s own, reproduced from its published text. Where the department’s copy carried a publisher’s notes after the instrument, those are not reproduced.

926. Whether renewal of registration can be refused merely because renewal had been refused in the immediately preceding year on technical grounds
1. The Board has considered the question as to whether renewal of registration can be granted to a firm for a particular year on the basis of a declaration in Form No. 12, if in the immediately preceding year, the same was refused on technical grounds or whether Form No. 11 should be insisted upon for granting registration for that year.
2. The Patna High Court in the case of Purusottam Lal Kishorilal v. CIT [1978] 115 ITR 377 following the decision in the cases of S.P. Pandey v. CIT [1974] 96 ITR 515 and CIT v. Sitaram Bhagwandas [1976] 102 ITR 560 has held that the ITO is not justified to refuse renewal of registration to the firm merely because renewal had been refused in the immediately preceding year on technical grounds, so long as there is no change in the constitution of the firm or in the shares of the partners. The judgment of the Patna High Court has been accepted by the Board.
Circular : No. 289 [F. No. 210/19/77-IT(A-II)], dated 29-12-1980.

What to watch

The concession holds only while the constitution of the firm and the shares of the partners are unchanged; any change and the reasoning does not apply.
The preceding year's refusal must have been on technical grounds, not on the genuineness of the firm.
Registration of firms under the Income-tax Act was later done away with in terms this text does not carry; the circular belongs to the era of Form No. 11 and Form No. 12.

Where you meet it

In an order refusing renewal of registration to a firm, and in the appeal against it.

What it names

Forms it names. Form No. 11, Form No. 12

← Circular No. 291 · Circular No. 288 →

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.