TMI Blog1978 (7) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... renew registration was correct ? " The reference arises out of the assessment for the year 1961-62. The assessee, M/s. Phoolchand Ramsahai, Neemuch, is a firm constituted of six partners, having one-sixth share each in the profits and losses of the business of the firm. It carries on business in groundnut and linseed. For the assessment year 1961-62, for which the accounting period ended on Diwali, 1960, the assessee filed a return of income declaring an income of Rs. 8,441. The assessee also filed an application for renewal of registration under r. 6 of the Indian I.T. Rules, 1922. The application for renewal of registration was filed on May 11, 1961. The ITO refused to renew the registration of the firm observing that "the partners o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the account books were deliberately suppressed to avoid assessment of proper income of the assessee. The ITO, therefore, proceeded to make a best judgment assessment on the same day and also passed an order (referred to above) refusing renewal of registration. When the assessee went up in appeal against this order it was pointed out that an application for renewal of registration was in fact filed and it was pointed out that the observation of the ITO is contrary to the record. The AAC held that even if the application for renewal was filed, the registration was refused because the account books were not produced under s. 23(4) for the reasons stated by the ITO and he confirmed the order passed by the ITO. On appeal, the Tribunal e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liance on the decisions in CIT v. Krishnamma Co. [1955] 28 ITR 273 (AP), Trivandrum Tobacco Combines v. CIT [1967] 63 ITR 813 (Ker) and J. M. Sheth v. CIT [1965] 56 ITR 293 (Mad). Learned counsel for the department contended that in fact the ITO refused renewal of registration on the ground that the books of account were not produced and, as observed by the ITO in his order, in the absence of the books of account, it was not possible for him to find out whether the profits according to the share ratio mentioned in the deed have been distributed among the partners or not. This, according to learned counsel, is good reason on the basis of which the ITO could reject the application for renewal of registration. He, however, contended that e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the books had been lost in transit. In this context, the Tribunal observed that this excuse was false and ultimately the ITO felt that, in the absence of the account books, it was not possible to find out as to whether the profits in the ratio as indicated in the deed of partnership have in fact been distributed to the partners or not. This, according to the Tribunal, was good reason for refusing renewal and, therefore, the Tribunal maintained the order of the ITO. Learned counsel, therefore, contended that the Tribunal being the appellate authority which ultimately maintained the order of the ITO and gave detailed reasons, it clearly goes to show that the ITO exercised his discretion and passed a reasoned order and, therefore, it could n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on one way or the other as contemplated under sub-s. (4) of s. 23 of the Act. In Trivandrum Tobacco Combines v. CIT [1967] 63 ITR 813, their Lordships of the Kerala High Court agreed with the view of Subba Rao C.J. in CIT v. Krishnamma Co. [1955] 28 ITR 273 (AP) and held that merely because the ITO has chosen to proceed under s. 23(4) to make a best judgment assessment,-merely on that ground-registration cannot be refused. In J. M. Seth v. CIT [1965] 56 ITR 293, their Lordships of the Madras High Court observed that merely because the ITO has proceeded to make a best judgment assessment under s. 23(4) of a firm for non-production of books of account, the ITO is not bound to cancel the registration. It is, therefore, clear that merely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is no doubt true that the first reason stated by the ITO is not correct and in view of the law settled, the third reason alone could be no reason for refusal to renew registration. But so far as the second reason is concerned, it could not be doubted that it does indicate the exercise of discretion. The Tribunal has explained that in the context of the past history of the earlier assessment the ITO wanted to satisfy himself as to whether in fact the profits have been distributed among the partners and that it has been done in the same ratio as shown in the deed of partnership. It could not be disputed that if the ITO comes to this conclusion that the profits have not been distributed among the partners and that it has not been distributed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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