Statutory notice for continuation of registration is mandatory; refusal without it was unsustainable under the Income-tax Act.

Refusal of continuation of a firm's registration could not be sustained without the 14 days' statutory notice required for continuation, cancellation or refusal under section 186(2) of the Income-tax Act. The application was for continuation of an existing registration, not fresh registration, so section 185(5) did not apply. On that basis, the High Court held the refusal unsustainable and decided the issue in favour of the assessee.

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Issues: Whether refusal of continuation of registration to a firm could be sustained without giving 14 days' statutory notice, where the matter fell under section 186 and not under section 185(5) of the Income-tax Act, 1961.

Analysis: The application was for continuation of an existing registration and not for fresh registration. A case of continuation, cancellation, or continuation of registration is governed by section 186(2), and the requirement of a statutory notice before refusing continuation applied. The refusal based on the premise that the matter was one of fresh registration under section 185(5) was therefore not justified.

Conclusion: The requirement of 14 days' statutory notice was applicable, and the refusal of continuation of registration without such notice was unsustainable. The issue was decided in favour of the assessee.

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