Firm registration can be refused when account books are not produced and profit-sharing under the partnership deed is not proved.

A firm's registration may be refused where the assessee fails to produce account books and cannot satisfactorily prove that profits and losses were apportioned among partners in the manner required by the partnership deed. The Tribunal accepted an adverse inference after the books were not produced for verification and the explanation that they were lost was not accepted. On the facts, the genuineness of the firm was not established for registration purposes, so the refusal of registration was upheld and the reference was answered against the assessee.

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Issues: Whether the Tribunal was justified in upholding refusal of registration of the firm on the ground that the assessee failed to produce account books and did not satisfactorily establish the apportionment of profits and losses between the partners in the manner specified in the partnership deed.

Analysis: The assessee claimed that copies of accounts showing distribution of profits and losses had been filed, but the Income-tax Officer called for the books to verify the correctness of the figures. The plea that the books were lost was not accepted, and an adverse inference was drawn against the assessee. In the absence of satisfactory proof that the profits and losses were apportioned as required by the partnership deed, the genuineness of the firm was not established for registration purposes.

Conclusion: The refusal of registration was justified, and the answer to the referred question was against the assessee and in favour of the Revenue.

Ratio Decidendi: Where an assessee fails to produce account books and does not satisfactorily prove that profits and losses were allocated among partners in accordance with the partnership deed, registration of the firm can be refused and adverse inference may be drawn.

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