Partnership registration cannot be cancelled for an honest profit-allocation mistake that was rectified and left the books genuine.

Incorrect allocation of partnership profits under a wrong deed clause, where the mistake was honest and promptly rectified by reversing the entries, did not undermine the genuineness of the books or justify cancellation of the firm's registration. The High Court treated the error as an innocent accounting mistake rather than a defect affecting entitlement to registration, and upheld the assessee's position on the merits.

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Issues: Whether cancellation of the firm's registration was justified on the ground that the profits were initially allocated under an incorrect clause of the partnership deed instead of the clause applicable to the relevant profit level.

Analysis: The allocation of profits under the wrong clause was found to be an honest and innocent mistake. The accounts were rectified on discovery by reversing the entries, and the books were found to be genuine. Such a mistake did not militate against the grant of registration or justify cancellation.

Conclusion: The cancellation of registration was not justified and the assessee succeeded on the merits.

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