Continued registration cannot be refused under the initial-grant provision; cancellation must follow the statutory notice-and-hearing procedure.

Where a firm's registration has already been continued under section 184(7), the Income-tax Officer cannot reject it under section 185(5), which applies only at the stage of initial grant or recognition. If the assessment is completed under section 144, the proper course is cancellation under section 186(2), and that power can be exercised only after at least 14 days' notice and a reasonable opportunity of being heard. The appellate authority may direct the officer to proceed under the correct provision after finding the refusal order unsustainable. The stated legal position is that refusal under section 185(5) cannot replace the statutory cancellation procedure under section 186(2).

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Issues: Whether the Appellate Assistant Commissioner was justified in directing the Income-tax Officer to proceed afresh after holding that the firm's declaration under section 184(7) had been properly filed and that its status should be treated as that of a registered firm.

Analysis: The firm had already obtained continuation of registration under section 184(7), so the Income-tax Officer could not refuse registration under section 185(5), which applies at the initial stage of grant or recognition of registration. If the assessment had been completed under section 144, the proper course was cancellation of registration under section 186(2), and that power could be exercised only after giving at least 14 days' notice and a reasonable opportunity of being heard. Since no such notice or opportunity had been given, the refusal order was not sustainable. The Appellate Assistant Commissioner, having found the order wrong, was entitled to direct the Income-tax Officer to proceed according to law and to pass an order under the proper provision.

Conclusion: The direction was valid and the answer was against the assessee and in favour of the Revenue.

Final Conclusion: The ruling confirms that where a registered firm's assessment is completed under section 144, the Income-tax Officer must invoke the cancellation procedure under section 186(2) with due notice and hearing, and cannot refuse registration under section 185(5) as a substitute.

Ratio Decidendi: Once registration has been continued under section 184(7), refusal of registration under section 185(5) is unavailable; cancellation, if warranted, can be made only under section 186(2) after compliance with the prescribed notice and hearing requirements.

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