Discretion under income-tax registration rules can be independently reappreciated on appeal when supported by relevant material.

Section 185(5) confers discretionary power on the Income-tax Officer, and an appellate authority may independently reappreciate the matter and substitute its own discretion. Where the Tribunal has done so, a question on whether the Income-tax Officer exercised that discretion properly does not arise from the Tribunal's order for reference. The Tribunal's conclusion will nevertheless be sustained if supported by relevant material, including procedural facts such as notices issued, assessment completed within a short period, and other surrounding circumstances showing that refusal to register the firm was not justified.

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Issues: (i) whether the question challenging the Income-tax Officer's exercise of discretion under section 185(5) of the Income-tax Act, 1961 arose out of the Tribunal's appellate order; (ii) whether there was material before the Tribunal to hold that the Income-tax Officer did not exercise his discretion judiciously under section 185(5) of the Income-tax Act, 1961.

Issue (i): whether the question challenging the Income-tax Officer's exercise of discretion under section 185(5) of the Income-tax Act, 1961 arose out of the Tribunal's appellate order.

Analysis: The power under section 185(5) is discretionary, but an appellate authority has the same power as the original authority and may substitute its own discretion for that of the Income-tax Officer. A question as to whether the Income-tax Officer exercised that discretion properly does not arise from the Tribunal's order when the Tribunal has itself reappreciated the matter and taken a different view.

Conclusion: The first question did not arise out of the Tribunal's order and was not referable.

Issue (ii): whether there was material before the Tribunal to hold that the Income-tax Officer did not exercise his discretion judiciously under section 185(5) of the Income-tax Act, 1961.

Analysis: The record showed notices under sections 143(2) and 142(1), completion of assessment within a short period, and the surrounding procedural circumstances relied upon by the Tribunal. These facts furnished material for the Tribunal's conclusion that refusal to register the firm was not warranted.

Conclusion: The second question was answered against the Revenue because adequate material supported the Tribunal's conclusion.

Final Conclusion: The application for reference failed in entirety and was dismissed, with parties left to bear their own costs.

Ratio Decidendi: A question as to the propriety of the Income-tax Officer's exercise of discretionary power does not arise for reference where the appellate authority has independently substituted its own discretion on the same matter, and the Tribunal's conclusion will stand if supported by relevant material.

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