Genuine partnership registration cannot be denied on suspicion where the deed is executed and acted upon.

A duly executed and acted-upon partnership deed, supported by account books showing capital contributions, drawings and profit-sharing, established genuineness of the firm and entitlement to registration under section 26A. Earlier family treatment as a Hindu undivided family did not bar a later disruption and fresh partnership arrangement. Retention of bank accounts in existing names and non-production of the Bali Khata were insufficient to prove the firm was a mere veneer; refusal based on surmise and suspicion could not stand. The registration refusal was therefore unsustainable and the firm was entitled to be registered for the relevant assessment year.

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Issues: Whether the partnership firm was genuine and entitled to registration under section 26A of the Indian Income-tax Act, and whether the material relied upon by the income-tax authorities was sufficient to refuse registration.

Analysis: The deed of partnership was executed and registered, the business was carried on pursuant to that deed, and the account books showed capital contributions, drawings, and division of profits. The earlier treatment of the family as a Hindu undivided family did not prevent a subsequent disruption and fresh partnership arrangement. The circumstances relied upon by the Department, including retention of bank accounts in existing names and non-production of the Bali Khata before excise authorities, did not establish that the partnership was a mere veneer or that the firm was not genuine. The refusal to register rested on surmise and suspicion rather than evidence.

Conclusion: The refusal to register the firm was unsustainable, and the firm was entitled to registration under section 26A for the relevant assessment year.

Final Conclusion: The appeals were allowed and the order refusing registration was set aside, with the firm directed to be registered for the assessment year in question.

Ratio Decidendi: Registration of a firm cannot be refused unless the revenue establishes, on evidence, that the partnership is not genuine; suspicion, conjecture, or unusual bookkeeping features are insufficient to displace a duly executed and acted-upon partnership deed.

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