Firm registration under section 185(5) is discretionary, not automatic, even where assessment is completed under section 144.

Section 185(5) gives the Income-tax Officer discretion to refuse firm registration where assessment is completed under section 144 for non-compliance with notice under section 143(2), but it does not require automatic refusal in every such case. The refusal made mechanically on that basis was unsustainable. On the facts, the appellate authority considered the partnership deed and surrounding circumstances, found no doubt about the firm's genuineness, and held that the required formalities had been substantially complied with. Registration for the immediately following year on the same deed further supported the conclusion that registration for the assessment year 1977-78 was justified.

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Issues: Whether refusal of registration of a firm is automatic when assessment is completed under section 144, and whether registration was rightly granted for the assessment year 1977-78.

Analysis: Section 185(5) confers discretion on the Income-tax Officer to refuse registration where the assessment is made under section 144 for non-compliance with notice under section 143(2), and does not mandate an automatic refusal in every such case. The refusal made as a matter of course was unsustainable. The appellate authority examined the merits, including the partnership deed and the surrounding facts, and found that the genuineness of the firm was not in doubt and that the necessary formalities were substantially complied with. The subsequent grant of registration for the immediately following year on the strength of the same partnership deed also supported that conclusion.

Conclusion: Refusal of registration under section 185(5) was not automatic merely because the assessment was completed under section 144, and the grant of registration for the assessment year 1977-78 was in law and in the assessee's favour.

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