Firm registration cannot be refused on a best judgment assessment basis once that assessment is set aside and reconsidered.

Where a firm's registration was refused under section 185(5) on the basis that the assessment had been completed under section 144, that refusal could not stand after the best judgment assessment was set aside and fresh assessment was directed. Once the quantum assessment ceased to operate, the factual foundation for refusing registration disappeared, and the application had to be reconsidered on the revised position. The appellate direction for fresh consideration of the registration request was therefore upheld.

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Issues: Whether the refusal to register the firm under section 185(5) of the Income-tax Act, 1961, on the ground that the assessment had been completed under section 144 of the Income-tax Act, 1961, could survive after the best judgment assessment had been set aside and fresh assessment directed.

Analysis: The assessment year was under reconsideration because the quantum assessment had already been set aside and the Income-tax Officer had been directed to make a fresh assessment. In that situation, the basis on which registration had been refused, namely completion of a best judgment assessment, no longer remained operative. The refusal of registration was therefore not sustainable on the facts then obtaining.

Conclusion: The refusal to register the firm was not justified, and the appellate order directing fresh consideration of the registration application was upheld.

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