TaxTMI 
TaxTMI 
1979 (7) TMI 130
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....ajor partners Svs. Shankerlal & Gopiram with 35 per cent share of profit each and two minors admitted to benefits of partnership with 15 per cent each, Svs. Brijesh Kumar and Ramesh Kumar. On 29th Dec., 1973 one of the major partners, Shri Shankerlal retired. Also Sri Brijesh Kumar attained majority. w.e.f. 27th Oct., 1973 the surviving major partner Sri Gopiram entered into partnership with Sri Brijesh Kumar each taking 35 per cent share and Sri Ramesh Kumar was admitted to benefits of partnership with 30 per cent share of profit. A partnership deed was drawn up. This firm filed an application for Registration in Form No. 11A alongwith newly drawn-up partnership deed on 22nd July, 1974. ITO required the assessee to produce the partners and....
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....oned the delay and entertained the application in Form No. 11. In this connection reference was made to CBDT's Circular No. F-1(44)/62/TPL dt. 28th Aug., 1962 in which the ITO were directed to admit Form No. 11 in places where From No. 12 had been filed in proper time. The AAC did not, however, consider it necessary to go into the various submissions made before him. He merely held that since the assessment itself was made under s. 144, the ITO could refuse registration on that ground alone in terms of s. 185(5). We reproduce below paragraph 3 of the AAC's order: "3. I have considered the arguments of the ld. A/R. As regards the first ground on which the ITO has refused the registration, in my view, the contention of the learned A/R are ....
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.... s. 185(5) is not automatic. It is discretionary and discretion should be exercised judicially. In support of this proposition he referred to Madras High Court decision in 56 ITR 292, Calcutta High Court decision in 59 ITR 197 and Kerala High Court decision in 63 ITR 813. On the facts of this case, Sri Dani pleaded, there was no justification at all for refusing registration even though the assessment in question was made under s. 144 on technical grounds. The learned counsel further argued that it was not correct for the ITO to say that the partners had not appeared before him for verification. He said that on 27th Sept., 1977, the ITO had asked for production of the partners and guardian of the minor partners on 7th Oct., 1977. On that da....
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....ition that refusal of registration under s. 185(5) is not automatic. The ld. AAC proceeded as though passing of the order of assessment under s. 144 alone was enough for refusing registration to the firm. The AAC's approach is clearly faulty. The different High Courts have held that the refusal of registration under s. 185(5) is discretionary and the ITO has to exercise the discretion in a judicial manner. In the present case, the assessee did not withhold any books of account. It could not produce the books for reasons beyond its control. No adverse inference therefore, could be drawn in the matter off registration. The assessee also did produce the partners before the ITO but the ITO was not present in his office on the fixed date. We do ....
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....gh Courts on the question whether in such circumstances a change in the constitution of the firm takes place or there is dissolution of the firm resulting in succession by the other firm. The assessee's plea that a mere change in the constitution had taken place is supported not only be certain High Court decisions but also by s. 187(2). The filing of application in Form No. 11A was not a bonafide belief that mere change in the constitution had taken place. That being the position the ITO should not have drawn any adverse inference and entertained the application in Form No. 11 after condoning delay. In some what similar circumstances the CBDT have directed the ITOs to accept applications in Form No. 11 as a substitute for the declarations ....
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....the question of registration on the material available before him. ITO could not refuse registration on the mere ground that a different conclusion would be illegal or not consistent. Their lordships further observed that if the evidence would justify the inference in any given case that the assessee must have been maintaining account books, it would be open to the Officer to treat him as a defaulter if the books are not produced. But if there are no materials from which the officer would reasonably infer that undisclosed account books exists, the non-production of such imaginary books would not be default as contemplated under s. 23(4) of the Act. There could be no presumption that the assessee is suppressing books and documents called for....