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Issues:
Application under section 256(2) of the Income-tax Act, 1961 regarding the cancellation of firm registration due to incorrect profit allocation. Analysis: The judgment pertains to two connected applications under section 256(2) of the Income-tax Act, 1961, concerning the assessment years 1983-84 and 1984-85. The primary issue revolves around the correctness of granting registration to a firm despite incorrect profit allocation, which was deemed prejudicial to the Revenue. The Commissioner of Income-tax had initially cancelled the firm's registration due to profits not being allocated as per the partnership deed. However, the Income-tax Appellate Tribunal later overturned this decision. The Tribunal accepted the explanation that the incorrect profit allocation was an inadvertent mistake by the accountant, rectified before assessment. The Tribunal found the firm to be genuine, emphasizing that registration should not be denied for errors made due to omission or mistake, citing relevant court precedents. The judgment highlights the importance of firm genuineness and compliance with statutory requirements for registration under the Income-tax Act. The court's analysis delves into the provisions of sections 184 to 186 of the Income-tax Act and the registration scheme, emphasizing that genuine firms meeting statutory criteria are entitled to registration. Despite the initial error in profit allocation, the Tribunal deemed the mistake as honest and rectifiable, aligning with previous court decisions. The judgment underscores that registration should not be denied solely based on clerical errors if the partnership's genuineness is established through the partnership deed and compliance with legal conditions. The court rejected the applications, affirming the correctness of the Income-tax Appellate Tribunal's decision, which was deemed justified in granting registration to the firm despite the profit allocation mistake. The judgment concludes that no statable question of law arises from the Tribunal's order, leading to the rejection of the applications without costs.
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