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TMI Blog1984 (7) TMI 159X X X X Extracts X X X X X X X X Extracts X X X X ..... The ITO declined registration in the assessment order by referring to the fact that the application was addressed to a wrong ITO and that he is entitled to reject the claim for registration acting under section 185(5) of the Income-tax Act, 1961 ('the Act') as the assessment itself is being made under section 144 of the Act. He also mentioned in passing that in absence of account books it is not possible for him to verify the claim that there was a firm according to the deed. As for alleged non-production of books, it is the assessee's case that only cash book could not be produced and that was because it had been misplaced and that all other books were available and produced and that detailed copies of accounts including partners' account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut that the appellate order is also a single one. Without prejudice to this contention, it was stated that the assessee would choose the issue of registration if it were compelled to choose only one issue. 5. On the question of registration, the learned representative for the assessee claimed that ex parte assessment itself was not justified on merits. At, any rate there was no material or even suggestion of any evidence to throw even a doubt about genuineness of the firm. Copies of accounts on record indicate division of profits. The firm came into existence consequent practically to a change in constitution of its predecessor Uma Medical Hall due to the induction of partners of another discontinued firm Surya Medical Hall. In fact, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or all years. As for quantum of Rs. 25,000 estimated, be justified the same with reference to the turnover which was about Rs. 10 lakhs inasmuch as net profit works out only to 2.5 per cent. 8. We have carefully considered the facts as well as the arguments. On the question of registration, section 185(5), in our view, lays down that in an assessment under section 144 'the Income-tax Officer may refuse to register the firm for the assessment year'. [Emphasis supplied] There are a number of decisions with reference to this provision under the Income-tax Act and the Indian Income-tax Act, 1922 ('the 1922 Act') listed in note 2 of page 858 of Kanga Palkhivala's The Law and Practice of Income-tax, Seventh edn., vol. 1, on page 166 of the su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sources of capital of partners to the effect that such capital was from drawings from Uma Medical Hall/Surya Medical Hall, both assessees and on record for earlier years. The copy of the order sheet filed by the learned departmental representative does not indicate that, at any stage genuineness of the firm was the subject-matter of enquiry so as to link the question of genuineness of the firm with non-production of books for which ex parte order was made. The accounts of partners show the debit of respective share of loss as per profit and loss account. Even the ex parte order assigns the status as firm though unregistered. Hence, we do not see how the existence of firm was treated as not proved when an assessment has been made on such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce require that there is opportunity in respect of registration claim as well either in connection with the processing of registration application or, at least, as part of the assessment proceedings. It is all the more difficult to justify non-registration in a case like this where non-production is not absolute but only partial where there is a return and formal application of registration. We ordinarily expect the enquiry to be simultaneous and no adverse inference regarding one is drawn for non-compliance regarding the other. If such procedure is not followed, there would have been no necessity of two orders in respect of a firm claiming registration, one for registration and the other for quantum. It is also seen that two appeals are pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quantum of assessment, we are of the view that, where there is no separate order on an application for registration, the assessee could not be shut out from questioning registration in an appeal against quantum assessment in view of the liability imposed on it as an unregistered firm. No doubt, the question is not free from doubt since the Allahabad High Court in ITO v. Vinod Krishna Som Prakash [1979] 117 ITR 594 and the Patna High Court in Madhur Jalpan's case are in favour of a single appeal, while the Orissa High Court in Nilamani Ghosh Partners v. CIT [1977] 106 ITR 281 requires two appeals which were considered necessary even in the case of a single order by the ITO. In such circumstances the Calcutta High Court in Fuel Supply Co. v ..... X X X X Extracts X X X X X X X X Extracts X X X X
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