9911796707
TMI Blog1997 (12) TMI 152X X X X Extracts X X X X X X X X Extracts X X X X ..... ooks of account. The assessee furnished some of the details but could not appear on last hearing of the case. Therefore, the AO completed the assessment under s. 144 by applying net profit rate. The CIT(A) rejected the appeal of the assessee by stating that the AO refused registration to the assessee-firm as per provisions of s. 185(5) which provides that notwithstanding anything contained in this section wherein in respect of any assessment year, there is, on the part of a firm, any such failure as is mentioned in s. 144, the AO may refuse to register the firm for the assessment year. Admittedly the assessee failed to comply with the terms of notice under s. 143(2) and assessment was completed under s. 144. Therefore, the AO was justified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he CIT(A) and he further submitted that the CIT(A) can change the section and he rightly changed the section for denial of registration i.e. from 185(1)(b) to 185(5). Reliance was placed on Punjab Ice Factory & Cold Storage vs. CIT (1986) 52 CTR (Pat) 192 : (1986) 160 ITR 761 (Pat) and Shant Lal Kalyani & Co. vs. CIT (1995) 213 ITR 273 (Raj). 4. We have heard the rival submissions and considered them carefully. We have also perused the material on record. After going through the ratio in case of Santlal Kalyani & Co. vs. CIT we find that in this case the Hon'ble Rajasthan High Court confirmed the findings of the Tribunal regarding refusing the registration under s. 185(5). In this case the assessment was completed under s. 144 and registra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts were to be filed by the partners to explain the source. Here, in this case the preliminary details were filed and further some details were to be filed which cannot be filed by the partners due to some unavoidable reasons. Further, we noted in the case that the registration denied by the AO was under s. 185(1)(b) "by stating that in absence of books of account, the genuineness of the firm cannot be verified. Even the assessee has not produced evidence regarding the source of investment by the partners though he was required to file so vide order sheet entry mentioned, supra. I, therefore, refuse to allow registration to the firm under s. 185(1)(b) of the IT Act." Thereafter, CIT(A) uphold the action of the AO by stating that "The AO refu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and to decide the matter afresh in accordance with law." In that case the registration was refused to the assessee-firm on the ground that the assessment had been completed under s. 144 of the Act and there was no proof whether the profits had been divided in the ratio specified in the deed. The assessee want in appeal. It was, inter alia, contended that on the basis of material that was filed by the assessee, the ITO could have ascertained as to whether the profits of the firm was divided or not according to the profit-sharing ratio as specified in the partnership deed and that the firm was genuine, and the ITO was not justified in refusing to grant registration. The AAC, taking the aforesaid facts into consideration opined that it was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... default was of such a nature so as to merit the penalty of denial of registration, are satisfied then the ITO can refuse registration under s. 185(5) of the Act and it is not necessary for him to go into the question whether the firm was genuine or it was otherwise entitled to registration under s. 185 of the Act. These observations are given in italic portion in the judgment, and after perusing these observations and other material on record, we now see the facts of the present case in the light of the observations and other material on record. The assessment was completed under s. 144 as assessee was failed to produce books of account and some other details on last hearing of the case. However, the assessee furnished some of the details a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uantum by allowing deduction on account of cost of material supplied by the Department by holding that this material does not have any profit element. It means some material was also before him and the same material was supplied by none other than the assessee. 7. The words used in s. 185(5) are "may refuse to register". From these words, it is clear that s. 185(5) does not prescribe automatic refusal of registration in the event of any such failure as is mentioned in s. 144 but confers a discretionary power of the ITO to refuse registration in such a case. The discretion is not to be exercised arbitrarily or capriciously but in a lawful manner and on the basis of material circumstances present in the given case. Here at this stage, we fin ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
