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TMI Blog1971 (1) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... rs 1961-62 and 1962-63 the assessee-firm was registered under the Act. For the assessment year 1963-64 corresponding to the accounting year ending with March 31, 1963, the firm returned a net income of Rs. 43,021 accompanied by a declaration in Form No. 12. The declaration states that there was no change in the constitution of the firm or the shares of the partners for the assessment year in question. The Income-tax Officer, on scrutiny of the accounts maintained by the firm, found no profit and loss account and the ascertainment and distribution of the profits amongst the parties. Hence, he refused to grant the certificate under section 185(4) of the Act for that year. The appeal by the assessee to the Appellate Assistant Commissioner was without success. However, on further appeal, the Tribunal upheld the contention of the assessee that it was entitled for the grant of renewal of registration notwithstanding the fact that there was no ascertainment or division of the profits of the business amongst the partners. Hence, this reference. The learned standing counsel for the revenue, Sri P. Rama Rao, contended that the Tribunal erred in law in directing the continuation of the regis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtificate under sub-section (4) of section 185 on the instrument of partnership or on the certified copy thereof, as the case may be, to the effect that the firm has been registered for the relevant subsequent year. The Income-tax Officer is not only empowered but has a statutory duty to enquire into the correctness of the statement made by the assessee in the declaration under Form No. 11 and to refuse registration of the firm if he is not satisfied about the truth and correctness of the declaration. Where the Income-tax Officer, after due enquiry, arrives at the conclusion that there was a change in the constitution of the firm or the shares of its partners as evidenced by the deed of partnership, he has to refuse continuation of registration for the subsequent year of assessment. The provisions of section 184(7) do not specifically mention the failure or absence of ascertainment or distribution of profits amongst the partners of the firm as one of the requisite conditions for the continuation of registration of the firm for the subsequent years. Nor is it possible on a plain reading of the provisions of section 184(7) and Form No. 12 or any other provisions of the Act or the Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by it furnishes the requisite particulars prescribed therefore, provided the existence of a genuine firm with the constitution so specified in the instrument of partnership is established. The discretion vested in the income-tax authorities under sections 184 and 185 of the Act is a judicial one and, therefore, the applications for the original registration or continuation of registration for subsequent years under the Act cannot be refused on suspicion or speculation. The Income-tax Officer has jurisdiction to reject the application of the firm for registration only if it is not in conformity with the rules and the provisions of sections 184 and 185 and when the firm is proved to be a bogus one, not genuine or has no legal existence, but not otherwise. He is empowered to enquire into the truth or otherwise of the requisite facts stated by the partners of the firm in the declarations and the applications made to him after due notice and opportunity to the assessee, and refuse registration or continuation of registration for subsequent years if the firm was not genuine or the declarations made are not true. Where the original registration has been granted under section 185(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the firm amongst its partners. The ascertainment and distribution of profits, no doubt, will have to be made according to the shares of the partners as evidenced in the deed of partnership. Whether there was ascertainment and distribution of profits or not, is a question of fact depending upon the facts and circumstances of each case. The distinction between the failure or absence of ascertainment and distribution of profits amongst the partners of a firm and the distribution of profits being not according to the shares specified in the deed of partnership may be noticed. Whether the allocation or distribution of profits was made in a manner different from the shares evidenced by the instrument of partnership, it may amount to change in the shares of the partners, but in the normal course, it cannot be said that there was a change in the shares of the partners. It may at the most be stated in such a case that there was a postponement of distribution of the profits earned by the firm amongst its partners. Hence, that itself cannot be held to amount to a change in the shares of the partners when compared with the shares specified in the instrument of partnership which was sought to b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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