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TMI Blog1996 (9) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... in holding that registration granted to the assessee-firm should not be refused under section 185(5) of the Act ? " In respect of the above assessment year, the Income-tax Officer issued notices under sections 142(1) and 143(2) of the Income-tax Act, 1961 (for short, "the Act"), to the assessee and as the latter did not comply with the requirements of the said notices, the assessing authority issued a notice under section 186(2) read with section 185(5) also seeking to cancel the registration of the firm. As there was no response even to that notice, the assessment was made according to the best judgment on July 24, 1984, and, on the same day, another order was passed contemporaneously refusing continuation of registration of the firm in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter to the Income-tax Officer "to consider the question of allowing continuation of registration to the firm on the materials available". At the instance of the Revenue, the above question was referred by the Tribunal for the opinion of this court. Sri J. V. Prasad, learned counsel for the Revenue, has argued that when the assessee has not responded to the notices issued not only under sections 142(1) and 143(2) but also the notice issued under section 186(2), it resulted in refusal to continue the registration. It is not incumbent upon the Assessing Officer to state any reasons for taking away the benefit of registration in a case where the assessee had suffered best judgment assessment. We are not inclined to agree with the submissions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " The use of the words 'may refuse' in section 23(4) would rather indicate that the Income-tax Officer has a discretion not to refuse registration or cancel registration even in spite of the default of the assessees. Significantly, the statute uses the words 'shall make the assessment to the best of his judgment' in the first part of the section. If the words 'shall' and 'may' are found in two different limbs of the same section, there cannot be a better legislative pointer to indicate that the first is obligatory and the second is discretionary. We have no doubt that the statute does not compel the officer to deprive the assessee of the benefit of registration under the last part of section 23(4). In other words, it would be wrong to as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ading of the above relevant statutory provisions, we are unable to draw the inference that in every case where a best judgment assessment was suffered by the assessee, the Assessing Officer must invariably pass an order refusing to continue the registration of the firm for the assessment year in question. Cancellation of the registration should only be after complying with the principles of natural justice, which necessarily implies that if the Assessing Officer is satisfied with the explanation offered by the assessee, he may drop the proposal to cancel the registration. Even if the assessee has not responded to the 14 days' notice issued under section 186(2), it cannot be predicated that the Assessing Officer must pass an order automatica ..... X X X X Extracts X X X X X X X X Extracts X X X X
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