Law:

Section:

Section 184 of the Income-tax Act, 1961 - Firm - Position prior to 1-4-1993 - Assessment year 1963-64 - Whether continuation of registration of assessee firm could not be refused on ground that there was no ascertainment or distribution of profits amongst partners for assessment year in question - Held, yes - Whether change in constitution of firm would come in only when there is change in its partners - Held, yes - Whether ITO has no right to refuse registration for subsequent years where assessee firm has satisfied statutory requirements of sub-section (7) of section 184 - Held, yes FACTS The assessee was a registered partnership firm consisting of five partners - During the accounting year relevant to the assessment year in question, the assessee along with the return of income filed a declaration in Form No. 12 stating that there was no change in the constitution of the firm or the shares of the partners for the assessment year in question. The ITO, 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) for that year. On second appeal the Tribunal held 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. On reference : HELD A combined reading of sections 184 and 185 and the rules made thereunder manifest that it is incumbent on the ITO to register a firm if the application 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 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 ITO has jurisdiction to reject the application of the firm for registration only if it is not in conformity with the rules and the…

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