Law:

Section:

Section 186 of the Income-tax Act, 1961 - Firm - Position prior to 1-4-1993 - Assessment year 1971-72 - Assessee firm carried on business of money lending as well as conducting teh bazari-contract work - Assessee declared certain Income from money lending business but nil income from teh bazari contract business - On basis of information that assessee had obtained teh-bazari contract in name of close relative, ITO issued a notice under section 142 requiring assessee to produce accounts of that contract business - Assessee however, replied that it had not done any such business - ITO disbelieved statement of assessee and made an ex-parte assessment - He also passed an order under section 186(2) cancelling registration of firm - Tribunal held that cancellation of registration was not justified - On instant reference, it was seen that ex-parte assessment had been maintained upto Tribunal stage with result that ITO's view that assessee's case that it had not taken any interest of teh-bazari was false had also been maintained - Whether, in view of aforesaid, it could be concluded that there was material non-compliance of notice under section 142 on part of assessee as its stand that it had not taken any teh bazari contract was found to be false - Held, yes - Whether, in such circumstances, case of cancellation of registration of assessee -firm under section 186(2) was in fact and in law made out - Held, yes FACTS The assessee firm carried on business of money lending as well as conducting teh-bazari contract work. In its return for the year 1970-71, the assessee declared some income from its money lending business but nil income from the teh-bazari business. The ITO got information that the assessee had taken a teh-bazari contract. The contract was taken in the name of S, who was the real sister's husband of one partner and the son-in-law of the other partner, of the assessee-firm. The ITO issued notice under section. 142 requiring the assessee to produce the accounts of said contract business. The assessee replied by a letter that it had never taken any contract of teh-bazari. The ITO, however, was not satisfied. He passed an assessment order to the best of his…

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