Law:

Section:

Section 183(1) of the Income-tax Act, 1961 - Firm - Registration - Cancellation of -Whether where ITO does not form an opinion that there was no genuine firm in existence during relevant previous year, he cannot cancel registration already granted under section 186(1) - Held, yes Facts The assessee-firm was formed under a partnership deed dated 23-10-1966 and had six partners. One of the partners died on 17-3-1978. A fresh deed of partnership was executed on 21-3-1978, specifically stating that It would come into effect from 1-4-1978. The ITO initially granted registration to the assessee for the assessment year 1978-79 but later on he cancelled the registration under section 186(1) on the ground that the accounts were continued even after the death of the partner although there was no deed of partnership for the period from 18-3-1978 to 31-3-1978. On appeal, the AAC held that the ITO had no reason to believe that there was no genuine firm in existence during the relevant year, and it was a condition precedent to invoke the power to cancel the registration under section 186(1). On appeal, the Tribunal affirmed the AAC's order. On reference : Held The emphasis in section 186(1) is with regard to the satisfaction of the ITO as to the non-existence of a genuine firm during the previous year. There is, thus, a limitation imposed by the Legislature for cancellation of registration. It has been confined to only one ground, that is, the firm that existed during the relevant year was not genuine. Such a power cannot be equated with the power to grant registration. For the purpose of granting registration to a firm under section 186(1) there shall be a firm valid in law and also on fact. The concept of the firm being valid in law is distinct from its factual genuineness and for purpose of granting registration both aspects are relevant and must be present and one without the other will be insufficient. But these two requirements need not be present for purpose of cancelling the registration once granted. If the ITO wants to cancel the registration under section 186(1), all that he has got to know is whether there was during the previous year no genuine firm in existence…

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