Law: Income Tax Act, 1961

Section: 184,185,186,187

Income-tax---Firm---Registration---Cancellation---Permissible only where firm not found genuine---That profits not allocated to retiring partner but only to partners continuing at end of previous year---No ground for cancellation of registration---Indian Income Tax Act, 1961, Ss. 184, 185, 186 & 187. From sections 184 to 186 of the Indian Income Tax Act, 1961, it is apparent that once the procedural requirements are complied with about the making of an application for registration of the firm and furnishing of the partnership deed, etc., the only enquiry germane for consideration regarding the question of registration is whether the firm which is seeking registration is genuine and existed during the previous year concerned. No other consideration enters the scrutiny at the stage of grant of registration. Section 186 deals with cancellation of registration already granted. It speaks of only one ground on the basis of which registration can be cancelled, viz., where the Assessing Officer was of the opinion that during the previous year, no genuine firm was in existence as registered. The assessment of taxable income in the hands of the firm and allocation of profits amongst the partners after adjusting the allowable expenses or outgoings in the name of the partners for the purposes of assessment of the income of the partners individually in their hands is part of the assessment proceedings having relation to computation. The allocation of shares to the persons/partners entitled to receive the same in the previous year in question is an obligation cast on the Assessing Officer while framing the assessment of the relevant assessment year, but is not an obligation cast on the assessee for the purposes of seeking registration of the firm nor is it a part of any relevant consideration for considering the question of grant of registration or cancellation of registration. The assessee-firm, originally constituted by three partners, was a registered firm for the purposes of the Income Tax Act, 1961. The accounting year of the firm was the calendar year. During the previous year relevant to the assessment year 1976-77, one of the partners, S, retired on March 31,…

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