Judgment:
Agarwala, J.
1. This is an application under Section 66 (2), Income-tax Act.
2. The applicant was required to produce arough cashbook in the matter of the assessment of tax for the year 1945-46. He produced some account book which was not accepted by the Income-tax Officer as genuine. Consequently the assessment against the applicant was made to the best of the judgment of the Income-tax Officer under Section 23(4) of the Act.
The Income-tax Officer then proceeded to deal with the applicant's application for the registration of his firm for that year. He refused to register the firm on the ground that the rough cashbook produced was not a genuine record of the assessee's business transaction' and the non-production of the original account books resulted in the assessment being made under Section 23(4). Against this order there was an appeal to the Appellate Assistant Commissioner which was dismissed and then a second appeal to the Appellate Tribunal and then an application to the Appellate Tribunal under Section 66(1) were made which were dismissed.
3. In this application two points have been urged before us. It has been contended that no application for the registration of the firm was made, but an application for renewal of registration was made. It was pointed out that the firm had already in the past been registered, and that as such the Income-tax Officer had no power under Section 23(4), Income-tax Act to refuse to renew the registration of the firm.
Secondly, that the Income-tax Officer has not in reality exercised the discretion vested in him under Section 23(4) because in refusing to register the renewal of the firm, he has simply referred to the very grounds on which the assessment was made under Section 23(4). We consider that there is no force in any of these contentions.
4. Section 23(4) provides as follows:
'If any person fails to make the return required by any notice given under Sub-section (2) of Section 22 and has not made a return or a revised return under Sub-section (3) of the same section or fails to comply with all the terms of a notice issued under Sub-section (4) of the same section or, having made a return, fails to comply with all the terms of a notice issued under Sub-section (2) of this section, the Income-tax officer shall make the assessment to the best of his judgment and determine the sum payable by the assessee on the basis of such assessment and, in the case of a firm, may refuse to register it or may cancel its registration if it is already registered :
Provided that the registration of a firm shall not be cancelled until fourteen days have elapsed from the issue of a notice by the Income-tax Officer to the firm intimating his intention to cancel its registration.'
5. Learned counsel for the applicant relied upon the words 'may refuse to register' and has urged that these words should not be construed to include refusal to renew the registration. The Act allows registration of a firm under Section 26A. The idea is that the registration shall be for each assessment year. When once a firm has been registered the registration for the next year is a renewal of registration and, therefore, the rules framed under the Act speak of renewal and the procedure for renewal is not so elaborate as in the case of the first registration of a firm.
6. But though the rules speak of renewal and do not prescribe an elaborate procedure for the same, the Act itself does not speak of renewal and speaks of registration merely. The conclusion is irresistible that so far as the Act is concerned the renewal of registration of a firm is nothing else but its registration for the next year. It follows, therefore, that the words 'refuse to register' in Section 23(4) must include the refusal to renew the registration of a firm.
7. This conclusion is reinforced by a consideration of the overall power given to the Income-tax Officer under that section. The section provides for refusal to register and for cancellation of registration. It is true that a fourteen days' notice has to be given to the assessee before the registration can be cancelled. But the point to note is that the Income-tax Officer is given power under that section to cancel the registration.
If the intentions of the Legislature were that the renewal of the registration were not to be refused by the Income-tax officer, then the result would be that though he would be bound to renew it, he could, at the same moment issue a notice for its cancellation. Thus the same result could be achieved though by circuitous procedure. The more natural interpretation of the section therefore, seems to be that the refusal to register Includes the refusal to renew registration.
8. The applicant's next contention that in the present case the Income-tax Officer has not exercised his discretion at all, is based upon the fact that in refusing to register the firm he had merely repeated the arguments upon which he based his assessment to the best of his judgment. The section does not lay down that the refusal to register may not be based upon any one or more of the grounds which led to the assessment being made to the best of the judgment of the Income-tax Officer.
Indeed, in most cases the reasons for refusal could be intimately connected with the reasons which led the Income-tax Officer to assess the firm according to the best of his judgment. We do not consider that in this case it can be said that the Income-tax Officer failed to exercise the discretion which was vested in him under Section 23(4).
9. There is no force in this application. Itis rejected with costs. We assess the cost of thecounsel for the Department at Rs. 100/-.