Full Judgment
The assessee has claimed the status of a registered firm for which a declaration under section 184(7) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') was filed along with the original return of income. In the original return, income declared was Rs. 21,060. Subsequently, the assessee has filed the revised return on 28-11-1979 and in the revised return, he has declared the income of Rs. 40,625. The admitted fact is that no books of account are maintained by the assessee. The assessing officer has refused to grant the registration to the firm of the assessee on the ground that there being no books of account and no evidence as to whether the enhanced profits were distributed amongst the partners in accordance with the declaration filed under section 184(7) of the Act, the assessee is not entitled to continue the registration of the firm.
2. In appeal, the Appellate Assistant Commissioner has allowed the appeal holding that once the partners have certified for distribution of the profits amongst them, the registration should be granted.
3. In appeal before the Tribunal, the Tribunal came to the conclusion that there is no distribution of enhanced profits in accordance with the declaration under section 184(7) and, therefore, restored the view taken by the assessing officer.
4. Heard the learned counsels for the parties. Mr. Kasliwal, the learned counsel for the assessee, submits that the assessee was a registered firm in the preceding year and this year only continuation of the registration is required for the firm. As per sub-section (7) of section 184, if the assessee shows that there is no change in the constitution of the firm, the shares of the partners and the assessee-firm furnishes the returns before the expiry of time allowed and also declaration in the prescribed form verified in the prescribed manner, the registration should be allowed to continue.
5. Mr. Kasliwal further submits that the registration once granted can be cancelled only under section 186(1) and 186(2).
6. Mr. Mathur, the learned counsel for the department, submits that when the original return has been filed, declaration under section 184(7) has been furnished along with the original return. In the original return, the income shown was Rs. 21,060 and in the revised return, the income shown was Rs. 40,625. When the declaration of income shown was only Rs. 21,060, and no further declaration was furnished though the income was shown as Rs. 40,625, the firm is not genuine and no case for continuation of the registration is made out.
7. The Tribunal is a fact-finding body. The finding of the Tribunal is that along with original return, the assessee has filed the declaration and in declaration, the income of the firm was shown as Rs. 21,060. Thereafter, revised return was filed. In the revised return, the income has been shown as Rs. 40,625 but no further declaration has been filed. The declaration has remained the same as was filed along with the original return. When in the original return the declaration was shown as Rs. 21,060 and in the revised return, the income was shown as Rs. 40,625, what is the correct state of affairs of firm is not known and genuineness of firm is in doubt.
8. Merely, if some member has certified that the income and the profits have been distributed as per partnership deed, that is not enough. Once the finding is that assessee has failed to prove that the partners have acted as per the terms of the partnership deed, the firm is not genuine and when the firm is not genuine, there is no question of continuation of registration. It is also pertinent to note that in earlier years books of the firm were not rejected but for this year the assessee has not maintained the books of account. Therefore, we find no infirmity in the order of the Tribunal.
9. In the result, we answer the question in the affirmative, i.e., in favour of the revenue and against the assessee.
10. The reference so made stands disposed of accordingly.