JUDGMENT
1. At the instance of the Revenue, the Income-tax Appellate Tribunal referred the following question for the opinion of this court :
"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in allowing the assessee's claim for continuation of registration ?"
2. The assessee-firm was granted renewal of registration for the assessment year 1973-74 and further applied for continuation of the registration for the assessment year 1974-75 with which we are concerned herein. The Income-tax Officer observed that the books of account produced by the assessee before him showed that the partners' accounts in the ledger did not contain any credit on account of the profit during the year and that the balances shown in the balance-sheet have also been brought forward from year to year and were not tallying with the books of account maintained by the assessee. Having so observed, he concluded that the profits of the firm had not been distributed in terms of the partnership deed and consequently he refused to grant continuation of registration.
3. On appeal, the Appellate Assistant Commissioner found as follows :
"In the absence of partners themselves deposing that they have received the actual shares of profits, entries in the books of account are material evidence to show that profits have been actually divided. In this case both these things are missing. Coupled with the fact that the balances in the partners' account do not tally for which no reason at all is forthcoming and also the fact that the deliberate non-compliance was made in response to the specific query of the Income-tax Officer. I am inclined to agree with the finding of the Income-tax Officer that there was no genuine firm in existence during the year under consideration and as profits have not been actually divided amongst the partners the action of the Income-tax Officer in refusing the registration to the firm was in order."
4. On further appeal, the Appellate Tribunal held as under :
"Viewed in this context it is not under dispute before us that the assessee is a firm constituted under an instrument of partnership, registration of which was granted for the assessment year 1973-74, i.e., the immediately preceding assessment year. It is further not disputed that the declaration as required by Sub-section (7) of Section 184 was filed along with the return within time. It is, therefore, not necessary for us to enter into the controversy whether the assessee's claim of ascertainment of profits and its distribution amongst the partners was correct or not... We, therefore, have no hesitation in coming to the conclusion that the assessee's claim for continuation of registration ought to have been allowed by the Revenue authorities and was wrongly not allowed."
5. Sub-section (7) of Section 184 of the Income-tax Act, 1961 (briefly the Act), in so far as material, runs as under :
"Where registration is granted or is deemed to have been granted to any firm for any assessment year, it shall have effect for every subsequent assessment year:
Provided that--
(i) there is no change in the constitution of the firm or the shares of the partners as evidenced by the instrument of partnership on the basis of which the registration was granted ; and
(ii) the firm furnishes, before the expiry of the time allowed under Sub-section (1) of Section 139 for furnishing the return of income for such subsequent assessment year, a declaration to that effect, in the prescribed form ..."
6. From Sub-section (7), it is manifest that the assessee has to establish only two ingredients for claiming continuation of registration : (1) that there is no change in the constitution of the firm or the shares of the partners as evidenced by the instrument of partnership which was the basis for granting the registration ; and (2) that the firm furnished a declaration to that effect in the prescribed form. It is not disputed that the assessee-firm furnished the declaration in the prescribed form for claiming continuation of registration. Also there is no finding either by the Income-tax Officer or by the Appellate Assistant Commissioner that there was change in the constitution of the firm or change in the share ratio, as evidenced by the partnership deed on the basis of which registration was granted for the preceding year.
7. In CIT v. Voleti Veerabhadra Rao and Sons [1972] 84 ITR 764 (AP), the court held that the provisions of Section 184(7) do not specifically mention the failure or absence of ascertainment or distribution of profits amongst the partners of the firm as one of the requisite conditions for the continuation of registration of the firm for the subsequent years.
8. The assessee having succeeded in establishing both the ingredients necessary for granting continuation of registration, we are of the view that the Tribunal was right in holding that the assessee was entitled to continuation of registration.
9. For these reasons, the above referred question is answered in the affirmative, that is, in favour of the assessee and against the Revenue.