Satish Chandra, C.J. - (1.) SETHA Ram Dhanvir Singh, the assessee-firm, was constituted under an instrument of partnership on 14th December, 1964. It consisted of six partners. The first accounting period of the firm was from August 1, 1964, to March 31, 1965, relevant to the assessment year 1966-67, for which the firm applied for registration in form No. 11, accompanied by the instrument of partnership on March 24, 1965. Under this instrument four partners had a two-anna six pie share each, while the other two had a three anna share each. On July 23, 1966, the firm filed its return showing division of shares equally among the six partners.
(2.) ON 19th January, 1967, the ITO passed an order of assessment as well as an order granting registration to the assessee-firm. The officer stated that the six partners each had one-sixth share and that the profits had been divided accordingly. The Commissioner, during his inspection, found that the ITO's order was erroneous. According to the partnership deed, two of the partners had a three-anna share each, while the other four had a two-anna six pie share each, while the profits of the firm had been divided by crediting one-sixth share to each of the six partners. He issued notice under Section 263 of the Act, and after hearing the assessee held that according to the profit and loss account and the balance-sheet, filed along with the return, the profits had been divided equally amongst the six partners, though the partnership deed indicated that four of the partners had only a two-anna six pie share each. The division of profits was not in accordance with the shares specified in the deed. He set aside the order granting registration and directed the ITO to reframe the assessment of the firm treating it as an unregistered firm, and to make consequential amendments in the assessment of the partners. The assessee appealed to the Tribunal, but failed. At the instance of the assessee, the Tribunal has referred for our opinion three questions, the substance of which is: " (1) Whether the cancellation of registration was, in law, justified ? (2) Whether after the partners' assessment the firm's assessment could be changed and assessed as an unregistered firm ? (3) Whether the Commissioner could cancel the registration only under Section 186 of the Income-tax Act?"
(3.) SECTION 184 of the I.T. Act, 1961, deals with registration of firms. It provides that an application for registration may be made on behalf of a firm, if- (a) the partnership is evidenced by an instrument, and (b) the individual shares of the partners are specified in that instrument. Section 184(6) says that the application shall be made in the prescribed form. Part V of the I.T. Rules, 1962, lays down the procedure for registration of a firm. Rule 22(1) provides that an application shall be made in Form No. 11. Clause (3) of Form No. 11 requires a certificate from the partners to the effect that the profit or loss of the previous year were/will be divided or credited as shown in the Schedule and that the information given in the Schedule is correct. The Schedule specifies the shares of the individual partners.;