1. B.P. JEEVAN REDDY, J.--The Income-tax Appellate Tribunal, Hyderabad, has referred the following question under Section 256(1) of the Income-tax Act, 1961: "Whether, on the facts and circumstances of the case, the Tribunal is justified in upholding the refusal of registration of the firm by the lower authorities?"
2. The assessee filed a return in respect of the partnership firm, Shri Vijayalakshmi Rice Mill Contractors Co., Akividu, for the assessment year 1976--77 (accounting year ending on October 13, 1975). Along with the return, an application in Form No. 11 was filed seeking registration of the firm.
3. The Income-tax Officer declined to register the firm on the ground that when called upon to produce the books of account, the assessee failed to produce the same on the plea that they were lost. He refused to accept that plea. On that basis, he held that there is no proof or material to know that profits were actually divided in a particular manner between the partners. So far as the assessm ent is concerned, the return filed by the assessee showed a loss of Rs. 2,46,230; the Income-tax Officer refused to accept the return and inasmuch as the assessee also failed to produce the books, he assessed the income at Rs. 20,000 to which the assessee agreed. No appeal was preferred against the order of assessment. Appeal was preferred only against the order refusing registration. In this appeal, the Appellate Assistant Commissioner agreed with the Income- tax Officer that the assessee had not satisfactorily explained the loss of books. He was of the opinion that in the absence of books, genuineness of the firm cannot be said to have been established. On further appeal, the Tribunal agreed with the reasoning of the first appellate Court.
4. Thereupon, the assessee asked for and obtained this reference.
5. Sri Y. Ratnakar, learned counsel for the assessee, submitted that along with the return, the assessee had filed copies of accounts showing distribution of profits and losses between the members. May be so. But the Income-tax Officer, evidently with a view to verify the correctness of the said figures, called upon the assessee to produce the account books. The assessee pleaded loss of books which was not accepted by the Income-tax Officer as a fact which means that he was entitled to draw an adverse inference against the assessee. Refusing the registration of the firm is a necessary consequence of the said finding. We do not see any error in the order of the Tribunal. It is not disputed before us that the registration could be refused if the firm failed to satisfy the Income- tax Officer that the profits and losses of the firm were apportioned between the partners in the manner specified in the partnership deed.
6. For the above reasons, the question referred to is answered in the affirmative, that is, in favour of the Revenue and against the assessee. No costs.