1. JUDGMENT : Satish Chandra, CJ - The question of law referred for our opinion is whether, on the facts and in the circumstances of the case, the assessee is entitled to the renewal or registration. The question relates to the assessment years 1957-58 and 1958-59. On December, 1958, the Income Tax Officer issued notice u/s 22(4) of the Income Tax Act, 1922, requiring the assessee to produce the account books which had been signed by the Inspector of Survey Squad on July 26, 1957. A similar notice was given for the assessment year 1958-59, as well. Inspite of service of these notices, the assessee did not produce the books of account. It put forward an explanation that the books had been lost in transit. The explanation was disbelieved. The Income Tax Officer completed the assessment u/s 23(4) to the best of his judgment. At the end of the order, he stated. "Renewal of registration has been refused as the assessment has been completed u/s 23(4)". For the year 1958-59, he made the following observation :
"Total income of the assessee comes to Rs. 52,606/- on which assessment is made as per form I.T. 30 in the status of unregistered firm".
2. The appeal was dismissed on the ground that in so far as it related to refusal of renewal registration, it was barred by time. On further appeal, the Tribunal held to the contrary, namely, that the appeals were not barred by time. It remanded the matter back. After remand, the Appellate Assistant Commissioner dismissed the appeals again on the finding that the Income Tax Officer had not passed an order u/s 26-A of the Act and so no appeal lay.
3. The assessee again appealed. The Tribunal held that the order passed by the Income Tax Office in relation to refusal to renewal of registration was not u/s 23(4) of the Act but was one u/s 26-A of the Act. The first appellate order was set aside and the case was sent back to him with a direction that he should dispose of the appeal on merits. After this remand, the Appellate Assistant Commissioner considered the facts and held :
"The appellant had deliberately suppressed some of the most vital account books pertaining to the assessment years 1957-58, 1958-59 and had prepared up a false story about their loss in transit in a railway train. It was thus not possible for the Income Tax Officer to determine the correct income of the appellant, and also to be satisfied that income had been properly distributed amongst the various partners of the firm in the specified proportions. It is trite law that an assessee is not entitled to registration as a matter of right, and that the registration under the Income Tax Act is a benefit to earn which an assessee has to come before the Income Tax Officer with clean hands. The above narration of the facts makes it unmistakably clear that the appellant did not come with clean hands before the Income Tax Officer. Under the circumstances, his claim for renewal of registration was rightly rejected".
The appeal was dismissed.
4. The assessee again went up in appeal to he Tribunal. The Tribunal repelled the contention on behalf of the Reveune that in point of fact and in law the order was really u/s 23(4) and not u/s 26-A. It held that the Department not having gone up in appeal or reference to the High Court against the previous remand order, the same had become final and could not be challenged at this stage. They went on to hold :
"The facts that now emerge, therefore are that the Income Tax Officer has refused to renew registration on the ground that the assessment was made ex-parte. It is an established law that if an Income Tax Officer passes an order u/s 26-A may be in the case of assessment which is completed ex-parte, he cannot refuse to register the firm merely on the ground that the assessment was completed ex-parte".
The Tribunal then came to the following conclusion :
"The other grounds, namely, that the assessee did not appear with clean hands or that the Income Tax Officer could not be satisfied in the absence of books of account as to whether the profits were apportioned amongst the partners in the terms of the deed, was not considered by the Income Tax Officer. This being so, we would hold that the Income Tax Officer was not justified in refusing to renew registration to the assessee for the assessment years 1957-58 and 1958-59".
5. It is apparent that the Income Tax Officer did not record any finding on this aspect, namely, whether the assessee had come with clean hands or whether it was possible to see whether the profits were apportioned in the shares mentioned in the deed, in the absence of the books of account. It is equally apparent from the passage quoted above from the judgment of the Appellate Assistant Commissioner that he did apply his mind and recorded a finding on this aspect. Obviously the finding was based on the materials on record. In these circumstances, it was incumbent on the Tribunal to have dealt with the findings of the Appellate Assistant Commissioner on merits itself. It could no validly set aside the appellate order merely on the ground that ITO had not given findings on that aspect. In the previous remand order, the Tribunal had specifically directed the Appellate Assistant Commissioner to decide the appeal on merits. He did so and yet the Tribunal has set aside the Appellate Assistant Commissioners order on the view that the Income Tax Officer had not applied his mind and given findings on the relevant aspects. In this the Tribunal was in error. It should have itself applied its mind to the facts and come to the conclusion whether the findings of the Appellate Assistant Commissioner was entitled to be upheld or otherwise and in the absence of any such finding, we are not in a position to give a proper answer to the question that has been referred to us, namely, whether the assessee was entitled to the renewal of registration. Following the example of the Supreme Court in Commissioner of Income Tax, Bombay City-1 v. Greaves Cotton & Co. Ltd., which was followed by the Madras High Court in B. Mumiappa Gounder v. Commissioner of Income Tax, Madras we send the case back to the Tribunal with a direction that it shall rehear the appeal and decide it in accordance with law, and in the light of the observations, made above.
6. In the result, we return the reference unanswered but with a direction that the Tribunal will rehear the appeal and decide it it as mentioned above. In the circumstances, we make no order as to costs.