Judgment

HEGDE, J.- This is an appeal by certificate. It arises from a decision of the Allahabad High Court. The appellant is the assessee and the concerned assessment year is 1948-49.

2. The assessee is a firm constituted under an Instrument of partnership dated April 30, 1947. The shares of the partners in the profit and loss of the firm as mentioned in that deed are as follows:

1. L. Khanjan Lal -/4/-

2. L. Lalloo Ram -/2/-

3. L. Dwarka Prasad -/2/-

4. L. Ram Lal -/2/-

5. L. Sewak Ram -/4/-

6. Smt. Jagrani Devi -/2/-

3. Lallu Ram, Dwarka Prasad and Ram Lal are the children of Khanjan Lal. Sewak Ram is the son of Jagrani Devi. The first group has -/10/- share in the profit and loss of the firm and the second group has -/6/- share.

4. The assessee firm was registered for the assessment year 1947-48. On July 12, 1949, the partners of the firm applied to the Income-tax Officer for renewal of the registration for the assessment year 1948-49. That application was signed by all the partners. To that application they appended a certificate to the effect that "profits of the previous year were divided or credited as shown below... On November 5, 1949, the partnership was dissolved under a deed of distribution dated November 9, 1949. One of the clauses in that deed provides:

"But if an amount which was not entered in the books at the time of settlement is found then only that person will be accountable for it through whom the money was received or paid. None of the parties will have any objection to it."

5. On October 5, 1950, the first four partners made a disclosure statement to the Income-tax Officer to the effect that the firm had earned Rupees 15,000/- by way of profits outside the books. In that disclosure statement, they further stated that those profits had been divided between the partners. On December 9, 1950, Sewak Ram, one of the partners stated on oath before the Income-tax Officer that he and his mother Jagrani Devi were not given full share of the profits of the business earned by the firm in Samv. Year 2005. He further stated that the entire profits earned in the business carried on in the previous year were not recorded in the books and the first four partners had given to him and his mother only their shares of those profits which were recorded in the books. Therein he sought to withdraw the application for registration because all the profits earned had not been divided according to the shares. According to Sewak Ram, the profits earned and not entered in the accounts amounted to Rs. 1,13,571/-. From the aforementioned statements, it is clear that the firm was trying to evade tax on a portion of the profits earned by it by not bringing the same into their books.

6. On March 31,1951, Sewak Ram sued the first four partners for rendition of accounts. In that suit he estimated his share of profits in the amount that had not been entered in the account books at Rs. 50,000/-. Ultimately the suit was compromised and Sewak Ram withdrew his suit. In his application to withdraw the suit, he stated that he wanted to withdraw the suit "in view of the circumstances of the above case", an expression of utmost ambiguity. Therein he stated that he is not entitled to get any more amount from the defendants.

7. On March 15, 1952, Sewak Ram and his mother Jagrani Devi gave an application to the Income-tax Officer stating that they are withdrawing their signatures on the application for renewal of registration as the profits of the previous year were not distributed according to the deed of partnership and the certificate of registration required under rule 4 (1) of the Income-tax Rules, 1922 (to be hereinafter referred to as "the Rules") framed under the Indian Income-tax Act, 1922 (in brief the Act ) had never been granted as required by law on the back of the partnership deed. Therein they further stated that as the certificate under Rule 6 had not been granted by the assessee in accordance with law, the firm was not entitled for registr