K.C. Agrawal, J.

1. THIS reference relates to the assessment years 1965-66 and 1966-67. The assessec, Messrs. Mardan Khan Rafiq Ahmad, is a partnership firm consisting of Mardan Khan and his son, Rafiq Abmad. The firm consisting of the aforesaid two persons started the business from January 1, 1963. Subsequently, an instrument of partnership was executed on June 25, 1963. The shares of the partners in the profits and losses were mentioned in the ratio of 10 annas and 6 annas. It, however, appears that in the books of accounts as well as in the returns, the partners distributed the profits in the ratio of 8 annas each. The ITO held that as the profits were not distributed in accordance with the shares mentioned in the partnership deed, the firm was not a genuine one. Accordingly, he held that the assessee was not entitled to the benefits of registration as a firm. The assessee took the matter in appeal before the AAC, The AAC also found that the partnership was not entered into with the intention of giving effect to the correct state of affairs. According to his opinion, it was sham. On this view, the appeal filed by the assessee was dismissed. The assessee, thereafter, prefe