A.R. HALDAR, J.M. ORDER This appeal is directed against order of AAC dt. 30th Oct., 1979 by which he confirmed action of ITO in cancelling registration under s. 186 of IT Act, 1961 which was already granted by him. 2 . While making original assessment, ITO granted registration to assessee firm. Subsequently, on perusal of partnership deed dt. 12th Sept., 1969 ITO found that in recital of deed, there was mentioned of three partners, viz., (1) Shankarlal Jhunjhunwala, (2) Smt. Purabee Dey and (3) Shri Jatindra Ch. Chandra. But in cl. (5) of deed of partnership, it was mentioned inter alia as under : "5. That accounting year of firm shall be Financial year. accounts of firm shall be closed and adjusted at end of each accounting year and net trading result shall be ascertained and shall be credited to their respective personal accounts. partners shall participate in net profit as well as in loss in following proportions. 1. Shri Ganeshji Maharaj 4 per cent 2. Shri Shankarlal Jhunjhunwala 32 per cent 3. Shrimati Purabee Dey 32 per cent 4. Shri Jatindra Ch. Chandra 32 per cent " This fact led ITO to believe that although it was firm constituted by three partners. But in fact four partners were participating both in profit and loss. ITO, was, therefore, of opinion that there was no genuine firm in existence during relevant previous year and, therefore, registration that was granted to assessee firm by mistake was liable to be withdrawn. Accordingly, ITO cancelled registration. 3 . assessee appealed to AAC and contended that ITO was wrong in cancelling registration. It was urged that since Shri Ganeshji Maharaj is none but charity to whom 4 per cent of profit was donated mutually by partners, it would not affect genuineness of partnership. It was also urged that since firm was duly registered and treated as genuine, ITO should not have invoked provisions of s. 186 of IT Act, 1961. AAC after interpreting cl. (5) of partnership deed has held that conclusion drawn by ITO was quite correct and in line with content and intent of cl. (5) of partnership deed. He, therefore, confirmed action of ITO. 4. assessee has come in further appeal before Tribunal and it was contended by ld. counsel for assessee before me that lower authorities were wrong in applying provisions of s. 186 of IT Act in instant case. He urged that there was no material on record to show that assessee firm was not genuine. He submitted that for purpose of allowing registration, partnership deed should be read as whole. He relied on decision reported in case of CIT, Mysore vs. Shah Mohandas Sadhuram (1965) 57 ITR 415 (SC) and in case of Ram Laxman Sugar Mills vs. CIT U.P. Anr. (1967) 66 ITR 613 (SC) for proposition that defect pointed out by ITO was not so serious as to render assessee firm as ingenuine and, therefore, is not entitled to benefit of registration. ld. departmental representative highlighted reasons given by lower authorities for coming to conclusion that there was no genuine firm in existence during assessment year under consideration. 5 . Sec. 186 of IT Act empowers ITO to cancel registration already given for particular assessment year which reads as under : "Sec. 186(1): If, where firm has been registered, or its registration has effect under sub-s. (7) of s. 184 for assessment year, Income-tax Officer is of opinion that there was during previous year no genuine firm in existence as registered, he may, after giving firm reasonable opportunity of being heard and with previous approval of Inspecting Asstt. Commissioner, cancel registration of firm for that assessment year." It, therefore, follows that only ground on which ITO may exercise his power under s. 186(1) to cancel registration already granted to firm is that he is of opinion that there was, during previous year, for which registration had been granted, no genuine firm in existence. power of ITO to cancel registration under s. 186(1) can be exercised in case he comes to conclusion that firm was non est and registration was obtained on account of mis-representation or deception. It is admitted fact that while granting initial registration, ITO did not raise any objection as to genuineness of firm. There was also no dispute about fact that three partners who constituted firm were genuine and partnership was evidenced by valid deed. perusal of deed of partnership would show that in recital there was mention of names of three partners. Clause (3) of partnership deed stated that capital of business shall be sum appearing in names of partners in books of account from time to time or at any time. Clause (7) of deed of partnership stated that control and management of business shall vest in partners equally and they are authorised jointly and severally to sign, execute and complete transactions, etc. Therefore, it can be legitimately presumed that Shri Ganeshji Maharaj was never made partner. Even in cl. (5) of partnership deed on which much reliance was placed by Revenue, there was clear mention that accounting year of firm shall be financial year. accounts of firm shall be closed and adjusted at end of each accounting year and net trading results shall be ascertained and shall be credited to their respective personal account. However, there was mention of one more sentence which is reproduced as under : "The partners shall participate in net profit as well as in loss in following proportions : 1. Shri Ganeshji Maharaj 4 per cent 2. Shri Shankarlal Jhunjhunwala 32 per cent 3. Shrimati Purabee Dey 32 per cent 4. Shri Jatindra Ch. Chandra 32 per cent " In my opinion this agreement of partners is not so serious as to indicate that there was no genuine firm in existence during assessment year, when partnership firm is found to be genuine otherwise. Supreme Court has categorically observed in case ofShah Mohandas Sadhuram(supra) so also i n case ofKylasa Sarabhaiah vs. CIT (1965) 56 ITR 219 (SC)that for purpose of granting registration partnership deed has to be construed in reasonable manner and deed read as whole and in context of relevant circumstances of case. As has been stated above, assessee firm was constituted by three partners as mentioned in recital of partnership deed, none of partners were found to be ingenuine. As per agreement three partners were to share profit and loss at 32 per cent each, firm was found to have carried on business. All these facts go to suggest that there was genuine firm in existence during previous year relevant to assessment year under appeal and, therefore, lower authorities were wrong in cancelling registration under s. 186 which was already granted to assessee firm. In result, appeal is allowed. *** UNITED BROTHERS v. INCOME TAX OFFICER