ORDER Oza, J. - l. This reference has been made by the Income-tax Appellate Tribunal Indore in accordance with the direction given by this Court in Misc. Civil Case No. 311 of 1971 decided on 28-11-1972. The following questions have been referred:- (1) Whether on the facts and circumstances of the case, the renewal of registration has been validly refused by the Income-tax Officer? (2) Whether the refusal to renew registration was correct? 2. The reference arises out of the assessment for the year 1961-62. The assessee M/s Phoolchand Ramsahaya, Neemuch, is a firm constituted by six partners having one-sixth share each in the profits and lossess of the business of the firm. It carries on business in groundnut and linseed. For the assessment year 1961-62 for which the accounting period ended on Diwali 1960, the assessee filed a return of income declaring an income of Rs. 8,441. The assessee also filed an application for renewal of registration under rule 6 of the Indian Income-tax Rules, 1922. The application for renewal of registration was filed on 11-5-1961. 3. The Income-tax Officer refused to renew the registration of the firm observing that "the partners of the assessee firm have not applied for renewal of registration this year under section 26-A." and further on the ground that- "......no books of account have been produced. In the light of above facts I am not satisfied that the profits have been distributed among the partners according to the share ratio mentioned in the partnership deed. The order has been passed exparte under section 23 (4)." 4. Before the Appellate Assistant Commissioner the assessee produced a certificate from the Income-tax Officer to the effect that a renewal application was duly received in the Income-tax Office on 11-5-1961. Then the Income tax Officer took up the assessment of the assessee, he served upon the assessee a notice under section 23 (2) of the Income-tax Act, 1922 (hereinafter referred to as "the Act"). But on 28-10-1965 nobody attended and a request for adjournment was made. Then the Income tax Officer took up the assessment of the assessee, he served upon the assessee a notice under section 23 (2) of the Income-tax Act, 1922 (hereinafter referred to as "the Act"). But on 28-10-1965 nobody attended and a request for adjournment was made. It appears that some more adjournments were granted to the assessee and on 8-11-1965 when the authorized representative of the assessee along with a Muneem - Rajmal- (son of one of the partners) attended the income-tax office and reported that the account-books could not be produced, the assessee was pressed and was asked to produce the account books for the purpose of enabling the Income-tax Officer to examine the accounts appearing therein. The assessee came forward with a plea that the account books had been lost in transit as they were being brought in a bedding from Neemuch to Indore. The Income-tax Officer did not accept the story in regard to the loss of account books in transit and held that the account books are deliberately suppressed to avoid assessment of proper income of the assessee. The Income-tax Officer therefore proceeded to make a best judgment assessment on the same day and also passed an order (referred to above) refusing renewal of registration. 5. When the assessee went up in appeal against this order it was pointed out that an application for renewal of registration was in fact filed and it was pointed out that the observation of the Income-tax Officer is contrary to the record. The Appellate Assistant Commissioner held that even if the application for renewal was filed the registration was refused because the account books were not produced under section 23 (4) for the reasons stated by the Income-tax Officer and he confirmed the order passed by the Income-tax Officer. On appeal, the Tribunal examined the explanation of the assessee about loss of account books in transit and rejected the same. The Tribunal held that the Income-tax Officer was justified in refusing renewal of registration. An application under section 66 (1) of the Act was made on behalf of the assessee before the Tribunal but that too was rejected. Thereafter the assessee approached this Court and this Court ordered as noted above, directing the Tribunal to make a reference. 6. The Tribunal held that the Income-tax Officer was justified in refusing renewal of registration. An application under section 66 (1) of the Act was made on behalf of the assessee before the Tribunal but that too was rejected. Thereafter the assessee approached this Court and this Court ordered as noted above, directing the Tribunal to make a reference. 6. Learned counsel appearing for the assessee contended that the Income-tax Officer refused renewal of registration solely on the ground that the application for renewal was not filed and proceeded under section 23 (4) of the Act. This, according to learned counsel was not justified in view of the provisions contained in section 23 (4) as according to learned counsel the order of the Income-tax Officer refusing to renew registration has to be a judicial order because under section 23 (4) it is in his discretion to allow or to refuse this application. According to learned counsel, the order of the Income tax Officer is a mere mechanical order as in the first place, he states a wrong fact that an application was not made, and then he observes that as he has passed an order under section 23 (4) the renewal of registration is refused. This, according to learned counsel, is not exercise of discretion as contemplated under section 23 (4). Learned counsel frankly conceded that although two questions have been referred, but in substance the answer to question No.1 will automatically answer question No.2. Learned counsel placed reliance on the decisions reported in (1955) 28 ITR 237, Commissioner of Income-tax Madras v Krishnamma & Co., (1967) 63 ITR 813, Trivendrum Tobacco Combines v. Commissioner of Income-tax and (1965) 56 ITR 293, J.M. Seth v. Commissioner of Income tax Madras. 7. Learned counsel for the Department contended that in fact the Income-tax Officer refused renewal of registration on the ground that books of account were not produced and as observed by the Income-tax Officer in his order in absence of the books of account it was not possible for him to find oat whether the profits according to the share ratio mentioned in the deed have been distributed among the partners or not. This, according to learned counsel, is good reason on the basis of which the Income-tax. Officer could reject the application for renewal of registration. This, according to learned counsel, is good reason on the basis of which the Income-tax. Officer could reject the application for renewal of registration. He, however, contended that even if the observations about absence of an application are not correct, the ground about impossibility to ascertain whether profits have been actually distributed itself is a sufficient ground and it could not be said that refusal by the Income-tax Officer is not justified in law. Learned counsel, however, frankly conceded that the order may not have been very well written: but hearing the appeal, the Tribunal has explained this ground for refusal of registration wherein the Tribunal observed that the previous history which was before the Income-tax Officer was that for the assessment year 1960-61 heavy additions were made in the accounts of the assessee because the assessee was doing business in fictitious accounts. It was found in that year by the Income-Tax-Officer in course of the assessment that the credits appeared both in round figures and also in odd figures in the name of Rampal Gopaldas and Narsinghdas, and all these names were admitted by the assessee to be fictitious names and it was found by the Income Tax Officer that the assessee was doing business in these fictitious accounts and the same were squared up before the end of the accounting year so that they may not appear in the balance sheet. Therefore, the income of the assessee in that assessment year was assessed over a lakh of rupees. The account-books were ordered to be impounded. In this background, when the assessment for the year 1961-62 was being done, the assessee wanted some excuse to avoid the production of accounts and therefore he made a pretext that the books had been lost in transit. In this context, the Tribunal observed that this excuse was false and ultimately the Income-tax Officer felt that in absence of the account books it was not possible to find out as to whether the profits in the ratio as indicated in the deed of partnership have in fact been distributed to the partners or not This, according to the Tribunal, was good reason for refusing renewal and therefore the Tribunal maintained the order of the Income-tax Officer. Learned counsel, therefore, contended that the Tribunal being the appellate authority which ultimately maintained the order of the Income-tax Officer and gave detailed reasons, it clearly goes to show that the Income tax Officer exercised discretion and passed a reasoned order and therefore it could not be said that the order is not valid. 8. Learned counsel did not dispute the proposition that merely because the Income-tax Officer has proceeded to assess under section 23 (4) of the Act,-on mere observation of this fact-renewal of registration could not be refused. But according to learned counsel that is not the only reason for refusing renewal in the present case. 9. In (1955) 28 ITR 273 (A.P.) (supra) the order refusing to register was in these terms: "At any rate I am unable to register the firm now inasmuch as the assessment of the firm is made under section 23 (4) of the Act." and it was this order refusing to register a firm that was considered in this decision by the Andhra Pradesh High Court and it was observed: "A perusal of the entire order clearly shows that the Income-tax Officer refused registration as, in his view, the provisions of rule 4 of the Income-tax Rules were not complied with. He did not exercise his discretion under section 23 (4), but made only a casual observation in regard to his power under that section. Section - 23 (4) does not purport to prescribe an automatic refusal of registration. Under that section, discretionary power is conferred on the Income-tax Officer to refuse registration in case an assessment is made under that section and, in this case, he did not purport to exercise his discretion one way or the other." It is therefore clear that the order passed by the Income-tax Officer in this case did not indicate that he exercised discretion one way or the other as contemplated under Clause (4) of section 23 of the Act. 10. In (1967) 63 ITR 813 (supra), their Lordships of the Kerala High Court agreed with the view of Subba Rao, C.J. in (1955) 28 ITR 273 and held that merely because the Income-tax Officer has chosen to proceed under section 23 (4) to make a best judgment assessment-merely on that ground-registration cannot be refused. 10. In (1967) 63 ITR 813 (supra), their Lordships of the Kerala High Court agreed with the view of Subba Rao, C.J. in (1955) 28 ITR 273 and held that merely because the Income-tax Officer has chosen to proceed under section 23 (4) to make a best judgment assessment-merely on that ground-registration cannot be refused. In (1965) 56 ITR 293 (supra) their Lordships of the Madras High Court observed that merely because the Income-tax Officer has proceeded to make a best judgment assessment under section 23 (4) of a firm for non-production of books of account, the Income-tax Officer is not bound to cancel the registration. 11. It is therefore clear that merely on the ground that the Income tax Officer has proceeded to make the best judgment assessment the registration cannot be refused and the Income-tax Officer while refusing renewal of registration has to give reasons for his order. And to this proposition of law there is no contest. The only question before us is as to whether the order passed by the Income-tax Officer and further clarified by the Appellate Authority, i.e., the Tribunal, goes to show that the Income-tax. Officer exercised discretion and passed the order refusing to renew registration. 12. The order in question reads :- "Order under section 26-A. The partners of the assessee firm have not applied for renewal of registration this year under section 26-A. Further no books of account have been produced In the light of above facts I am not satisfied that the profits have been distributed among the partners according to the share ratio mentioned in the partnership deed. The Order has been passed exparte under section 23 (4). The renewal of registration is refused and the status of the firm is treated as unregistered firm. Dated Ratlam 27-1-66." If this order is analysed, it indicates that registration was refused for three reasons; (i) that no application for renewal has been made under section 26-A (ii) that account books have not been produced and the Income-tax Officer is not satisfied that the profits have been distributed among the partners in accordance with the share ratio mentioned in the deed of partnership; and (iii) that order has been passed exparte under section 23 (4). 13. 13. It is no doubt true that the first reason stated by the Income-tax Officer is not correct and in view of the law settled, the third reason alone could be no reason for refusal to renew registration. But so far as the second reason is concerned, it could not be doubted that it does indicate the exercise of discretion. The Appellate Tribunal has explained that in the context of the past history of the earlier assessment the Income tax Officer wanted to satisfy himself as to whether in fact the profits have been distributed among the partners and that it has been done in the same ratio as shown in the deed of partnership. It could not be disputed that if the Income-tax Officer comes to this conclusion that the profits have not been distributed among the partners and that it has not been distributed in the same ratio as shown in the deed of partnership, the Income-tax Officer will be right in refusing to renew the registration. It appears that the whole controversy has arisen because the order of the Income-tax Officer is not a well written order. But the Appellate Authority which ultimately maintained the order has in detail discussed how the discretion is exercised. And even the order passed by the Income-tax Officer as analysed above clearly shows that the second reason indicated in the order clearly gives a good reason indicating exercise of discretion. If the second reason were not stated in the order, probably the contention advanced by learned counsel for the assessee would be accepted; but the second reason clearly indicates application of mind and exercise of discretion by the Income-tax Officer. 14. In this view of the matter, our answer to the first question is in the affirmative. The answer to the second question follows. Reference is answered accordingly. Parties are directed to bear their own costs.