JUDGMENT The Income Tax Appellate Tribunal, Delhi Bench "E", Delhi, has under section 256(1) of the Income Tax Act, 1961, referred the following question of law for the opinion of this court :
"Whether, on the facts and in the circumstances of the case, there was only a change in the constitution of the assessee-firm on 6-1-1976, within the meaning of section 187(2) of the Income Tax Act, 1961, and, therefore, one single assessment covering both the periods, namely, from 1-4-1975, to 4-1-1976, and 6-1-1976, to 31-3-1976, was justified ?"
The reference has been made at the instance of the Commissioner of Income Tax, Meerut, and the aforesaid question of law is stated to arise out of the Tribunal's order dated 12-6-1981, passed in ITA No. 2760 (Delhi) of 1980 for the assessment year 1976-77.
2. We have heard Sri A. N. Mahajan, learned counsel for the Commissioner, and Sri R. R. Agarwal, learned counsel for the respondent.
2. We have heard Sri A. N. Mahajan, learned counsel for the Commissioner, and Sri R. R. Agarwal, learned counsel for the respondent.
The assessee was a partnership firm. During the course of the accounting period relevant to the assessment year 1976-77, one of the partners, namely, Sri Janardhan Dass, died on 4-1-1976. The firm was reconstituted with effect from 6-1-1976, when a son of the deceased partner, Janardhan Dass, was taken as a partner. The firm filed two returns of income, one for the period 1-4-1975, to 4-1-1976, and the other 6-1-1976, to 31-3-1976. The assessing officer treated it to be a case of mere reconstitution of the firm and made a single assessment. The assessee appealed to the Commissioner (Appeals) who held that there was no clause in the partnership deed to the effect that in the case of the death of a partner, the firm would not get dissolved. Therefore, the learned Commissioner (Appeals) held that by the operation of law, the death of Janardhan Dass dissolved the firm and a new firm came into existence on 6-1-1976, and hence it was a case of succession and two assessments should have been made. The assessing officer appealed to the Tribunal, that was dismissed. Therefore, at the instance of the Commissioner, the question, as reproduced above, has been referred.
A perusal of the question proposed by the Commissioner and referred by the Tribunal would show that there is a misconception about the Tribunal's order and the question as framed does not arise out of the order of the Tribunal. In fact, the Tribunal's finding is that it is not a case of reconstitution of a firm within the meaning of sub-section (2) of section 187 of the Act and the Tribunal has not held that a single assessment was justified. We, therefore, reframe the question as under :
"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that a single assessment for the periods 1-4-1975, to 4-1-1976, and 6-1-1976 to 31-3-1976 was not justified ?"
3. The controversy now stands settled by the Supreme Court in CIT v. Empire Estate (1996) 218 ITR 355 (SC) in which it has been held that where there is no provision in the partnership deed that the firm would not be dissolved on the death of a partner, the death of a partner dissolves the firm in terms of section 42 of the Partnership Act and, therefore, two assessments have to be framed. Following the law as declared by the Supreme Court, the question, as reframed by us, is answered in the affirmative, i.e., in favour of the assessee and against the Commissioner.
3. The controversy now stands settled by the Supreme Court in CIT v. Empire Estate (1996) 218 ITR 355 (SC) in which it has been held that where there is no provision in the partnership deed that the firm would not be dissolved on the death of a partner, the death of a partner dissolves the firm in terms of section 42 of the Partnership Act and, therefore, two assessments have to be framed. Following the law as declared by the Supreme Court, the question, as reframed by us, is answered in the affirmative, i.e., in favour of the assessee and against the Commissioner.