JUDGMENT
1. At the instance of the Commissioner of Income-tax, Lucknow, the Income-tax Appellate. Tribunal has referred the following question under Section 256(1) of the Income-tax Act, 1961 (briefly, "the Act") :
"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the provisions of Section 187 of the Income-tax Act, 1961, were not applicable and that there were two separate firms during the previous year liable to be assessed separately?"
2. A notice was sent to the assessee by registered post long before. The registered cover has not been received back undelivered and, therefore, the assessee is presumed to have been served with the notice.
3. List has been revised. None appears for the assessee and we have, therefore, heard learned standing counsel only for the applicant.
4. The reference relates to the assessment year 1974-75, the accounting period for which ended on March 31, 1974.
5. The facts, in brief, are that the assessee, a partnership-firm, carrying on business in foodgrains and oil seeds filed two returns of income for the assessment year 1974-75, one for the period from April 1, 1973, to September 9, 1973, and another for the period from September 13, 1973, to March 31, 1974. Under the partnership deed dated January 13, 1970, a partnership was constituted by three partners, namely, Smt. Ram Kali Devi, Shri Dharmpal and Shri Chandrapal having 1/3 share each. Smt. Ram Kali Devi died on September 9, 1973, and Shri Dharampal retired from the partnership, with the result that Shri Chandrapal alone was left behind. The contention of the assessee was that, owing to the death of Smt. Ram Kali Devi and the retirement of Dharampal, the firm which was constituted under the deed dated January 13, 1970, stood dissolved and thereafter a new firm was constituted under the deed dated September 13, 1973, by Sri Chandrapal with Smt. Anguri Devi admitting some minors to the benefits of the partnership.
6. The Income-tax Officer rejected the contention of the assessee that the firm stood dissolved on September 9, 1973. He was of the view that no dissolution deed was drawn up nor were accounts finally adjusted as they are done upon dissolution of a firm. He, therefore, made a single assessment for the entire accounting period relevant to the assessment year 1974-75.
7. The assessee then appealed to the Appellate Assistant Commissioner who affirmed the order of the Income-tax Officer holding that there was only a change in the constitution of the firm after the death of Smt. Ram Kali Devi and that no new firm came into being on September 13, 1973.
8. The assessee then carried the dispute in further appeal to the Appellate Tribunal which rejected the view taken by the Income-tax Officer. The Tribunal found that, after the death of Smt. Ram Kali Devi and retirement of Shri Dharampal, the partnership constituted under the deed dated January 13, 1970, was dissolved. The finding of the Tribunal that Smt. Ram Kali Devi died on September 9, 1973, and Shri Dharampal sought retirement, has not been disputed and no question has been referred in that behalf. The factual position emerging from the case, therefore, is that there were three partners originally and one of them died and one sought retirement and only one partner remained behind. The question is whether one out of the three partners alone could have constituted a firm. One of the requisite conditions to form a partnership is that there should be more than one person to make an agreement of partnership. Chandrapal alone could not have constituted the firm after the death of Smt. Ram Kali Devi and retirement of Dharampal. On these facts, the firm constituted under the deed dated January 13, 1970, therefore, stood dissolved automatically on September 9, 1973.
9. A Full Bench of this court on almost similar facts in Dahi Laxmi Dal Factory v. ITO [1976] 103 ITR 517 held that after the death of a partner only one partner was left and since one man cannot constitute the firm, the firm automatically came to an end. In the case in hand, there were three partners and after the death of one of the partners and the retirement of another, only one partner remained behind and, therefore, it must be held that the Tribunal was right in holding that the firm constituted under the deed dated January 13, 1970, automatically came to an end on September 9, 1973.
10. On these facts, we do not find any infirmity in the view taken by the Appellate Tribunal.
11. We, therefore, answer the abovementioned question in the affirmative, in favour of the assessee and against the Revenue. No order as to costs.