SANGAM SILKS Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) WHETHER, on account of any change brought about in the constitution of a partnership firm during an accounting year preceding an assessment year, s. 187 of the I.T. Act, 1961 (hereinafter referred to as ("the Act"), requires the income-tax authorities to make separate assessments, one for the period commencing from the accounting year up to the date of reconstitution of the firm and another for the period commencing from the date of such reconstitution till the end of the accounting year or a single assessment, on the reconstituted firm, is the question of law that arises for consideration in this reference made by the Income-tax Appellate Tribunal, Bangalore Bench, Bangalore (hereinafter referred to as "the Tribunal"), pursuant to an order made by this court under s. 256(2) of the Act.

(2.) THE brief and undisputed facts of the case relevant for answering the reference are these : M/s. Sangam Silks, Bangalore, the assessee, is a partnership firm. THE assessment year concerned is 1971-72. During the relevant accounting year ending March 31, 1971, there was a reconstitution of the firm on June 12, 1970. Prior to June 12, 1970, the firm consisted of three partners, namely, V. Pandurangaiah. G. Srinivasulu Shetty and P. R. Sathyanarayana Shetty. On June 12, 1970, P. R. Sathyanarayana Shetty went out of the firm by executing a release deed. On the same date two other partners entered into the partnership firm. THEy are P. S. Ramachandra Shetty and K. N. Srinivasa Shetty. Thus, the new firm consisted of four partners out of whom who were partners prior to June 12, 1970. THE firm continued its business during the accounting year. For the assessment year 1971-72 the firm filed two separate returns, one for the period commencing from April 1, 1970; to June 12, 1970, and another for the period commencing from June 13, 1970, to March 31, 1971. THE ITO made a single assessment on the reconstituted firm clubbing the income for both the periods. Aggrieved by the order, the assessee preferred an appeal before the AAC who affirmed the order of assessment. THE further appeal by the assessee to the Income- tax Appellate Tribunal also met with failure. THEreafter, on a petition made to this court under s. 256(2) of the Act, this court directed the Tribunal to refer the following question for the opinion of this court :

(3.) LEARNED counsel for the assessee submitted that though the question referred covers only the first contention urged for the assessee, the real controversy between the assessee, and the revenue consists of both the contentions urged for the assessee. From the order of the Tribunal, it is clear that the assessee had raised both the contentions before it and in fact the second contention was its main point. Sri. S. R. Rajasekhara Murthy, learned counsel appearing for the revenue, also stated that the question as framed did not cover the second contention urged for the assessee and he did not dispute that it was the main contention urged before the Tribunal. In the circumstances, the learned counsel for the assessee parties for reframing the question so as to include the second contention also. He submitted that in reference made under s. 256 of the Act, it is open to this court to reframe the question so as to bring forth the real issue between the parties. This is also the view taken by the Patna High Court in the case of Ramcharitar Ram Harihar Prasad v. CIT [1953] 23 ITR 301. In the circumstances, learned counsel for both the parties agreed to the reframing of the question as required and accordingly we reframe the question as follows :