COMMISSIONER OF INCOME TAX Vs. DELHI CEMENT STOCKISTS

JUDGEMENT

(1.) THE following question has been referred by the Tribunal under S. 256(1) of the INCOME TAX ACT, 1961 :

(2.) THE assessee is a registered firm carrying on the business of dealing in cement. By a partnership deed dt. 1st April, 1956, the firm consisting of 17 partners was constituted. The relevant portion of cl. 5 of that deed was in the following terms :

(3.) MR . A. N. Kirpal, learned counsel for the CIT, contends that, though two returns of income were filed by the assessee, the ITO passed a single assessment order and it shows that his intention was to tax the assessee in respect of both the periods, and it was only by mistake that he did not add the income computed for the first period to the income of the second period. He further submits that, under S. 26(1) of the Indian IT Act, 1922, there was a change in the constitution of the assessee -firm and so the ITO had passed one assessment order. Mr. Yogeshwar Dayal, learned counsel for the assessee, contends that the assessee's case was one of succession as envisaged under S. 26(2) and not one of reconstitution under S. 26(1). He further contends that S. 26 of the Act is a procedural section and does not create any liability. It was there when S. 23 of the Act before its amendment in 1956 did not make the registered firm liable for payment of tax. He thus contends that the ITO correctly made separate computations for the two periods and charged for the second period because the income of the firm exceeded Rs. 40,000. He also contends that S. 154 of the INCOME TAX ACT, 1961, is not applicable since rectification, if any, could be done only under S. 35 of the IT Act, 1922.