THE C.I.T. Vs. KELUKUTTY, CALICUT

JUDGEMENT

(1.) This is a reference under S.256(1) of the Income Tax Act 1961 at the instance of the Commissioner of Income Tax, Kerala. The questions of laws referred are:

(2.) The first question is whether there were two firms in the accounting year in question. When Kelukutty died on 8-7-1959 there was no dissolution of that firm, for Clause.7 of the partnership deed dated 1-1-1959 specifically provided that the death of any of the members of the partnership, would not automatically dissolve the partnership, but that the remaining partners should carry on the business. As already stated, in the first partnership there were 8 partners, Kelukutty, his three major sons and 4 minor sons. The proportion in which the profits and the losses are to be shared or borne is specified in the deed. In the partnership dated 15-7-1959 except the fact that Kelukutty ceased to be a partner there was no change in the membership or management of the firm. There was some change in the proportion in which profits and losses have to be shared and that was in consequence of the death of Kelukutty. The firm constituted under the deed dated 15-7-1959 carried on the same business as the old firm and the assets of the old firm became the assets of the firm constituted under the deed dated 15-7-1959. A mere change in the constitution of the partnership does not necessarily bring into existence any new assessable unit or distinct assessable entity. In other words, a mere change in the personnel of the partners and in their respective shares, without a dissolution of the firm or division of its assets and liabilities, would not be sufficient to bring into being a totally different assessable unit. Since there was no dissolution of the partnership I on the death of Kelukutty, but only a reconstitution of the firm, the assessment on the reconstituted firm must be for the entire period from 1-1-1959 to 31-12-1959.

(3.) The second question is whether the Income Tax Officer has jurisdiction to reopen the assessments under S.147(b). S.147(b) provides: