UNITED COIR WORKS Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE assessee is before us. It is a registered firm having the name, the United Coir Works. THE assessee filed two returns of income, one for the period from August 17, 1974, to April 15, 1975, and the other for the period from April 16, 1975, to August 16, 1975, both relating to the previous year relevant to the assessment year 1976-77. To a query of the assessing authority as to why two returns were filed, the assessee gave the explanation which, briefly stated, is this : During the period from August 17, 1974, to April 15, 1975, the business was carried on by a registered firm with the partners C.V. Mathew, C.M. George and C.M. Mathew. This business was sold to a new firm with the partners C.V. Mathew, C.M. George, C.M. Mathew and P.I. Alexander, constituted on April 16, 1975. THE two firms which carried on the business during the periods aforesaid are two distinct and different legal entities. THE firm which came into being prior to April 16, 1975, sold its business as a running concern to the firm which was constituted on April 16, 1975. THE assessment, therefore, is required to be made under Section 188 of the Income-tax Act.

(2.) THE assessing authority, however, was of the view that the assessee could not be said to be the successor-firm, within the meaning of Section 188, because the partnership deed dated April 16, 1975, constituting the firm had effected only a change in the constitution of the old firm ; and, as such, there is no scope to make the assessment under Section 188. Accordingly, the assessment was made under Section 187. This order of assessment was appealed against and the Commissioner of Income-tax (Appeals) who heard the appeal, by his order dated October 25, 1978, upheld the view of the assessing authority and consequently dismissed the appeal. To uphold the view of the assessing authority, the Commissioner of Income-tax (Appeals) pressed into service the decision of this court in Excel Productions v. CIT [1971] 80 ITR 356. THE second appeal taken therefrom was dismissed by the Appellate Tribunal which also was of the view that the question raised before it was covered by the ruling in Excel Productions. Accepting the application of the assessee under Section 256(1), the following question is referred to this court for our opinion :

(3.) APPLYING these principles to the facts of the case on hand, let us see whether the assessment should be completed by applying section 187 or made under Section 188. The facts found by the Tribunal and relevant in this context are :