COMMISSIONER OF INCOME-TAX Vs. GUPTA STORES

JUDGEMENT

(1.) The assessee, M/s. Gupta Stores, Katra, Allahabad, is a registered firm. Originally it was constituted by four partners including one Smt. Laxmi Devi who died on 26th October, 1976. Thereafter, the remaining partners carried on the business of the firm in the same name and style. For the assessment year 1977-78 the assessee filed two separate returns, one for the period April 1, 1976, to October 26, 1976, and the other for the period October 27, 1976, to March 31, 1977, and claimed that two separate assessments should be made for that year. The ITO rejected the claim of the assessee on the ground that as after the death of Sint. Laxmi Devi the remaining partners had continued the business as a going concern and had taken over all the assets and liabilities of the previous firm, it was a case where merely a change in the constitution of the firm had taken place and hence a single assessment for the entire period could be made. The view taken by the ITO was upheld in appeal by the AAC of Income-tax, Allahabad. Aggrieved the assessee went up in appeal before the Income-tax Appellate Tribunal, which referred to two Full Bench decisions of this court in the case of Dahi Laxmi Dal Factory v. ITO [1976] 103 ITR 517 and in the case of Badri Narain Kashi Prasad v. Addl. CIT [1978] 115 ITR 858, and held that, in the circumstances of the case, this was not a case of reconstitution of the firm but a case of dissolution and succession. As such, the assessments for the two periods, as claimed by the assessee, had to be made separately. It accordingly allowed the appeal filed by the assessee.

(2.) At the instance of the Commissioner, the Appellate Tribunal has referred the following question for the opinion of this court :

(3.) From the perusal of the order of the Income-tax Appellate Tribunal it appears that it has proceeded on the footing that on the death of Smt. Laxmi Devi the firm as originally constituted had dissolved and that a new partnership firm had come into existence thereafter. In the case of Dahi Laxmi Dal Factory v. ITO [1976] 103 ITR 517 (All) [FB] a Full Bench of this court by majority took the view that where a firm is dissolved and another firm takes over, it will be a case of succession governed by Section 188 of the I.T.. Act even though some of the partners of the two firms are common. In this case, since the erstwhile firm stood dissolved on the death of one of the partners, the petitioner-firm which took over the same business could be assessed only in accordance with Section 188 and a single assessment for the whole year was not valid. The view taken in the above case of Dahi Laxmi Dal Factory v. ITO [1976] 103 ITR 517 (All) [FB], is being consistently followed in this court and the latest case on the point is the case of CIT v. Satya Deo Omprakash [1982] 136 ITR 720 (All).