COMMISSIONER OF INCOME-TAX Vs. CHANDIGARH BOTTLING CO

JUDGEMENT

(1.) THE assessee, a partnership firm, was constituted by a deed dated January 14, 1967. It was a partnership at will by virtue of Clause 9 but not liable to be dissolved on the insolvancy, death or severance of any partner and the legal heirs were entitled to be taken as partners in place of the deceased partner as provided in Clause 14 of the said agreement. The firm was allowed registration for the year ending March 31, 1968, and its continuance for year ending March 31, 1969.

(2.) TEJA Singh, one of the partners, died on March 29, 1970, and for the assessment year 1970-71, the firm filed, two returns, one for the period from April 1, 1969, to March 29, 1970, and the second for the remaining two days of the year ending on March 31, 1970. Along with the return, declaration in Form No. 12 was also filed for allowing continuation of the registration of the firm up to March 29, 1970. The return for the two days was submitted as an unregistered firm. The Income-tax Officer accepted the declaration contained in Form No. 12 and allowed continuation of the registration for the period up to March 29, 1970. For the remaining period of two days, the provisions of Section 183 (b) were invoked and the firm was treated as a registered firm holding that it would be beneficial for the Revenue to do so. Both the periods were thus clubbed together and only one assessment made. However, the Commissioner of Income-tax being of the view that on the death of Teja Singh, there was a change in the constitution of the firm and as such it ought to have applied for fresh registration in accordance with the provision of Section 184 (8), invoked his powers under Section 263, set aside the order of the Income-tax Officer holding the same to be erroneous and prejudicial to the interests of the Revenue. In the result, the case was remanded to the Income-tax Officer for making a fresh assessment treating the assessee as an unregistered firm. Aggrieved thereby, the assessee went in appeal before the Tribunal who reversed the order of the Commissioner being of the view that there was no change in the constitution of the firm up to March 29, 1970, and even thereafter it continued to be in existence by virtue of the provisions of Clause 14 of the partnership deed. On an application made by the Revenue, the Tribunal has referred the following four questions for our opinion : " 1 Whether, on the facts and in the circumstances of the case, the Tribunal was right in law vacating the order of the Commissioner of Income-tax by holding that the firm constituted by the deed dated January 14, 1967, continued up to March 31, 1970, even after the death of Teja Singh on March 29, 1970, and as there was no change in the constitution of the firm, the declaration in Form No. 12 was correct and thus the Income-tax Officer's order allowing continuation of the registration was not erroneous and prejudicial to the interests of the Revenue ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in vacating the order of the Commissioner of Income-tax by holding that even if a change in the constitution had occurred on the death of Teja Singh and an application for registration in Form No. 11a was not erroneous when by accepting the declaration in Form No. 12, registration was allowed in substance and the defect, if any, in the application was impliedly condoned ?

(3.) WHETHER, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that after completing the individual assessment of the partners where share income from the assessee-firm was included as their income, the firm could be denied the benefit of registration and assessed in the status of an ' unregistered firm ' ?