COMMISSIONER OF INCOME TAX Vs. SHANKAR VASTRALAYA

JUDGEMENT

(1.) IN this case, a statement of case was called for by this court under Section 256(2) of the INcome-tax Act, 1961 (hereinafter to be referred to as "the Act"), for considering the following question of law :

(2.) THE assessee is a partnership-firm. THE present reference relates to the assessment year 1976-77. During the previous year relating to the assessment year in-question, i.e., on April 18, 1975, one of the partners, namely, Mahadeo Lal Kedia, died. Two days thereafter i.e., on April 21, 1975, a new deed of partnership was executed by inducting a new partner in the firm. THE books of account of the old firm were closed and new set of books of account were opened from April 21, 1975, i.e., from the date of constitution of the second firm, Two trading accounts and profit and loss accounts were prepared and two separate returns were filed along with an application for continuance of registration for the first period and a claim for fresh registration for the second period. THE Income-tax Officer, while making the assessment, granted continuance of registration till April 18, 1975, i.e., the date of death of the deceased partner and granted fresh registration to the newly constituted firm from April 21, 1975, as per the provisions of Section 185 of the Act. Inspite of this fact, the Income-tax Officer clubbed the income of both the periods and assessed the tax liability. THE assessee preferred an appeal to the Appellate Assistant Commissioner but the same was dismissed. On second appeal, the Tribunal took the view that the first firm was dissolved on the death of Shri Mahadeo Lal Kedia and, accordingly, directed that the income for the two periods cannot be clubbed and separate assessments should be made for the two periods.