Law:

Section:

JUDGMENT Sohani, J.-By this reference under s. 256(1) of the I.T. Act, 1961, hereinafter called "the Act", the Income-tax Appellate Tribunal, Indore Bench, Indore, has referred the following question of law to this court for its opinion: "(i)Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that only a single assessment could be made on the firm, M/s. Dungarsidas Kaluram, for the assessment year 1971-72 in regard to its income of the whole period Diwali 1969 to Diwali 1970 when out the two partners one partner expired on 4th August, 1970, i.e., between Diwali 1969 to Diwali 1970, and the firm stood dissolved on the said date? (ii)Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in holding that the case comes under the ambit of section 187 and one assessment of the income of the whole period be made? (iii)Whether the provisions of section 187(2)(a) of the Income-tax Act, 1961, is applicable if there is a dissolution of partnership in the eye of law as provided under section 42 of the Indian Partnership Act?" The material facts giving rise to this reference briefly are as follows: The assessee is M/s. Dungarsidas Kaluram and the assessment year in question is 1971-72. The assessee filed two returns of income-the first up to 4th August, 1970, when one of the two partners of the firm, namely, Chhaganlal, died and the other from 5th August, 1970, onwards, when the surviving partner formed another partnership with Smt. Rukmanibai, widow of Chhaganlal, and one Sureshchandra. The ITO made only one assessment for the entire accounting period. On appeal, the AAC found that after the death of Chhaganlal, one of the two partners of the firm, the firm ceased to exist and another firm came into existence. The AAC, therefore, held that two separate assessments had to be made. Against the order of the AAC the department preferred an appeal before the Tribunal. The Tribunal held that by virtue of the provisions of s. 187(2)(a) of the Act there was a change in the constitution of the firm and only one assessment had to be made for the entire accounting period. In this view…

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