Law:

Section:

Section 187 of the Income-tax Act, 1961 - Firm - Registration - Change in constitution of - Assessment year 1981-82 - Assessee-firm, which consisted of four partners, was dissolved by mutual consent on 30-6-1980 - With effect from 1-7-1980 a new firm was brought into existence, which had all four partners of earlier firm and one J who was not a partner of earlier firm - Assets, liabilities, sundry debtors, sundry creditors, etc., were same and business was continued in same premises - For relevant assessment year, assessee filed two separate returns and claimed two assessments, viz., one from 1-4-1980 to 30-6-1980 and other from 1-7-1980 to 31-3-1981 - ITO made single assessment on ground that it was case of reconstitution of firm - AAC and Tribunal accepted assessee's plea for two separate assessments without recording finding as to whether or not firm was actually dissolved - Whether appeal required fresh disposal by Tribunal, after proper investigation into question of dissolution of firm - Held, yes FACTS The assessee-firm, which consisted of four partners, was allegedly dissolved by mutual consent on 30-6-1980. With effect from 1-7-1980, a new firm was brought into existence which had as its partners all the four partners of the previous firm and also one J, who was not a partner earlier. For the assessment year 1981-82, the assessee filed two separate returns, one for the period from 1-4-1980 to 30-6-1980 and the other for the period from 1-7-1980 to31-3-1981, and claimed two assessments under section 188. The ITO held that it was a case of change in the constitution of firm within the meaning of section 187(2)(b) as the business was the same, assets and liabilities were the same, sundry creditors and debtors were the same and the business had continued in the same premises. Accordingly, he brought to tax the entire income earned during the aforesaid two broken periods, at one place, in the hands of the assessee. On appeal, the Commissioner (Appeals) allowed the assessee's claim and, on further appeal by the revenue, the Tribunal upheld the order of the Commissioner (Appeals). However, none of the lower authorities including the Tribunal went into the…

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