Commissioner of Income Tax vs K.D. Punetha and Sons

At the instance of the Revenue, the Income Tax Appellate Tribunal has referred the following question of law u/s 256(1) of the Income Tax Act, 1961, for the opinion of this court :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in upholding the Appellate Assistant Commissioner''s finding that two assessments for the two different periods should be made in this case ?"

There was a firm in the name and style of K.D. Punetha and Sons. It had four partners. One of the partners, Sri Keshav Dutt Punetha, died on February 25, 1975. Thereafter, another partnership deed was executed but the same was not registered. However, this firm was constituted by three partners of the old firm and Smt. Mohini Devi Punetha, widow of the late K.D. Punetha. The firm first filed a combined return for both the periods on June 28, 1975. However, on September 11, 1975, two returns were filed, one for the period April 1, 1974, to February 25, 1975, and the second for the period February 26, 1975, to March 31, 1975. The Income Tax Officer made a combined assessment order for both the periods. Aggrieved, the assessee filed an appeal to the Appellate Assistant Commissioner of Income Tax. The appellate authority was of the view that after the death of K.D. Punetha, one of the partners, two assessments should have been made for the two respective periods. Thereafter, the Revenue went in appeal before the Income Tax Appellate Tribunal. The Tribunal dismissed the appeal.

The question referred to this court was considered in the case of Dahi Laxmi Dal Factory Vs. Income Tax Officer and Another, , by a Full Bench of this court wherein it was held that on the death of a partner there is a dissolution of the firm and, therefore, two assessments for the two different periods should have been made unless the partnership deed otherwise provided so. In the present case, the registered partnership did not provide that the firm would continue even after the death of one of the partners. In view of this, in the absence of such recital in the registered partnership deed, it was incumbent upon the Assessing Officer to make two assessments for the two different periods. In view of this, we answer the question in the affirmative and against the Revenue. There shall be no order as to costs.