COMMISSIONER OF Income Tax vs NOOR MOHD. and CO.

This is a reference under S. 256(1) of the IT Act by the Tribunal, Allahabad, arising out of ITA No. 1465 of 1978-79 for the asst. yr. 1971-72 referring the following question for our opinion :

"Whether, on the facts and in the circumstances of the case, was the Tribunal legally correct in confirming the order of the CIT(A), directing the ITO to exclude income for latter period i.e. from 30th June, 1970 to 15th August, 1970 and allow registration to the firm".

We have heard Sri Shekhar Srivastava, Standing Counsel for the Department, and Sri Rakesh Ranjan Agarwal for the assessee.

The assessee is a firm, the accounting year of which for the asst. yr. 1971-72 ended on 15th August, 1970. One of the partners of the assessee firm, namely, Shri Rabab Ali, died on 29th June, 1970. The firm closed its accounts on the death of the partners and claimed assessment in respect of the income earned by the firm for 10-1/2 months for the period between 15th August, 1969, and 29th June, 1970. The assessment was originally completed on the said basis on a total income of Rs. 1,24,770. Thereafter, the CIT passed an order under S. 263 of the Act and set aside the said assessment order and asked the ITO to reframe the assessment for the entire previous year commencing on 16th August, 1969, and ending on 15th August, 1970, because, according to him, cl. 13 of the partnership deed drawn on 15th September, 1966, did not permit dissolution of the firm on the death of one of the partners and further provided that the legal heirs of the deceased partner and the surviving partners may continue, if they agreed, and in accordance with the above agreement, a new partnership deed was drawn up on 27th February, 1970, admitting the deceased wife Smt. Majjo Bibi in his place. The ITO, accordingly, completed re-assessment of the firm and brought to tax in the assessees hands the income of Rs. 1,25,380 after adding Rs. 610 to the income already determined as being the income earned between 30th June, 1970, and 15th August, 1970. The assessee challenged this order of assessment before the learned CIT(A) who allowed the appeal after holding that the facts of the case were covered by the decisions mentioned and that there was no justification for clubbing the income for the period 30th June, 1970, to 15th August, 1970, in the hands of the firm. Thus, the income for this period was excluded holding that there should have been two assessments. Aggrieved by this order, the Department appealed to the Tribunal, which rejected the Departmental appeal, as, in its opinion, there was no merit in it inasmuch as the decision of the CIT(A) was based on ample authority.

Learned counsel for the Department has submitted that since the partnership agreement provided that the firm would not stand dissolved on the death of a partner a single assessment for both the periods should have been made and has, in support of his submission, referred to CIT vs. Satyadeo Om Prakash (1991) UPTC 81 (All) and Commissioner of Income Tax Vs. Indralok Picture Palace, However, in the present case, the partnership deed has not been annexed to the reference and the terms of the partnership deed have not been reproduced in any of the orders. Furthermore, the facts, as stated in the order under reference, are not correctly stated since it is stated that the death occurred on 29th June, 1970, and a new partnership deed was drawn up on 27th February, 1970. Had the death occurred on 29th June, 1970, the date of the agreement must have been subsequent to that date and not 27th February, 1970. In the absence of the relevant document on record and also because the amount involved is a petty one, being a sum of Rs. 610 only, we decline to answer the question.