COMMISSIONER OF Income Tax vs RAJDOOT ENTERPRISES.

JAIPUR BENCH

This reference u/s 256(1) of the Income Tax Act, 1961, at the instance of the Revenue is to decide the following question of law, namely :

"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that it was not a case of change in constitution of the firm u/s 187(2) of the Income Tax Act, 1961, and, consequently, in directing the Income Tax Officer to make two separate assessments ?"

The relevant assessment year is 1980-81. The material facts are these.

Out of the several partners in the firm, one of them, namely, Navratanmal, died and a new firm was constituted with effect from June 7, 1979, during the relevant period. The assessee filed two returns for the periods prior and subsequent to the death of Navratanmal and claimed that two separate assessments be made on their basis. The Income Tax Officer rejected the assessees contention and made only one assessment taking the view that it was a case merely of a change in the constitution of the firm. The assessees appeal to the Commissioner of Income Tax (Appeals) was allowed and the Income Tax Officer was directed to make two separate assessments as claimed by the assessee. The Tribunal has affirmed this view. Hence, this reference at the instance of the Revenue.

The present is a case governed by the amended section 187 as it stands after the insertion of the proviso in sub-section (2) of section 187 retrospectively with effect from April 1, 1975. The view taken in such a situation on the basis of the newly inserted proviso in sub-section (2) of section 187 by this court in Commissioner of Income Tax Vs. Assumal Veerumal, is that it is a case of succession governed by section 188 of the Act and not of a mere change in the constitution of the firm to which section 187 applies. Following that decision, it is to be held that the Tribunals view is justified.

Consequently, the reference is answered against the Revenue and in favour of the assessee by holding that the view taken by the Tribunal is justified.

No costs.