P.M. Uthuppu vs Commissioner of Income Tax

K.K. Usha, J.—These petitions, filed u/s 256(2) of the Income Tax Act, 1961, arise out of a common order passed by the Income Tax Appellate Tribunal, Cochin Bench, in I. T. A. No. 507/Coch of 1992 filed by the assessee and I. T. A. No. 538/Coch of 1992 at the instance of the Revenue. The relevant assessment year is 1981-82. The questions of law sought to be referred are :

"1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the stock-in-trade of the appellant's business was to be revalued at the market price and the total income of the applicant was to be enhanced even though there was no dissolution of the business ?

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that there was a cessation of the business when the appellant formed a partnership by converting the proprietary business conducted by the appellant ?

Whether, there were materials for the Appellate Tribunal to hold that the jewellery business of the appellant was not continued after December 31, 1979 ?

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in interfering with the order of the Commissioner of Income Tax (Appeals) holding that the enhancement in the value of closing stock would be only to the extent of 2/3rds share as relating to the other two partners, and in sustaining the addition made by the assessing authority ?"

It is contended by the assessee that when its proprietary business was converted into partnership business, there is no dissolution of the business and, therefore, the decisions of the Supreme Court referred to and relied on by the Tribunal are not applicable to the facts of this case.

We heard learned counsel for the assessee as well as learned counsel for the Revenue. After hearing the arguments of both sides and after going through the order passed by the Tribunal, we are of the view that questions of law referred to above do arise in this case. We therefore direct the Income Tax Appellate Tribunal, Cochin Bench, to refer the above-mentioned questions of law for the opinion of this court. The original petitions stand disposed of as above.