Allahabad H.C : The assessee, M/s Gupta Stores, Katra, Allahabad, is a registered firm. Originally it was constituted by four partners including one Smt. Laxmi Devi who died on 26th October, 1976.

High Court Of Allahabad

CIT vs. Gupta Stores

Section 188

Asst. Year 1977-78

H.N. Seth & R.S. Singh, JJ.

IT Ref. No. 63 of 1981

16th December, 1982

Counsel Appeared

M. Katju, for the Revenue : A.K. Gupta, for the Petitioner

H. N. SETH, J:

The assessee, M/s Gupta Stores, Katra, Allahabad, is a registered firm. Originally it was constituted by four partners including one Smt. Laxmi Devi who died on 26th October, 1976. Thereafter, the remaining partners carried on the business of the firm in the same name and style. For the asst. yr. 1977-78 the assessee filed two separate returns, one for the period April 1, 1976, to October 26, 1976, and the other for the period October 27, 1976, to March 31, 1977, and claimed that two separate assessments should be made for that year. The ITO rejected the claim of the assessee on the ground that as after the death of Smt. Laxmi Devi the remaining partners had continued the business as a going concern and had taken over all the assets and liabilities of the previous firm, it was a case where merely a change in the constitution of the firm had taken place and hence a single assessment for the entire period could be made. The view taken by the ITO was upheld in appeal by the AAC, Allahabad. Aggrieved the assessee went up in appeal before the Tribunal, which referred to two Full Bench decisions of this Court in the case of Dahi Laxmi Dal Factory vs. ITO (1976) 103 ITR 517 (All) and in the case of Badri Narain Kaski Prasad vs. Addl. CIT 1978 CTR (All) 390 (FB) : (1978) 115 ITR 858 (All), and held that, in the circumstances of the case, this was not a case of reconstitution of the firm but a case of dissolution and succession. As such, the assessments for the two periods, as claimed by the assessee, had to be made separately. It accordingly allowed the appeal filed by the assessee.

2. At the instance of the CIT, the Tribunal has referred the following question for the opinion of this Court : “Whether, on the facts and in the circumstance of the case, the Tribunal was legally justified in directing the ITO to make two separate assessments, one for the period of April 1, 1976, to October 26, 1976, and the other for the period of October 2, 1976, to March 31, 1977 ?” From the perusal of the order of the Tribunal it appears that it has proceeded on the footing that on the death of Smt. Laxmi Devi the firm as originally constituted had dissolved and that a new partnership firm had come into existence thereafter. In the case of Dahi Laxmi Dal Factory vs. ITO (supra) a Full Bench of this Court by majority took the view that where a firm is dissolved and another firm takes over, it will be a case of succession governed by s. 188 of the IT Act even though some of the partners of the two firms are common. In this case, since the erstwhile firm stood dissolved on the death of one of the partners, the petitionerl-firm which took over the same business could be assessed only in accordance with s. 188 and a single assessment for the whole year was not valid. The view taken in the above case of Dahi Laxmi Dal Factory vs. ITO (supra), is being consistently followed in this Court and the latest case on the point is the case of CIT vs. Satya Deo Omprakash (1982) 30 CTR (All) 284 : (1982) 136 ITR 720 (All).

The learned counsel representing the Department has drawn our attention towards Dharam Pal Sal Dev vs. CIT (1974) 97 ITR 302 (P & H) and Nandlal Sohan Lai vs. CIT 1978 CTR (P&L) 5 (FB) : (1977) 110 ITR 170 (P & H) (FB), where, in similar circumstances, it has been held that such a case amounts to a reconstitution of the firm and a single assessment has to be made. However, we are bound by the Full Bench decision of our own Court and the view taken from time to time by different Benches of this Court. The ratio of the case of Dahi Laxmi Factory vs. ITO (supra), is fully applicable to the facts of the present case and we have no hesitation in holding that the Tribunal was right in holding that, in the Circumstances of the case, two separate assessments one for the period April 1, 1976, to October 26, 1976, and the other for the period October, 27, 1976, to March 31, 1977, had to be made and that it was justified in directing the ITO to make the assessments accordingly.

In the result, we answer the question referred to us in the affirmative and in favour of the assessee, who is entitled for the costs of the reference assessed as Rs. 250. While we are delivering judgment, learned counsel for the CIT submitted that as there is a conflict between the judicial opinions, on the point in controversy, as between this Court and the Punjab and Haryana High Court, it is desirable that the said controversy should be finally resolved by the Supreme Court. He, therefore, prayed for the requisite certificate under s. 261 of the IT Act. Having considered the submission made by the learned counsel we are inclined to agree with it. We accordingly, certify that this case is a fit one for appeal to the Supreme Court.

[Citation : 142 ITR 123]

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