2002 (12) TMI 40 - HC - Income Tax

1. Whether, Tribunal was legally correct in upholding the order of the Commissioner of Income-tax (Appeals) directing the Income-tax Officer to assess the income? - 2. Whether, it was not the case of mere change in the constitution of the firm within the meaning of section 187(2) of the Income-tax Act? - if one or more partners cease to be partners, or one or more new partners are admitted, then it would be a case of reconstitution and not dissolution of the firm, provided that at least one of the partners prior to the change in the firm is a partner after the change. In the present case two members, namely, Smt. Shakuntala and Smt. Urmila, are common, three members have gone and five new members have come in. It is thus covered by section 187(2)(a) of the Act and hence it is a case of reconstitution and not dissolution of the firm. Hence, only one assessment is to be made. In view of this we answer both the questions in the negative, i.e., in favour of the Department and against the assessee.

Summary

The High Court of Allahabad ruled on a case involving the reconstitution of a firm under the Income-tax Act. The court found that the changes in the firm constituted a reconstitution, not dissolution, as per sections 187 and 188 of the Act. The judgment favored the Department over the assessee, directing only one assessment to be made.