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Issues:
1. Whether two separate assessments should be made for a firm for different periods due to a change in the constitution of the firm or a case of dissolution and succession. Analysis: The judgment delivered by the High Court of Allahabad involved the assessment of a registered firm, M/s. Gupta Stores, Katra, Allahabad, after the death of one of the partners, Smt. Laxmi Devi. The firm filed two separate returns for the assessment year 1977-78 covering different periods, claiming two separate assessments. The Income Tax Officer (ITO) rejected this claim, stating that as the remaining partners continued the business after the death of Smt. Laxmi Devi, it was a case of a mere change in the firm's constitution, warranting a single assessment for the entire period. The Appellate Tribunal, however, referred to previous court decisions and concluded that it was a case of dissolution and succession, not reconstitution, allowing separate assessments for the two periods as claimed by the assessee. The primary issue revolved around whether the situation constituted a reconstitution of the firm or a case of dissolution and succession. The court referred to the Full Bench decision in Dahi Laxmi Dal Factory v. ITO, which established that in cases where a firm dissolves and another takes over, it constitutes a case of succession under section 188 of the Income Tax Act. The court emphasized that the firm stood dissolved upon the death of a partner, leading to the formation of a new partnership firm, thereby necessitating separate assessments for the periods involved. The Department cited cases from the Punjab and Haryana High Court where similar circumstances were considered as a reconstitution of the firm, warranting a single assessment. However, the High Court of Allahabad reiterated its adherence to the Full Bench decision and previous court rulings, emphasizing the applicability of the succession principle in the present case. Consequently, the court upheld the Tribunal's decision to direct the ITO to conduct two separate assessments for the distinct periods, ruling in favor of the assessee. In conclusion, the High Court answered the referred question in the affirmative, supporting the assessee's entitlement to two separate assessments for the specified periods. Additionally, due to conflicting judicial opinions between different High Courts, the court certified the case as suitable for appeal to the Supreme Court under section 261 of the Income Tax Act, aiming to resolve the controversy definitively.
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