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Assessment method under Section 26(2) of the Indian Income-tax Act, 1922 for a dissolved firm. Detailed Analysis: The case involved a dissolved firm, where the business was taken over by one of the partners after dissolution. The Commissioner of Income-tax revised the assessment method, causing a reference to the Court to determine if the Commissioner was correct in setting aside the Income-tax Officer's order and directing assessment on the entire profits as a successor under Section 26(2) of the Act. The key question was whether a firm that has been dissolved can be considered as "cannot be found" under the proviso to Section 26(2), even if all the members of the firm are alive and locatable. The relevant provision, Section 26(2) as amended in 1939, states that when a person carrying on a business is succeeded by another person, both are to be assessed for their actual shares of income. The proviso comes into play when the person succeeded cannot be found, allowing assessment on the successor. However, for the proviso to apply, it must be established that the person succeeded truly "cannot be found," typically meaning deceased or missing. In this case, all partners of the dissolved firm were alive and locatable, indicating that the proviso should not be invoked. The Court emphasized that the term "cannot be found" in the proviso should be interpreted strictly, requiring the person succeeded to be unlocatable due to death or disappearance. The Commissioner's argument to dissociate partners from the firm post-dissolution was deemed excessive. While a firm is often treated as a unit for tax assessment, it does not automatically mean the firm is unlocatable when all partners are alive and known. The Court's decision focused solely on interpreting the phrase "cannot be found" in the context of the proviso to Section 26(2), leading to a negative response to the Commissioner's question. In conclusion, the Court ruled in favor of the assessee, stating that the firm was locatable despite dissolution, and the Commissioner's assessment method was incorrect. The assessee was awarded costs and a refund of the deposit. The reference was answered in the negative, affirming that the Commissioner's direction to assess the entire profits on the successor was not valid in this scenario.
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