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Interconnected appeals involving dissolution of a partnership firm, subsequent formation of a new partnership, assessment by the Income Tax Officer (ITO), challenge by the Commissioner under section 263 of the IT Act, 1961, application of sections 187 and 188 of the Act, and conflicting judicial authorities. Analysis: The judgment involves two interconnected appeals concerning the dissolution of a partnership firm, M/s. Bhagwandas Dwarkadas, and the subsequent formation of a new partnership by two of the original partners. The dissolution deed executed on 26th Sept., 1973, detailed the terms of dissolution, transfer of assets and liabilities, and closure of books of accounts. Following the dissolution, the remaining partners formed a new partnership under the same name, carrying on business in ghee and food-grains. The Income Tax Officer (ITO) assessed the income of both firms separately, granting registration to both entities. The Commissioner, finding the ITO's orders erroneous, initiated action under section 263 of the IT Act, 1961. The Commissioner held that the ITO should have made a single assessment of the firm as it stood constituted at the time of assessment, considering sections 187 and 188 of the Act. The Commissioner relied on specific decisions and canceled the assessments, taking into account the profits of the entire year. The appellants challenged this decision before the Tribunal, arguing for the restoration of the separate assessment orders. The Tribunal, after considering the facts and legal provisions, concluded that the formation of the new partnership constituted a case of succession under section 188 of the Act. Citing relevant judicial precedents, including a Full Bench decision of the Allahabad High Court, the Tribunal rejected the Revenue's argument of a mere change in the constitution of the firm under section 187(2). The Tribunal highlighted conflicting judicial authorities but relied on decisions favoring the assessee's position. Consequently, the Tribunal held that the separate assessment orders passed by the ITO were correct, vacating the Commissioner's orders and restoring the original assessments. In summary, the Tribunal allowed the appeals, emphasizing the succession of the new firm from the dissolved partnership and rejecting the Revenue's argument of a mere change in constitution. The judgment underscores the application of sections 187 and 188 of the IT Act, conflicting judicial interpretations, and the importance of following decisions favorable to the assessee in resolving such disputes.
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