1982 (7) TMI 164 - AT - Income Tax

Summary

Issues:
1. Validity of the order passed by the CIT under section 263
2. Consideration of accounting year and dissolution of the firm
3. Renewal of registration for the assessee firm for the assessment year 1978-79

Analysis:
1. The appeal was filed by the assessee against the order of the CIT passed under section 263, challenging the decision to assail the order of registration granted to the assessee firm for the assessment year 1978-79. The CIT contended that the order allowing registration was erroneous and prejudicial to the revenue's interest.

2. The key issue revolved around the dissolution of the firm due to the death of a partner and the subsequent reconstitution. The partnership deed stipulated that the firm would continue even in the event of a partner's death, with the legal heir taking the deceased partner's place. The CIT argued that the firm should not have been considered dissolved upon the partner's death and that the accounting year should have ended on 31st March, 1978, not on 13th March, 1978. However, the tribunal found that the facts of the case supported the renewal of registration granted by the ITO.

3. The counsel for the assessee contended that the CIT's action was not legally sound, as the renewal of registration was sought for the accounting year ending on 13th March, 1978, following the partner's death. The tribunal emphasized that the actual events and facts should prevail over the intentions expressed in the partnership deeds. The tribunal concluded that the renewal of registration was justified based on the circumstances and facts of the case, and there was no error in the ITO's decision. The tribunal also considered precedents cited by both parties and decided in favor of the assessee, vacating the CIT's order and restoring the ITO's decision.

4. In the final analysis, the tribunal allowed the appeal, emphasizing that the renewal of registration for the assessee firm for the assessment year 1978-79 was valid and in accordance with the facts of the case. The tribunal rejected the CIT's contention that the accounting year should have ended on 31st March, 1978, and upheld the decision of the ITO to grant renewal of registration based on the actual events and legal provisions.