Change in constitution of firm - Section 187 - Income Tax - Ready Reckoner - Income Tax

Change in constitution of firm - Section 187 Where at the time of making an assessment under section 143 , (Assessment) section 144 (Best Judgement Assessment) or section 147 (Income Escape Assessment) or section 153A (Assessment in case of search or requisition) it is found that a change has occurred in the constitution of a firm, the assessment shall be made on the firm as constituted at the time of making the assessment. Note:- There is a change in the constitution of the firm: If one or more partners cease to be partners or one or more new partners are admitted, in such circumstances that one or more of the persons who were partners of the firm before the change, continue as partner or partners after the change or Where all the partners continue with a change in the respective shares or in the shares of some of them. However, nothing in clause (a) shall apply where the firm is dissolved on the death of any of its partners. Note 1:- Where the firm is dissolved and reconstituted, it was merely a change in constitution of the firm u/s 187 and not a case of succession u/s 188 . It was held that no separate assessment has to be made on two returns filed by the firm, instead only one assessment has to be made. [ CIT v Hindustan Motors Finance Co. 2004 (9) TMI 60 - Allahabad HC ] Note 2:- Dissolution of a firm due to death not any partner will not be considered as change in the constitution of the firm [ Proviso to section 187 ]:- Where the firm is dissolved on the death of any of its partner it will not be considered as a change in the constitution of the firm as per clause (a) of section 187(2) and it will be covered u/s 189 .