9911796707
TMI Blog1980 (7) TMI 135X X X X Extracts X X X X X X X X Extracts X X X X ..... been assessed in the status of un-registered firm for the assessment year under appeal, filed a declaration under s. 184(7) of the IT Act, 1961 (hereinafter to be referred to as the 'Act'), in statutory Form No. 12 under statutory IT Rules, 1962, the said having been filed on 18th June, 1975, inter alia, stating therein that there has been no change in the constitution of the firm or in the shares of its partners since the last date of the previous year relevant to the asst. yr. 1974-75 upto the last day of the previous year relevant to the assessment year under appeal. The ITO observed that the above statement of the assessee in its declaration filed in statutory Form No. 12 was not correct. He observed that the assessee firm was constituted by two partners, namely S/Shree Benigopal Bajaj and Srawanchand Bajaj. Shri Benigopal Bajaj expired on 23rd Feb., 1975 hence with his death the firm stood dissolved and since no fresh instrument of partnership w.e.f. 24th Feb., 1975 was executed and for the reason that the assessee filed only one return for the whole of its previous year 1974-75 relevant to the assessment year under appeal and the accounts of the assessee were also closed at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a regular appeal against the assessment made, as such, but an appeal was preferred and has since been heard and decided by the AAC on the subject-matter of registration which virtually arose out of the ITO's order under s. 143(3). He has also contended that the AAC erred in law in directing the ITO to allow continuation of registration to the firm for a part of the year and to treat the firm for the remaining part of the same year as unregistered firm, since, according to the Revenue, there being a change in the constitution of the firm, the firm as stood constituted on the last day of the previous year relevant to the assessment year under appeal should be taken as the firm existing for the whole of the previous year relevant to the assessment year under appeal and in this case on the last day of the previous year relevant to the assessment year under appeal the firm was constituted by two partners and there was no new instrument evidencing partnership, not the assessee has made any application as is required under the law, hence the status of the assessee for the whole of the assessment year has rightly been taken on facts and in law by the ITO as un-registered firm. Shri Joshi, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct-matter, he has contended that on the death of Benigopal Bajaj on 23rd Feb., 1975, the firm came to an end, since the firm was constituted by two partners and with the death of one partner, in law and on facts no longer there remain any firm, since a single partner could not constitute a firm, hence there cannot be any change in constitution, since a change in constitution presupposes that there was in existence a legal entity known as firm. Clarifying Shri Agarwalla has stated that a change in constitution in the case of a firm can be said to be there when there are more than two partners, but in the case of a firm which is constituted by two partners on the death of a partner, the other partner cannot be said to be carrying on a business in the name of the firm because in law a single person cannot constitute a firm, hence the benefits of continuation of registration to the assessee in this present set of circumstances and stated facts of the case was called for and has rightly been allowed by the AAC upto the date of the death of Shri Benigopal Bajaj. Concludingly, while generally supporting the impugned order of the AAC, he has placed reliance on the ratio of the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of the ITO reads, "the status is, therefore, determined as unregistered firm". 10. Since the ITO has determined the status of the assessee as an un-registered firm and the determination of the status has been made as an integral part of the assessment made by the ITO under s. 143(3) of the Act, an appeal to the AAC under s. 246 (c) of the Act, was competent, we hold accordingly. 11. As regards the merits of the case, the firm was constituted by two partners, namely, Benigopal Bajaj and Srwanchand Bajaj and one of the partners, namely, Benigopal Bajaj died on 23rd Feb., 1975. With the death of the said Shri Benigopal Bajaj on 23rd Feb., 1975 the firm stood dissolved by operation of law, since a sole surviving partner, namely, Srawanchand Bajaj, under the provisions of Indian Partnership Act, 1932 could not constitute a firm. The firm having come to a 'nought' with the death of Benigopal Bajaj the erst-while partner on 23rd Feb., 1975, the introduction of a new partner, namely, Smt. Rameswari Devi Bajaj, on the facts of the assessee's case cannot amount to change in the constitution of the firm. Like the case of a person dying intestate, with the death, the succession ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd one of the partners died and with his death i.e., as on 23rd Feb., 1975 the assessee firm automatically came to an end, hence there was no partnership for a third party to be introduced thereon and accordingly it cannot be said that the joining of hands as between Shri Srawanchand Bajaj and Smt. Rameswari Devi Bajaj, as partners on 24th Feb., 1975 amounted to any change in the constitution of the assessee-firm. 14. As regards the case law since relied upon by the Revenue, their Lordships of the Orissa High Court in the case of Nilamani Ghosh vs. CIT have held that in an appeal under s. 246(c) the issue regarding the registration of the firm cannot be raised by agitating the question of status taken in the assessment order. In the present case, the AAC has entered the appeal of the assessee as to the subject-matter of status, treating the order of the ITO under s. 185 of the Act, and rightly so on the stated facts of the assessee's case in appeal before us, hence the observations-findings of their Lordships of the Orissa High Court in the case of Nilamani Ghosh are of no avail. 15. As regards the ratio of the decision of the Calcutta High Court since relied upon by the Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Partnership Act, 1932 i.e., by operation of law. This case, as such, is also distinguishable on facts. As regards the case of Kaithari Lungi Stores vs. CIT, Madras since relied upon by the Revenue, the facts of the case as were before their Lordships of the Madras High Court are distinguishable, since in the case of the assessee in the Kaithari Lungi Stores, the partnership was constituted by 14 partners and the observations and findings of their Lordships were as such on the stated facts of the said assessee, whereas on the facts of the assessee's case in appeal before us, there being two partners and one of them having died, the partnership-firm came to a 'nought' i.e. to an end by operation of law and there being no legal entity known as firm as on the date as one of the two partners died, there cannot be said to be any change of constitution, vis-a-vis the assessee firm. This case also stands distinguished on the facts. 16. As regards the case of K.C. Trunk and Bucket Factory vs. CIT, Assam, Nagaland, Meghalaya, Manipur, Tripura, Mizoram and Arunachal Pradesh, Shillong the facts of the case before their Lordships of the Gauhati High Court were, that the assessee firm was co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce one man i.e., the sole surviving partner, by himself, could not constitute a firm, hence on the death of the one of the two partners, there being no firm in existence, since the firm came to an end, there could not be said to be any firm in existence, hence there could not be said to be any change in the constitution of the firm when the sole surviving partner on a subsequent date joined hands with another and constituted a new entity-a new firm. Their Lordships of the Gauhati High Court were not seized of a matter where one of the partners having died, the sole surviving partner could not continue the firm, since the firm came to an end by the death of one of the two partners and a single partner could not constitute a firm within the meaning of s. 4 of the Indian Partnership Act, 1932 but their Lordships were seized of the facts, where there were three partners, apart from a minor who was admitted to the benefits of partnership, and subsequently the widow of the deceased partner was taken as a partner, hence the above observations-findings of their Lordships, are distinguishable vis-a-vis the facts of the assessee's case in appeal before us. 17. In the result, the appeal by ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
