9911796707
TMI Blog1989 (10) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... eriod from July 1, 1980, to March 31, 1981. The assessee based its claim relying on the provisions of section 188 of the Act. That section provides that separate assessments shall be made on the predecessor firm and the successor firm in accordance with the provisions of section 170, where a firm carrying on a business or profession is succeeded by another firm and the case is not covered by section 187 of the Act. According to the assessee, the firm as it existed during the first period, which consisted of four partners was dissolved by mutual consent on June 30, 1980. In the second period, with effect from July 1, 1980, a new firm was brought into existence which had as its partners all the four persons who were the partners of the previous firm and also one Sri R. C. Jain who was not partner earlier. The case set up was that it was a case of succession of one firm by another firm and, therefore, two assessments had to be made for the two broken periods. For this proposition, the assessee relied upon Full Bench decision of this court in Dahi Laxmi Dal Factory v. ITO [1976] 103 ITR 517. The claim made by the assessee did not find favour with the Incometax Officer. He held that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Wazid Ali Abid Ali v. CIT [1988] 169 ITR 761. Being aggrieved, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals). A perusal of the appellate order shows that while disputing the correctness of a single assessment for the two broken periods, the assessee specifically challenged the finding of the Income-tax Officer that, on facts, it was a case of a mere change in the constitution of the firm. The case pleaded was that the provisions of section 187(2) had no application, inasmuch as the previous firm was dissolved on June 30, 1980, and, thereafter, a new firm was brought into existence which maintained separate account books in respect of the business carried on by it. The appellate authority allowed the assessee's appeal but on different considerations. No effort whatsoever was made to decide the appeal on the lines it was argued for the assessee. No finding was recorded either way on whether there was any dissolution or not preceding the reconstitution or formation of the new firm, as asserted by the assessee. The appeal was allowed on the short ground that even if it was a case covered under section 187(2) of the Act, one assessment could not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Basant Behari Gopal Behari and Co. [1988] 172 ITR 662. It was emphasised that the decision in Wazid Ali's case [1988] 169 ITR 761 (SC) is distinguishable and it has no bearing on the correctness of the view taken in Vishwanath's case [1984] 146 ITR 249 (All) [FB], and it has also been so held in Basant Behari's case[1988] 172 ITR 662 (All). On due consideration of the matter, we feel that it is not necessary for us to express any opinion on the merits or demerits of the contention advanced on behalf of the Revenue. In our opinion, the question referred to this court is liable to be returned unanswered. The relevant tax authorities have failed to record their factual findings on an important aspect of the case which has a vital and material bearing for a complete decision of the case. We have seen that the assessee's case throughout had been that it was a case of succession and not a case of reconstitution, in view of the dissolution having intervened before the reconstruction of the firm, and, hence, the provisions of section 188 of the Act applied to its case. Admittedly, the appellate authorities have not examined the case on these lines. As stated, it was not considered nec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r view was expressed by the Delhi High Court in CIT v. Sant Lal Arvind Kumar [1982] 136 ITR 379. The Bench observed (headnote) : "Section 187 of the Income-tax Act, 1961, comes into operation and applies only when there is in the eye of law a firm with continued existence and not to a case where under the law one firm has ceased to exist and another has come into existence. The purpose of sub-section (2) of section 187 is not one of expansion of the normal concept of a change in the constitution of a firm but is really one of limitation : the purpose is not to say that a firm will continue in spite of dissolution but rather to say that, even in a case where there is only a change in the constitution, sub-section (1) will not apply if the partners before and after the change are not common. It is not correct to say that section 187(2) contemplates change in all cases where the business continues though in the hands of different firm provided there are common partners. Though creating a mild ambiguity, the language of section 188 is not only inconsistent or contradictory but is intended to clarify the meaning of section 187 and to exclude the possibility of the common law doctrine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any other appropriate collateral purpose cannot detract from the totality of the succession." The finding of the Income-tax Officer which we have extracted earlier, namely, that the assets and liabilities are the same, sundry creditors and sundry debtors are all the same and the business is continued in the same premises, does not help the Revenue's case. Likewise, the other findings which are based on the decision of Nandlal's case [1977] 110 ITR 170 (P H) [FB] are of no avail as that decision has been overruled by the Supreme Court. The deciding factor between the change in the constitution of the firm and the succession is the factum of dissolution of the earlier firm. Where there is, in fact and in law, a dissolution of the earlier firm preceding the constitution of the new firm, the two firms should be taken to be separate entities and the assessment for the two periods cannot be clubbed in one assessment. In other words, in such a case, section 188 will be applicable. With the coming into being of the decision in Vishwanath's case [1984] 146 ITR 249 (All) [FB] which was not there when the matter was decided by the Tribunal, the question whether the previous firm was, in f ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
