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TMI Blog1986 (5) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... nge. According to the assessee the firm was dissolved on 15-4-1980 and a new firm came into existence thereafter (as understood by the assessee). The new firm, however, chose to close its accounts on 31-3-1981. The assessment year for the new firm was the same, viz., 1981-82 as for the old firm. The firm, accordingly, filed two returns : (i) The ITO, however, held that there was no dissolution on 15-4-1980 of the old firm in terms of section 187(2) of the Income-tax Act, 1961 ('the Act'). Therefore, an assessment has to be made on the same old firm subject, however, to the allocation of profits between the partners in the proportion they were entitled to in the different parts of the previous year. There is no quarrel between the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner (Appeals) who purportedly relied on the decision of the Punjab and Haryana High Court in the case of Karnal Kaithal Co-operative Transport Society Ltd. v. CIT [1972] 84 ITR 46. The assessee is in appeal. 3. The learned counsel for the assessee reiterated before us the stand taken by him before the authorities below. He drew our attention to the observations of the High Court in Sangam Silks' case at p. 485, viz, section 187 contemplates of only one assessment for the entire concerned previous year on the reconstituted firm. It was submitted that this meant that the previous year of the firm cannot be extended beyond 12 months. The previous year remained the same as before, viz., 31st October in this case. He submitted that the order o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actice could not be deemed to be continuing : (i) We notice that the situation here is quite different. The assessee in Karnal Kaithal Co-operative Transport Society Ltd.'s case was the same. The previous year had changed. Voluntary submission of returns by the same assessee was considered as an application for change of the previous year. In the present case, technically speaking the two firms, viz., the one which existed up to 15-4-80 and the other which came into existence after that date, were different. At any rate that is so in accordance with the Indian partnership Act, 1932. However, by operation of the legal fiction in section 187(2) it was considered by the Courts that there was no change in the constitution on 15-4-80. The inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the opinion that the previous year continues to be the same, viz., year ending 31st October. The ITO is, therefore, directed to assess the income of the firm for the period 1-11-1979 to 31-10-1980 for the assessment year 1981-82. If, however, the assessee now makes a request to the ITO that it would like to change its previous year to 31st March the ITO is welcome to assess the income for the period of 17 months. With the above finding, we set aside the orders of the authorities below and restore the assessment to the ITO for the purpose of taxing the income in accordance with the choice of the previous year the assessee would like to make now, keeping in view to provisions of section 3 of the Act. 5. In the result, IT Appeal No. 230 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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