R.R.RASTOGI, J. - (1.) THIS is a reference under S. 256(1) of the IT Act, 1961 (hereafter 'the Act'). At the instance of the CIT the following two questions have been referred by the Tribunal, Allahabad Bench. Allahabad (hereafter 'the Tribunal') for the opinion of this Court : "1. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in cancelling the assessment and directing the ITO to make two assessments, one for the period upto the date of reconstitution of the firm and another for the period after the reconstitution of the firm? 2. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the firm after its reconstitution was different from the firm which existed previously and, therefore, was entitled to choose its own previous year from the date of its reconstitution in its own right ?"
(2.) THE facts found by the Tribunal briefly stated are that the respondent assessee, Bharat Builders and Engineers Lucknow was a partnership firm of four partners up to 1st Jan, 1970. The firm was dissolved and a fresh instrument of partnership was executed on 1st Jan., 1970. Sarvashri Gurmukh Singh Puri and Mohinder Singh Puri left the partnership and the remaining two partners Sarvashri Yogendra Singh Puri and Narendra Singh Puri agreed to continue the business as equal partners. The previous year of the firm before, its dissolution was the year ending 30th June,. The newly constituted firm adopted the calendar year as its previous year. For the year under consideration, that is, 1971-72, two sets of account books had been maintained by the firm : one for the period 1st July, 1969 to 31st Dec., 1969 and the other for the period 1st Jan, 1970 to 31st Dec., 1970. The assessee filed two returns for these two periods separately. It also filed applications for continuation of registration for the first period and for the grant of fresh registration for the second period. The ITO computed the income for the two period separately but made one assessment treating the assessee as a BOI. At the same time he made another assessment wherein the income for both periods was separately determined and the assessment was made in the status of a registered firm. That was a protective assessment.
(3.) THE assessee went up in appeal before the AAC. The AAC allowed some relief in the quantum of the income but he did not interfere with the manner in which the two assessments had been made by the ITO. Aggrieved, the assessee filed appeals before the Tribunal.;