- (1.) THIS reference under S. 256(1) of the INCOME TAX ACT, 1961, at the instance of the Revenue is to decide the following question of law, namely : " Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that it was not a case of change in constitution of the firm under S. 187(2) of the INCOME TAX ACT, 1961, and, consequently, in directing the ITO to make two separate assessments -
(2.) THE relevant asst. year is 1980 -81. The material facts are these. Out of the several partners in the firm, one of them, namely, Navratanmal, died and a new firm was constituted w.e.f. June 7, 1979, during the relevant period. The assessee filed two returns for the periods prior and subsequent to the death of Navratanmal and claimed that two separate assessments be made on their basis. The ITO rejected the assessee's contention and made only one assessment taking the view that it was a case merely of a change in the constitution of the firm. The assessee's appeal to the CIT (A) was allowed and the ITO was directed to make two separate assessments as claimed by the assessee. The Tribunal has affirmed this view. Hence, this reference at the instance of the Revenue. The present is a case governed by the amended S. 187 as it stands after the insertion of the proviso in sub -s. (2) of S. 187 retrospectively w.e.f. April 1, 1975. The view taken in such a situation on the basis of the newly inserted proviso in sub -s. (2) of S. 187 by this Court in CIT vs. Assumal Veerumal (1987) 65 CTR (Raj) 301:(1988) 170 ITR 489 (Raj), is that it is a case of succession governed by S. 188 of the Act and not of a mere change in the constitution of the firm to which S. 187 applies. Following that decision, it is to be held that the Tribunal's view is justified.
(3.) CONSEQUENTLY , the reference is answered against the Revenue and in favour of the assessee by holding that the view taken by the Tribunal is justified.;