TMI Blog1988 (8) TMI 135X X X X Extracts X X X X X X X X Extracts X X X X ..... ar year. The excise duty so paid was relevant to the asst. year 1971-72. Though the said firm paid the amount of Rs. 66,892 yet it challenged the imposition of excise duty before the Collector of Customs. 3. In the meantime, w.e.f.31-12-1970, the firm constituted by the above two partners was dissolved. On the dissolution of the firm, Shri Maman Chand took over all the assets and liabilities of the dissolved firm. On1-1-1971a new firm under the name and style of M/s. Maman Chand Ramji Das (Extrusion Laminators) was formed by five partners including the two partners who constituted the erstwhile firm dissolved w.e.f.31-12-1970. The new firm took over all the assets and liabilities of the business. The excise duty imposed though challenged continued to be levied up to7-4-1971. In other words, the successor firm which also followed the mercantile system of accounting paid excise duty for the period from1-1-1971to7-4-1971amounting to Rs. 54,107.38. Since, the new firm also followed the calendar year as the previous year, the amount of Rs. 54,107 was paid in the previous year relevant to assessment year 1972-73. Thus, the total amount paid as excise duty by the two firms was Rs. 1,21, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made an order u/s. 185 on28-2-1975holding the firm to be genuine and granted registration to it for the assessment year 1972-73. The ITO had prior to the above assessment order and the order made u/s. 185 made on28-2-1975considered the issue of continuation of registration for the dissolved firm up to the assessment year 1971-72. In his order dated 27th March, 1974 u/s. 184(7), the ITO considered the claim made before him for extension of the previous year of the dissolved firm from 31-12-1970 to 31-3-1971. This claim of the assessee was rejected by him on the ground that the firm was dissolved on31-12-1970, on which date the previous year of the dissolved firm came to an end. He also noted that the balance sheet of that firm also showed the state of affairs of the firm as on31-12-1970. The ITO further observed, "the dissolved firm is not entitled to carry on the business after the date of dissolution and under the law the accounting year of the firm is also closed on that very date of dissolution." The claim for extension of previous year was rejected. There was some delay in filing Form No. 12, which was condoned by the ITO and continuation of registration granted for the asst. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the amount involved in dispute before us now is Rs. 66,892 though the same is sometimes mentioned in the above narration at Rs. 66,893. 10. Before us the ld. counsel for the assessee has submitted that the authorities below proceeded on absolutely erroneous grounds in bringing to tax the impugned sum of Rs. 66,892 in the hands of the assessee-firm, which was dissolved w.e.f.31-12-1970. Relying on the judgment of the Hon'ble Supreme Court in the case of Hukumchand Mohanlal and the judgment of the Madras High Court in the case of CIT v. P. K. Kaimal [1980] 123 ITR 755 and a decision of the Tribunal in the case of New Cawnpore Flour Mills (P.) Ltd. v. ITO [1986] 19 ITD 360 (All.) the ld. counsel for the assessee submitted that for invoking the provisions of section 41(1) of the Act, it was necessary that the pre-requisites laid down in the section were fully satisfied. In this regard, he submitted that the identity of the assessee, who obtained the benefit of deduction in the computation of total income should be the same as that of the assessee who got the remission or cessation of the liability subsequently. He emphasised that the ITO after due application of mind as is clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch, the assessment proceedings were properly initiated u/s. 147(a) by serving notice on partners of the new firm and assessment has rightly been made. The orders of the authorities below may, therefore, be confirmed. 14. We have given careful consideration to the rival submissions. Section 41(1) of the Act lays down that where allowance or deduction has been made in the assessment for any year in respect of loss, expenditure, or trading liability incurred by the assessee, and subsequently during any previous year the assessee has obtained, whether in cash or in any other manner, whatsoever, any amount in respect of such less or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by him or the value of benefit occurring to him shall be deemed to be profits and gains of business or profession and accordingly chargeable to income-tax as income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not. It is, thus, clear from a simple reading of sub-section (1) of section 41 that the assessee to whom an allowance o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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