TMI Blog1997 (5) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... ere was a note in the computation sheet attached to the return of income filed for the first period, which the AO has quoted in the assessment order at page 2 as under: "The assessee filed two returns due to death of one partner Shri Pyarelal on 21st Aug., 1986, the firm stood dissolved. Hence, assessee filed two returns separately from 18th April, 1986 to 21st Aug., 1986 (1st return) and from 25th Aug., 1986 to 31st March, 1987." 3. As stated before us by the learned counsel, the assessee had filed Form No. 12 for the first period and for the second period fresh application for grant of registration was filed in Form No. 11. The returns were accepted under s. 143(1). Subsequently, it transpired as per the version of Revenue that the assessee had overvalued the closing stock in the first return so as to take benefit of the same in the second return. In the first return, the assessee had declared an income of Rs. 8,350 after inflating the value of stocks by a sum of Rs. 9,05,184. But for this overvaluation of closing stock there would have been a loss of Rs. 8,96,834. It is the case of the Revenue that by overvaluation of the closing stock for the first period assessee suppresse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in order so establish that the claim made by the assessee was afterthought and without any substance. The AO referred to the following facts: That a typed copy of the partnership deed dt. 15th June, 1969, provided by the bankers had following clause No. 9: "That all the parties shall diligently, honestly and faithfully carry on the partnership business, but the firm shall not stand dissolved on the death of any partner." In the supplementary partnership deed dt. 24th of June, 1969, cl. 10 has been shown to exist as under: "The firm shall not stand dissolved on the death of any partner." 4. When the AO required the branch manager of the bank to produce original deeds, it was informed that no such deed existed with the bank. The AO has further pointed out that vide letter dt. 29th Sept., 1988, the branch manager, Punjab National Bank had been requested to furnish the photocopies of the partnership deed prior to 21st of Aug., 1986. The same was provided to the AO and in the partnership deed dt. 15th June, 1969, cl. 9 stood as under : "That all the parties shall diligently, honestly and faithfully carry on the partnership business." There has been no mention of the words ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in detail, demonstrated as to how there is difference in the valuation of the closing stock of first period and corresponding overvaluation of opening stock in the second period. This has resulted in underassessment of income to the tune of Rs. 9,05,184 and the same has been brought to tax. Certain other additions have been made which we shall discuss while dealing with the grounds relating to such addition. We would, however, like to make a mention of the addition of Rs. 56,84,158 on account of excess stock on the basis of statements of closing stock filed with the banks. This addition was set aside by the CIT(A) and is not an issue before us, as the addition is stated to have finally been deleted. 8. The assessee appealed to the CIT(A) against the order of the AO. Whereas the addition of Rs. 56,84,158 was set aside, the CIT(A) confirmed the addition of Rs. 9,05,184. The objection raised by the assessee relating to the validity of the initiation of proceedings under s. 147 was also rejected by the CIT(A). 9. The assessee is in appeal before us. Grounds No. 6.1 to 6.5 relating to addition of Rs. 56,84,158 are dismissed as not pressed. Ground Nos. 7.1 to 7.2, which reads as unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he firm was not dissolved on the death of Shri Pyarelal on 21st of Aug., 1986, and that on the execution of fresh partnership deed the widow of the deceased having taken the place of the deceased, there was a change in the constitution of the firm and that only a single assessment was to be made in respect of the entire year. As has already been pointed out, the issue as to whether there was a dissolution of the firm on the death of a partner or was there a change in the constitution of the firm was no longer open when the claim of the assessee that there was a dissolution was accepted by the AO under s. 143(1). On the authority of the Supreme Court decision in the case of Sun Engg., it was not open to the assessee to agitate in reassessment proceedings about the issue that had reached finality in the original assessment. The assessment had been reopened on the ground that there was escapement of income. The assessee has made an attempt to change the stand in the reassessment proceedings which, in our view, is not permissible. 12. Even otherwise the claim of the assessee is not acceptable as we are also convinced that the same is clearly afterthought. The AO has dealt with this i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m. 15. The assessee has heavily relied on the certificate of branch manager, Punjab National Bank, to the effect that the partnership deed as well as the supplementary partnership deed were available with them in their records. Firstly, it has not been stated by the concerned manager as to when these partnership deeds were filed by the assessee. Secondly the AO has pointed out the discrepancy in cl. 9 of the partnership deed of the typed copy, which contains a clause relating to the firm not getting dissolved on the death of any partner. Ultimately it has been found that cl. No. 9 was presented in a distorted manner and the words relating to the dissolution of the firm not being effected by the death of the partner were found as non-existent. A comparison of cl. 9 as per typed copy with cl. 9 as per the original deed given below clearly indicates that assessee was anxious to present a distorted picture of facts before the AO: Cl. 9 as per typed copy Cl. 9 as per original deed That all the parties shall deligently, honestly and faithfully carry on the partnership business but the firm shall not stand dissolved on the death of any partner. That ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d seems to have been adopted at a higher rate with a definite purpose of reducing the profits of the second period. There is otherwise no explanation given by the assessee for overvaluation of the closing stock of the first period. The only benefit the assessee has derived is to reduce the profit of the second period as a measure of tax planning. The assessee had perceived that there was a dissolution of the partnership on the death of one of the partners. In order to lower the tax brunt it seems that a tax planning device had been adopted by the assessee. In such circumstances, the Revenue was justified in rejecting the claim of the assessee for adopting the same value in the opening stock as had been adopted in valuing the closing stock in the first period. The assessee at best can claim that for the first period the closing stock should be revalued. The CIT(A) has issued certain directions for adjusting the closing stock in the first period. It has been stated before us by the learned counsel for the assessee that this direction of the CIT(A) is not being implemented by the Revenue. He further stated that this direction of the CIT(A) has not been challenged before us by any part ..... X X X X Extracts X X X X X X X X Extracts X X X X
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