TMI Blog1974 (10) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... n accounting period, as a new assessee, from the date of its reconstitution, in its own right ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in directing exclusion from the assessment under consideration of the income relating to the period ending March 31, 1961, for making another assessment in respect of profits of the old firm on the basis of the previous year of that firm ? " The assessee in this case is a partnership firm carrying on business under the name and style of Messrs. Shiv Shanker Lal Ram Nath. The two questions mentioned above arise in connection with its assessment for the year 1962-63. Earlier, seven persons carried on the partnership business under the name and style ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee had changed the accounting year without such permission, the reconstituted firm was liable to be assessed on the basis of the income earned during the period September 30, 1960, to March 31, 1962, in one assessment. He, accordingly, determined the total income of the reconstituted firm at Rs. 1,46,789 as made up of Rs. 63,497, income derived by the old firm during the period September 30, 1960, to March 31, 1961, and Rs. 83,292, the income derived by the new firm during the financial year 1961-62. He treated the firm as unregistered for the period ending 31st March, 1961, and registered for the period 1st April, 1961, to 31st March, 1962. In appeal, the Appellate Assistant Commissioner upheld the action of the Income-tax Officer in in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It accordingly directed that the profit relating to the period ending 31st March, 1961, be excluded from the assessment of the new firm. The effect of the Tribunal's order was that after reconstitution, for the assessment year 1962-63, separate assessments in the hands of the new firm had to be made, one in respect of the income derived by the old firm, on the basis of the previous year opted by that firm, and the other in respect of the income derived by the new firm on the basis of the previous year opted by it. Section 187 of the Income-tax Act provides that where at the time of making an assessment under section 143 or section 144, it is found that a change has occurred in the constitution of a firm, assessment shall be made on the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 187, even by implication, does not create a fiction that the income derived by the old firm becomes the income of the reconstituted firm. Normally, it is various items of income that accrue to a particular assessee which alone can, for the purpose of computing the income-tax payable by him, be aggregated. Chapter V of the Income-tax Act, however, provides for situations in which while determining the total income of an assessee liable to be taxed, the income derived by someone else may also be included in his income. This Chapter does not contain any provision that for the purpose of computing income-tax payable by a firm, the income derived by it has to be added to the income of the firm as it stands after reconstitution. Accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question of making a provision for assessment of two different persons, arises. Merely because, as in section 188, no similar provision for assessing two different persons has been made in section 187, it does not follow that this section contemplates only one assessment being made on the new firm after clubbing the income derived by it and that derived by the old firm during the accounting year relevant to the assessment year in question. Section 188 contemplates a case where a firm carrying on business or profession is succeeded by another firm, i.e., it postulates two different assessable entities on which separate assessments could under the law be made. Provisions of section 187 make it clear that in a case of reconstitution, the firm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a date within the said financial year, then, at the option of the assessee, the 12 months ending on such date ; or......... (4) Where in respect of a particular source of income or in respect of a business or profession newly set up, an assessee has once exercised his option under clause (b)...... then, he shall not, in respect of that source, or, as the case may be, business or profession, be entitled to vary the meaning of the expression 'previous year' as then applicable to him, except with the consent of the Income-tax Officer and upon such conditions as the Income-tax Officer may think fit to impose. " It is obvious that after undergoing a change in its constitution, the new firm, which was a distinct assessable entity, different ..... X X X X Extracts X X X X X X X X Extracts X X X X
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