B.P. Jeevan Reddy, C.J.@mdashu/s 256(2) of the Income Tax Act, 1961, the Appellate Tribunal has stated the following two questions for the opinion of this court:
"1. Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in holding that two assessments should be made separately for the two periods, April 1, 1971, to October 31, 1971, and November 1, 1971, to March 31, 1972 ?
2. Whether, on the facts and in the circumstances of the ease, the Tribunal was legally justified in not treating the assessee-firm as reconstituted within the meaning of the clear provisions contained in Section 187(2)(a) of the Income Tax Act, 1961 ?"
2. The assessee is a partnership firm. The assessment year concerned is 1972-73. The firm consisted of five partners. Smt. Vindeshwari Devi died on November 1, 1971, three partners retired leaving only one of them, namely, Gopal Narain, as the sole proprietor. On the same day, Gopal Narain took two other persons as partners and the business continued. Only one return was filed for the said assessment year though two sets of accounts were maintained. One set of accounts was maintained from April 1, 1971, to October 31, 1971, and the other from November 1, 1971, to March 31, 1972. Separate applications for registration/continuation were filed. The Income Tax Officer was of the opinion that it was a case of mere reconstitution of firm and, accordingly, made one assessment for the entire year. He also did not accept the return relating to the income, he enhanced it.
3. On appeal, a contention was raised by the assessee that two separate assessments should have to be made for the two separate periods, one for the period April 1, 1971, to October 31, 1971, and another for the period November 1, 1971, to March 31, 1972. This plea was accepted by the Appellate Assistant Commissioner against which the Department went up in appeal. The Tribunal dismissed the appeal following the decision of this court in
4. We may point out that what we are called upon to answer is whether there was a reconstitution of the firm or there was a succession of one firm by another on November 1, 1971. We are not called upon to answer as to what happened on October 7, 1971. We shall, therefore, confine our attention to the position as on November 1, 1971. On that day, as stated above, three of the four partners retired leaving only one person in the firm. On the same day, the said sole surviving partner took two other persons as partners. The question is whether it is a case of reconstitution within the meaning of Section 187 of the Income Tax Act or a case of succession within the meaning of Section 188. If the Partnership Act alone is taken into account, there may be something to be said in favour of the view taken by the Tribunal, but we have to answer the question keeping in view the provisions of Sub-section (2) of Section 187, which is quoted below:
"(2) For the purposes of this Section, there is a change in the constitution of the firm : --
(a) if one or more of the partners cease to be partners or one or more new partners are admitted, in such circumstances that one or more of the persons who were partners of the firm before the change continue as partner or partners after the change ; or
(b) where all the partners continue with a change in their respective share or in the shares of some of them :
Provided that nothing contained in Clause (a) shall apply to a case where the firm is dissolved on the death of any of its partners."
5. According to the above sub-section, where one or more of the partners cease to be partners or one or more new partners are admitted, in such circumstances that one or more of the persons who were partners of the firm before the change continue as partner or partners after the change, it shall be treated as reconstitution. In similar circumstances, we have held that it was a case of reconstitution, vide our judgment in I. T. R. No. 1095 of 1978,
