Dissolution by conduct not established; continuing partners and written terms supported a single assessment under section 187.

A written arrangement describing one partner as retiring and the others as continuing partners supported continuity of the firm rather than dissolution by conduct. The surrounding clauses showed that the continuing partners retained their inter se rights and liabilities and carried on the business with the assets that remained with them. A brief absence of closing stock or trading transactions was insufficient, by itself, to prove dissolution where the document did not support that inference. The finding of dissolution was therefore unsustainable, and a single assessment for the entire period under section 187 was correct rather than separate assessments under section 188.

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Issues: Whether the firm was dissolved by conduct so as to require separate assessments under section 188 of the Income-tax Act, 1961, instead of a single assessment under section 187.

Analysis: The document executed between the parties described one partner as retiring and the others as continuing partners. The surrounding clauses showed that the continuing partners retained their rights and liabilities inter se and carried on the business with the assets that remained with them. The mere absence of closing stock or trading transactions for a short period was insufficient to establish dissolution by conduct, especially when the written arrangement did not support such a conclusion.

Conclusion: The finding of dissolution was not sustainable. The assessment for the entire period under section 187 was correct, and the answer is against the assessee.

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