Change in constitution of firm requires one assessment for the full year, not split assessments under income-tax law.

Where a firm is found to have undergone only a change in constitution under section 187(2) of the Income-tax Act, 1961, the income for the relevant previous year must be assessed as one unit. Section 188 applies only when section 187 is inapplicable, so a mere change in constitution does not permit fragmentation into separate pre-change and post-change assessments. The direction to make two separate assessments was therefore not sustainable.

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Issues: Whether, after holding that the case involved a change in the constitution of the firm under section 187(2) of the Income-tax Act, 1961, the Tribunal was justified in directing two separate assessments for the pre-change and post-change periods.

Analysis: Once the Tribunal found that the matter fell within section 187 of the Income-tax Act, 1961 and not within section 188, the income for the relevant period had to be assessed as one unit. Section 188 applies only where section 187 is inapplicable, and a case of mere change in constitution does not justify fragmentation of the assessment into two parts.

Conclusion: The direction to make two separate assessments was not sustainable. The question was answered in favour of the Revenue and against the assessee.

Ratio Decidendi: Where a firm is held to have undergone only a change in constitution within section 187(2) of the Income-tax Act, 1961, the assessment must be made as one assessment for the entire previous year and not as separate assessments for different periods.

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