Change in constitution of firm requires a single assessment for the full accounting year, not separate assessments.

Where a firm was reconstituted during the accounting year on the death of a partner, the governing principle was that dissolution followed by succession by a firm with one or more common partners amounts only to a change in constitution under section 187(2) of the Income-tax Act, 1961. The income for the period before and after the reconstitution must therefore be aggregated and assessed in a single assessment for the entire accounting year. The contrary view based on earlier authority was rejected in light of the Full Bench ruling, and the direction for two separate assessments was held to be unjustified in law.

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Issues: Whether, on the facts and in the circumstances of the case, two separate assessments were required for two periods when a firm was reconstituted during the accounting year upon the death of a partner.

Analysis: The governing principle applied was that where, during an accounting year, a firm is dissolved and succeeded by another firm with one or more common partners, the case falls within the scope of section 187 of the Income-tax Act, 1961, as it amounts only to a change in the constitution of the firm under section 187(2). In such a situation, the income of the firm before and after the change is to be aggregated and assessed in one assessment for the entire accounting period. The contrary view previously taken on the basis of an earlier decision was rejected in light of the Full Bench ruling.

Conclusion: The Tribunal was not justified in law in directing two separate assessments, and only a single assessment was required for the entire accounting period.

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