Separate assessments for broken periods after firm reconstitution; composite assessment not justified under section 187(1).

A change in the constitution of a firm during the accounting year gave rise to two broken periods, and section 187(1) of the Income-tax Act, 1961 was applied to determine the correct mode of assessment. The Tribunal followed the jurisdictional High Court's view that, where a firm is reconstituted, assessment may be made on the reconstituted firm, but the provision does not permit a single composite assessment covering income earned before the change. Separate assessments were therefore required for each broken period, and composite assessment was not justified.

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Issues: Whether, on a change in the constitution of a firm during the previous year, the income of the two broken periods could be covered by a single composite assessment or whether separate assessments were required for each period.

Analysis: The assessment year was 1976-77, attracting section 187(1) of the Income-tax Act, 1961. The firm's constitution changed during the accounting year, resulting in two distinct broken periods. The Tribunal followed the view of the jurisdictional High Court that section 187(1) permits assessment of the reconstituted firm where there is a change in constitution, but does not authorize a composite assessment so as to include income relating to a period prior to the change.

Conclusion: Separate assessments were required for the two broken periods and the composite assessment was not justified. The appeal was therefore dismissed, in favour of the assessee.

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