Succession to business after dissolution sustains assessment on pre-dissolution profits despite a mistaken statutory label.

Where a firm's business is succeeded to after dissolution rather than merely discontinued, assessment must be governed by the succession provision and not by the discontinuance provision. The court treated the case as one of succession under section 26(2) of the Income-tax Act, 1922, so section 44 did not apply. It also held that the assessment was not invalid merely because the wrong statutory label was mentioned, since the assessment was confined to pre-dissolution profits and the relevant notices had been issued. The assessment on the firm for the relevant year was therefore sustained as lawful.

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Issues: Whether the assessment made on the assessee-firm for the assessment year 1953-54 in respect of pre-dissolution profits after its dissolution was valid in law.

Analysis: The facts showed a succession to the business and not a mere discontinuance. On that footing, section 44 of the Income-tax Act, 1922 had no application, and the proper provision governing assessment was section 26(2). The form or label used in the assessment order was not decisive if the assessment was otherwise supportable under the correct statutory provision. Since the assessment was confined to pre-dissolution profits and the relevant notices were issued, the assessment could not be invalidated merely because section 44 had also been mentioned.

Conclusion: The assessment was valid in law and the question was answered in the affirmative, against the assessee and in favour of the Revenue.

Final Conclusion: The firm's assessment for the relevant year was sustained as a lawful assessment on pre-dissolution profits notwithstanding the dissolution of the firm, because the case fell within the scheme of succession under the Act.

Ratio Decidendi: Where a firm's business is succeeded to and is not discontinued, the assessment must be sustained under the provision governing succession, and an assessment on pre-dissolution profits is not invalid merely because the wrong statutory label was used if the substance of the assessment is otherwise lawful.

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