TaxTMI 
TaxTMI 
1984 (4) TMI 117
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....tered firm and the assessee filed a declaration in Form No. 12 for the continuation of registration. No fresh application for registration of the new firm was made. The deed of partnership in respect of the new firm was also executed on 24-10-1976, i.e., after the close of the accounting year. The assessee filed two separate returns, one for the period up to 14-8-1976 and the other for the period 15-8-1976 to Diwali 1976. The ITO took the view that it was a case of reconstitution of a firm and, therefore, the assessee should have applied for fresh registration in Form No. 11A and he, therefore, refused the registration to the firm and made a single assessment for both the periods treating the assessee as an unregistered firm. The assessee's appeal before the AAC failed and he has come to this Tribunal in second appeal. 2. We have heard the learned counsel for the assessee and the learned departmental representative and have gone through the record. 3. Two arguments were raised by the learned counsel for the assessee before us. The first was that the old firm got dissolved on 14-8-1976 and there was no change in its constitution till 14-8-1976, the date of dissolution, and the....
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....ease to be partners or one or more new partners are admitted, in such circumstances that one or more of the persons who were partners of the firm before the change continue as partner or partners after the change ; or (b) where all the partners continue with a change in their respective shares or in the shares of some of them. " Section 188 then says that where a firm carrying on a business or profession is succeeded by another firm and the case is not covered by section 187, separate assessments shall be made on the predecessor firm and the successor firm in accordance with the provisions of section 170 of the Act. Section 189 then says that where a firm is dissolved, the ITO shall make an assessment of the total income of the firm as if no dissolution had taken place. 6. In the case before us the assessee-firm carrying the name of Ramsahai Nathulal was a partnership firm under a deed dated 24-3-1970, consisting of Ramsahai, Nathulal and Vimal Chand as partners. This firm purports to have been dissolved by a deed dated 14-8-1976 by which Nathulal and Vimal Chand retired leaving the business to Ramsahai and they rejoined Ramsahai from the next day, i.e., 15-8-1976, along w....
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....te on which a partner retired and was not entitled to a registration for the broken period from 4-3-1963 to 31-3-1963. The question of application of section 187 was not considered either in this case or in the other two cases mentioned above. 9. To the contrary there is the ruling in CIT v. Sree Durga Enterprises [1984] 145 ITR 351 in which the Karnataka High Court held that where a firm consisting of five partners was dissolved and the same business was continued by one of the partners who took four new partners, it was a case of change in the constitution of a firm and a single assessment for the entire period could be made. The Madhya Pradesh High Court which has jurisdiction over this Bench in a Full Bench case in Girdharilal Nannelal v. CIT [1984] 38 CTR (MP) 258 has held that the provisions contained in Chapter XVI are special provisions relating to firms and where even on the death of a partner a firm is succeeded by another firm with the old surviving partner and one or more new partners, the case would be one of mere change in the constitution of the firm as contemplated under section 187(2) and not that of dissolution. As already stated, the case of a dissolved firm i....
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....he assessee, the three partners in the old firm joined hands with two new partners in constituting the new firm which carried on the same business with the same assets and liabilities, it was a case of mere reconstitution of the firm. The result, therefore, is that under section 187 only one assessment had to be made on the firm for the whole of the accounting period and it being a case in which a change had taken place in the constitution of the firm during the previous year, the assessee was bound to make a fresh application for registration in terms of sub-section (8) of section 184. Admittedly, no such application was made and registration granted in the earlier years could not have any effect for the assessment year in question as there had been a change in the constitution of the firm. The ITO, therefore, rightly refused to grant registration to the firm and rightly assessed it as an unregistered firm. In similar circumstances registration was refused to a firm and the Hon'ble Madhya Pradesh High Court affirmed the action in Ganesh Rice Mills v. CIT [1980] 4 Taxman 540. In that case there was a change in the constitution of the firm due to the retirement of a partner. It was ....
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....rjibhai v. CIT [1981] 128 ITR 747. In that case also it was held that where the partners have been assessed separately of their respective share of profit, subsequent assessment in the status of an unregistered firm was not possible. These rulings will not help the assessee for a variety of reasons. Section 183 deals with the assessment of unregistered firms and it gives the option to the ITO either to assess the income in the hands of the firm itself treating it as an unregistered firm or if it is beneficial to the revenue, to tax the respective shares in the hands of the partners, then he may make an assessment as if the firm was a registered firm. As is clear from the language of section 183, the option lies with the ITO assessing the firm and not with the ITO assessing the partners. In the present case the firm was an old assessee and was being assessed by the ITO. The assessment of partner Nathulal appears to have been made by ITO 'N'-Ward, and it is not clear which ITO made the assessment in the case of partner Ramsahai. In any case it is not shown that the cases of the partners as well as the firm were being dealt with by the same ITO. Therefore, the assessment of the partne....
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....nt of an income in wrong hands cannot prevent its assessment in the hands of the right assessee. It was in the case of ITO v. Bachu Lal Kapoor [1966] 60 ITR 74. In that case a partition in the family was recognised and assessments were made in the hands of the individual members. Later it was discovered that the partition was fake and action under section 34 of the 1922 Act was initiated against the joint family. The same argument was raised that the income having once been assessed in the hands of the individuals its taxation in the hands of the family would amount to double taxation. The Hon'ble Supreme Court held that if the HUF existed, the assessment of income in the hands of the individual members was wrong and the ITO had jurisdiction to initiate proceedings under section 34 against the karta of the joint Hindu family. As regards the apprehension of double taxation, the Hon'ble Supreme Court held that adjustments had to be made by the ITO in respect of the taxes realised by the revenue on that part of the income of the family assessed in the hands of the individual. To do so was not to reopen the final assessment orders, but in reality to arrive at the correct figure of tax ....