BALASUBRAHMANYAN J.

These two tax cases bear on the same assessment year of the same assessee under the I.T. Act, 1961. The following questions of law have been referred for our opinion by the Income-tax Appellate Tribunal :

"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was entitled to the benefit of registration till December 7, 1969, for the assessment year 1970-71 ?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessment should be made in the status of a registrated firm till December 7, 1969, and thereafter till March 31, 1970, the assessment should be made in the status of an unregistered firm ?" *

The facts bearing on these two questions may be shortly stated : The assessee is a partnership firm, assessed to income-tax in the status of a registered firm till the assessment year 1969-70. The firm had four partners. One of them, Velayutha Nadar, died on December 7, 1969, in the midst of the firm's account year, which would normally have ended on dissolved on December 7, 1969. The surviving partners, however, did not proceed to an accounting of the partnership as on December 7, 1969, but closed the accounts only on March 32, 1970. This they did apparently on the basis of an independent agreement which was come to on November 26, 1969, in and by which the surviving partners agreed to continue the partnership till March 31, 1970. The fact, however, was that subsequent to the death of Velayutha Nadar on December 7, 1969, no transactions were effected by the partnership firm, but only the business of the partnership was wound up and the accounts taken for the purpose of dissolution of partnership as on December 7, 1969.While so, however, in connection with the firm's assessment for the assessment year 1970-71, the surviving partners and the legal representatives of the deceased partner filed a declaration in Form No. 12 of the forms prescribed under the Income-tax Rules, 1962, and prayed for a declaration that their firm, which had obtained registration till 1969-70, might be declared to be entitled to registration even for the assessment year 1970-71. In filing up the form, however, the applications asked for registration for the previous year ended with March 31, 1970, even though the firm was dissolved by the death of Velayutha Nadar on December 7, 1969.

The ITO scanned the form of declaration filed by the surviving partner and held that the particulars mentioned therein were defective. According to the ITO, the continuance of registration to the firm could not be granted for the assessment year 1970-71 for the reason that the continuance was asked for in respect of the year ended March 31, 1970, on the basis that the constitution of the firm remained unchanged, whereas, in point of fact, there had been the death of one of the partners, Velayutha Nadar. On appeal by the assessee-firm, the AAC confirmed the order of the ITO, refusing to grant continuance of registration to the firm for the assessment year 1970-71, more or less on the same grounds which weighed with the ITO.

On further appeal, the Tribunal held that the firm came to close on December 7, 1969, with the death of the partner, Velayutha Nadar, having regard to s. 42 of the Indian Partnership Act, 1932. The Tribunal also took note of the fact on the dissolution, by the partner's death of this firm, no fresh partnership was entered into by the surviving partners and the legal representatives of the deceased partner, nor was the firm reconstituted in any other manner. In these circumstances, the Tribunal held that the registration of the firm as an assessable entity must be granted till December 7, 1969, after which date, the declaration filed by the surviving partners and the heirs of the deceased partner would not hold good having regard to the provisions of the I.T. Act, 1961. In the result, they directed the ITO to recognise