A partnership firm can be dissolved by mutual consent of the partners, and the absence of a notice under Section 176(3) of the Income Tax Act, 1961, does not lead to the conclusion that the firm continued.

C.S.P. Singh, J.

1. THE Tribunal has referred the following question of law for our opinion :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in directing the Income-tax Officer to treat the assessee as a registered firm and in making two separate assessments for the two periods in the status of a registered firm ? "

2. THE assessee was doing business originally under the name and style of M/s. Gurdeo Prasad Jagannath Prasad which consisted of five partners and was constituted under a partnership deed, executed on the 1st of June, 1968. THE partners' respective shares were :

(1) Gurdeo Prasad 20%

(2) Jagannath Prasad 25%

(3) Jamuna Prasad 20%

(4) Harihar Prasad 20%

(5) Baijnath Prasad 15%

Clause (6) of the partnership deed made provision for the continuance of the firm even in the event of the death of any partner, and provided that on the death of a partner, his heirs, legal assigns or successors-in-interest would ipso facto become a partner in the firm. Clause (7) of the deed of partnership provided for dissolution of the firm by mutual consent or by two months' registered notice by any of the partners to the others. This firm was registered in the year 1969-70 and continued to be assessed as such. On the 30th of September, 1972, two partners, viz., Gurudeo Prasad and Baijnath Prasad, retired from the partnership firm from October 1, 1972. On the retirement of these two partners a deed of dissolution appears to have been executed and a fresh partnership deed was drawn up on 18th October, 1972, with three of the surviving partners. In pursuance of these deeds a declaration under Section 184 in Form No. 12 was filed on September 6, 1973, for continuation of registration for the first period, and an application for registration in Form No. 11 was filed on 2nd December, 1972. The assessee filed two returns in keeping with the two deeds of partnership, one for the period up to 1st October, 1972, and the other for the subsequent period up to March 31, 1973. The ITO, however, held that the old firm continued, as no notice under Section 176(3) for discontinuance of the business was given by the assessee within 15 days, and it was only on 2nd December, 1972, when the new deed of partnership was filed along with an application in Form No. 11 for fresh registration that the ITO was informed of the matter. He took the view that as under Clause (6) of the original deed of partnership, the partners had agreed not to dissolve the firm even in the event of death of one of the partners and, further, that Clause (7) contemplated dissolution only after a notice, which had not been given, the erstwhile firm was not dissolved and all that happened was that there was a change in the constitution of the firm within the meaning of Section 187(2) of the I.T. Act. On this view he made a single assessment on the firm. As respects the registration applied for by the new firm on the basis of the new partnership deed, he found that although in para. (2) of the partnership deed of the 18th October, 1972, Jagannath Prasad, Jamuna Prasad and Harihar Prasad had shares in the ratio of 40%, 30% and 30%, respectively, the profits had been divided in the ratio of 25%, 25% and 25%. On this view the ITO held that no genuine firm had come into existence. The appeal filed by the assessee failed. Thereafter, the matter was taken up before the Tribunal. From the order of the Tribunal it appears that the dissolution deed was fited before it and the Tribunal has recorded a finding that the dissolution deed was genuine. Taking into account this dissolution deed and the fact that the new partnership deed had been drawn up later, it held that the earlier firm stood dissolved on 30th September, 1972. As regards the right of the partners to dissolve the partnership without notice it held that they could do so as they had mutually agreed upon such a course. Commenting upon the genuineness of the newl