JUDGMENT

H.N. Seth, J. - At the instance of the Commissioner of Income Tax, Lucknow, the Income Tax Appellate Tribunal, Delhi Bench, has referred the following questions for the opinion of this court:

"1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the firm as reconstituted within the meaning of Section 187(2) of the Income Tax Act, 1961, was entitled to choose its own accounting period, as a new assessee, from the date of its reconstitution, in its own right ?

2. Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in directing exclusion from the assessment under consideration of the income relating to the period ending March 31, 1961, for making another assessment in respect of profits of the old firm on the basis of the previous year of that firm ?"

2. The assessee in this case is a partnership firm carrying on business under the name and style of Messrs. Shiv Shanker Lal Ram Nath. The two questions mentioned above arise in connection with its assessment for the year 1962-63. Earlier, seven persons carried on the partnership business under the name and style of Messrs, Shiv Shanker Lal Raghunath Das with their head office at Bareilly and branch at Lucknow. The accounting period of that firm ended on Dusehra of each year. With effect from 1st April, 1961, the constitution of the firm underwent a change. Two of the partners, viz., Ram Krishna Das and Sri Krishna Das, retired and, in their place, two other persons, viz., Radhey Shiam and Ghanshyam Das, were admitted as partners. In addition, two minors were also admitted to the benefits of the firm. Thereafter, the firm carried on the business in the name of Messrs. Shiv Shanker Lal Rain Nath. For facility of reference the firm as it stood before its reconstitution will hereinafter be referred to as "the old firm" whereas the firm as it stood after its reconstitution will be referred to as "the new firm".

3. For the assessment year 1962-63, the assessee filed two Income Tax returns, one in respect of the old firm, showing the income earned by it during the period September 30, 1960, to March 31, 1961, and the other in respect of the new firm showing income derived by it in the previous year ending 31st March, 1962, i.e., for the period April 1, 1961, to March 31, 1962. The Income Tax Officer held that this was a case merely of change in the constitution of the firm as contemplated by Section 187(2) of the Income Tax Act, 1961. The assessee was not competent to change its accounting year to the financial year without obtaining the permission of the Income Tax Officer. Since the assessee had changed the accounting year without such permission, the reconstituted firm was liable to be assessed on the basis of the income earned during the period September 30, 1960, to March 31, 1962, in one assessment. He, accordingly, determined the total income of the reconstituted firm at Rs. 1,46,789 as made up of Rs. 63,497, income derived by the old firm during the period September 30, 1960, to March 31, 1961, and Rs. 83,292, the income derived by the new firm during the financial year 1961-62. He treated the firm as unregistered for the period ending 31st March, 1961, and registered for the period 1st April, 1961, to 31st March, 1962. In appeal, the Appellate Assistant Commissioner upheld the action of the Income Tax Officer in including the income of both the firms in one assessment made on the reconstituted firm. He, however, directed that the firm was entitled to registration for both the periods. He reduced the income of both the firms to some extent. The assessee then took the matter up in appeal before the Income Tax Appellate Tribunal and urged that while completing its assessment for the year 1962-63, the Income Tax authorities erred in making an assessment on the basis of income earned in a period of 18 months, i.e., September 30, 1960, to March 31, 1962. According to the assessee the relevan