These appeals are by assessees. 2. IT Appeal No. 230 (Bang.) of 1985: firm Swamy & Pathy is being assessed as registered firm. Its previous year ended on 31st October. Thus, it was assessed for assessment year 1980-81, with previous year ending o n 31-10-1979. For assessment year 1981-82, its previous year should normally have been year ending on 31-10-1980. However, constitution of firm underwent change. According to assessee firm was dissolved on 15-4-1980 and new firm came into existence thereafter (as understood by assessee). new firm, however, chose to close its accounts on 31-3- 1981. assessment year for new firm was same, viz., 1981-82 as for old firm. firm, accordingly, filed two returns: (i) ITO, however, held that there was no dissolution on 15-4-1980 of old firm in terms of section 187(2) of Income-tax Act, 1961 ('the Act'). Therefore, assessment has to be made on same old firm subject, however, to allocation of profits between partners in proportion they were entitled to in different parts of previous year. There is no quarrel between assessee and revenue insofar as application of section 187(2) is concerned, as it is supported by decision of Karnataka High Court in case of Sangam Silks v. CIT [1980] 122 ITR 479. But decision of ITO was that income had to be assessed in one single year on profits earned by firm in period of 17 months starting from 1-11-1979 and ending on 31-3-1981. It is to this proposition that assessee objects. (ii) According to assessee, while there is no bar to making assessment on firm as if no new taxable entity has come into existence, there was no authority of taxing income of firm for period exceeding 12 months. This was borne out by section 3 of Act. It is not to be presumed that assessee changed previous year from October ending to March ending with no consent of ITO. There was no such request on part of assessee. assessee changed previous year to 31st March as, in its opinion, new firm came into existence on 16-4-1980 and new firm could choose its own previous year not exceeding 12 months. In sum, stand is that, while section 187(2) enables ITO to make assessment of firm ignoring claim of assessee that there was dissolution of firm 15-4-1980 in view of specific provisions of section 187(2) , there is nothing in Act suggest that previous year of firm should be extended to period beyond 12 months. These arguments were rejected by Commissioner (Appeals) who purportedly relied on decision of Punjab and Haryana High Court in case of Karnal Kaithal Co-operative Transport Society Ltd. v. CIT [1972] 84 ITR 46. assessee is in appeal. 3. learned counsel for assessee reiterated before us stand ta k e n by him before authorities below. He drew our attention to observations of High Court in Sangam Silks' case (supra) at p. 485, viz, section 187 contemplates of only one assessment for entire concerned previous year on reconstituted firm. It was submitted that this meant that previous year of firm cannot be extended beyond 12 months. previous year remained same as before, viz., 31st October in this case. He submitted that order of Commissioner (Appeals) should be reversed. learned departmental representative, on other hand, submitted that legal fiction enacted under section 187(2) has to be carried to its logical conclusion. previous year of firm having ended on 31-3-1981 profit of entire period of 17 months has to be assessed in single year. 4. We have heard rival submissions. In Karnal Kaithal Co-operative Transport Society Ltd.'s case (supra) facts were: up to assessment year 1955-56, assessee filed its returns showing year ending on 31st March of each year as previous year. For assessment years 1956-57 to 1959-60, assessee filed returns showing year ending 30th September of each year as previous year. For 1960-61 assessee filed return showing year ending 31st March as previous year. ITO required assessee to file its return for previous year ending on 30-9-1959. It was held that ITO was right as assessee had not applied under section 2(11) of Act, for change of previous year. Though previously assessee has not made any application for changing previous tear from tear ending on 31st March to ending on 30th September, voluntary submission by assessee of returns for previous year ending on 30th September amounted to application for change of previous year and acceptance of those returns by officer amounted to his consent for change and earlier practice could not be deemed to be continuing: (i) We notice that situation here is quite different. assessee in Karnal Kaithal Co-operative Transport Society Ltd.'s case (supra) was same. previous year had changed. Voluntary submission of returns by same assessee was considered as application for change of previous year. In present case, technically speaking two firms, viz., one which existed up to 15-4-80 and other which came into existence after that date, were different. At any rate that is so in accordance with Indian partnership Act, 1932. However, by operation of legal fiction in section 187(2) it was considered by Courts that there was no change in constitution on 15-4- 80. income-tax law being special law took precedence over general law. It is to be noticed that assessees has not accepted this interpretation until Court intervened and gave its own interpretation. Therefore, it is by legal fiction, we to hold that old firm continued to exist even after its reconstitution after 15-4-1980. (ii) It is well settled that legal fiction cannot be extended beyond purpose for which it is intended, as they are created for limited purpose-CIT v. Amarchand N. Shroff [1963] 48 ITR 59 (SC). Therefore, we cannot say that legal fiction also enabled ITO to elongate previous year from 12 months to 17 months. submissions of second return disclosing income from 16-4-1980 to 31-3-1981 cannot be construed as voluntary act on part of assessee changing previous year from 31st October to 31st March, for, all along stand of assessee had been that there were two separate firms. Therefore, dictum laid down in Karnal Kaithal Co-operative Transport Society Ltd's case (supra) cannot be extended to this case. It is necessary, therefore, to provide opportunity to assessee to have say in matter of closing previous year. It is now for assessee to exercise option to change its previous year from October ending to March ending. If legal position regarding application of section 187(2) had been known to assessee, it might not have changed previous year at all. Therefore, we are of opinion that previous year continues to be same, viz., year ending 31st October. that previous year continues to be same, viz., year ending 31st October. ITO is, therefore, directed to assess income of firm for period 1- 11-1979 to 31-10-1980 for assessment year 1981-82. If, however, assessee now makes request to ITO that it would like to change its previous year to 31st March ITO is welcome to assess income for period of 17 months. With above finding, we set aside orders of authorities below and restore assessment to ITO for purpose of taxing income in accordance with choice of previous year assessee would like to make now, keeping in view to provisions of section 3 of Act. 5. In result, IT Appeal No. 230 (Bang.) of 1985 is treats as allowed. 6. IT Appeal No. 231 (Bang.) of 1985: For detailed reasons stated above by us while dealing with IT Appeals No. 230 (Bang.) of 1985, we set aside orders of authorities below and restore assessment to ITO for purpose of taxing income in accordance with choice of previous year assessee would like to make now. 7. In result, IT Appeal No. 231 (Bang.) of 1985 is treated as allowed. *** SWAMY AND PATHY v. INCOME TAX OFFICER