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Issues: Assessment of an association of persons after assessing one of its members individually, exercise of option by the Income-tax Officer, legal sanction for assessment on the association as a whole.
Assessment of Association of Persons: The case involved four individuals who purchased land and later agreed to sell it to a cooperative society, resulting in assessable profit. The Income-tax Officer assessed one individual on his share of capital gains. The association filed a nil return, claiming no income was liable to be assessed due to the forced sale under threat of compulsory acquisition. The Income-tax Officer rejected the claim and assessed a sum as business profit from the sale of the association. The Tribunal accepted the contention that the department could not assess the association after assessing one member individually. Legal Sanction for Assessment: The Tribunal referred a question regarding the legality of assessing the association after assessing one member individually. The court held that the department, by assessing an individual member first, did not foreclose the option to assess the association later. The normal procedure is to tax the association primarily and then consider individual members. If the Income-tax Officer chooses to assess an individual first, the department still retains the option to assess the association as a whole. Therefore, the assessment on the association of persons after assessing one member individually was held to have legal sanction. Exercise of Option by Income-tax Officer: The court considered the evidence presented by the Tribunal regarding the Income-tax Officer's exercise of option to assess one member before the association. The court noted that the department, not the individual officer, has the power to choose whether to assess the association or individual members. The court cited precedents emphasizing the department's discretion in choosing the order of assessment. As the department retains the option to assess the association even after assessing individual members, the exercise of option by the Income-tax Officer was deemed valid in this case. This judgment clarifies the legal framework surrounding the assessment of associations of persons and individual members, emphasizing the department's discretion in choosing the order of assessment and maintaining the option to assess the association as a whole even after assessing individual members.
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