1964 (4) TMI 18 - SC - Income Tax

Whether when the Income-tax Officer in his discretion assessed an association of persons to income-tax, the Appellate Assistant Commissioner in appeal or Appellate Tribunal in further appeal can set aside the Income-tax that order and direct him to assess the members of that association individually? Held that - Section 3 impliedly gives an option to an appropriate authority to assess the total income of either the association of persons or the members of such association individually. We, therefore, hold, agreeing with the High Court, that the Appellate Tribunal has jurisdiction to give directions to the appropriate authority to cancel the assessment made on the association of persons and to give appropriate directions to the authority concerned to make a fresh assessment on the members of that association individually. The answer given by the High Court to the question propounded is correct. Appeal dismissed.

Summary

Issues:
Whether the Appellate Tribunal can direct the Income-tax Officer to assess the members of an association individually after the Officer has assessed the association as a collective unit.

Analysis:
The case involved a dispute over the assessment of an association of persons for income tax purposes. The Income-tax Officer had assessed the total income of the association for a particular year. The association contended that each member's income should be assessed individually rather than as a collective unit. The Appellate Assistant Commissioner dismissed the association's appeal, leading to a further appeal to the Income-tax Appellate Tribunal. The Tribunal acknowledged the Officer's discretion to assess either the association or its individual members but held it lacked the power to direct the Officer on the choice. The matter was referred to the High Court, which ruled that the Tribunal could set aside the Officer's assessment and direct individual assessments.

The Supreme Court analyzed the relevant provisions of the Indian Income-tax Act, particularly Sections 3, 14, 30, and 31. Section 3 imposes a tax on various entities, including associations of persons and their individual members. The Court emphasized that an association and its members are distinct assessable entities under the Act, allowing for assessment on either entity. The Court held that the Income-tax Officer has the initial discretion to choose the entity for assessment, but this decision can be challenged through appeals.

The Court clarified that an assessee has the right to appeal against the Officer's assessment choice under Section 30 of the Act. The Appellate Assistant Commissioner has broad powers under Section 31 to confirm, modify, or annul assessments, including directing a fresh assessment. Similarly, the Appellate Tribunal, under Section 33, can order changes in assessments, including directing individual assessments for association members. The Court concluded that both the Appellate Assistant Commissioner and the Tribunal have the authority to direct the Officer to assess association members individually if deemed appropriate.

In alignment with the High Court's decision, the Supreme Court affirmed that the Appellate Tribunal has jurisdiction to instruct the relevant authority to cancel an association's assessment and conduct individual assessments for its members. Consequently, the appeal was dismissed, upholding the Tribunal's power to issue directions for individual assessments following the Officer's collective unit assessment.