1984 (8) TMI 98 - AT - Income Tax

Summary

Issues:
1. Assessment of the assessee as an unregistered firm without seeking registration.
2. Dispute regarding the assessment of the firm after partners' share income assessment.
3. Interpretation of the Supreme Court decision in Murlidhar Jhawar and Purna Ginning & Pressing Factory case.
4. Applicability of CBDT circulars on the assessment under the Income-tax Act, 1961.
5. Conflict of decisions between different High Courts on assessing a firm after partners' share income assessment.

Analysis:

1. The Income Tax Officer (ITO) assessed the assessee as an unregistered firm due to the absence of an application in Form No. 11A seeking registration. The Commissioner (Appeals) found that some partners had already been assessed on their share income from the firm before the firm's assessment. The Commissioner held that the ITO did not clearly establish whether the firm fulfilled the registration requirements, and directed a reassessment.

2. The counsel for the assessee argued that once partners' share income is assessed, assessing the firm again is not permissible. The departmental representative supported the original assessment. The Tribunal noted that the partners had been assessed on their share income before the firm's assessment, citing the Supreme Court decision in Murlidhar Jhawar and Purna Ginning & Pressing Factory case.

3. The Tribunal analyzed the Supreme Court decision and CBDT circulars, clarifying that the decision in Murlidhar Jhawar case applies to assessments under the Income-tax Act, 1961. Various High Courts have upheld this interpretation in different cases, emphasizing that once partners are assessed, assessing the firm as unregistered is not valid.

4. The Delhi High Court had a contrary view, allowing the assessment of an Association of Persons (AOP) even after individual assessments of its members. However, the Tribunal followed the decisions favoring the assessee, concluding that the ITO cannot assess the firm as unregistered after assessing partners' share income.

5. Therefore, the Tribunal allowed the appeal, canceling the assessment order on the assessee-firm as an unregistered entity. The decision was based on the principle that once partners' share income is assessed, a separate assessment of the firm as unregistered is not permissible under the law.