9911796707
TMI Blog1967 (12) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... 1), proposing to rectify the assessments of the appellants in respect of the assessment years 1958-59, 1959-60 and 1960-61. Thus, the notices challenged are three notices for each of these assessment years in respect of each of the six appellants, so that there were 18 petitions before the High Court. The High Court decided all the petitions by a common judgment and, consequently, in these appeals, all of them are being dealt with together. During all these three assessment years 1958-59, 1959-60 and 1960-61, both the firms filed returns declaring themselves to be registered firms and also presented applications for registration of the firms under section 26A of the Income-tax Act, 1922 (11 of 1922). The Income-tax Officer refused registration of the firms and assessed the income of the firms, treating them as unregistered. The assessments of these six appellants were also made, so that their incomes from the two firms were included in their individual assessments as if they had received the income in the capacity of partners in unregistered firms. The firms went up in appeal against the orders of the Income-tax Officer refusing registration. These appeals were allowed by the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assistant Commissioner granting registration to the firms, proceeded to pass orders rectifying the assessments of the firms under section 35(1) of the Act of 1922 on 20th December, 1966. It was urged that no fresh computation of income of the partners is sought to be made in pursuance of the notices issued and, similarly, no fresh computation of the income of the firms was made when the Income-tax Officer passed his orders on 20th December, 1966, to give effect to the decision of the Appellate Assistant Commissioner granting registration to the firms. No fresh computation of income being involved, it must be held that the proceedings now sought to be taken are not proceedings for assessment, and, similarly, no proceedings for assessment or reassessment were taken by the Income-tax Officer when he passed his orders on 20th December, 1966. This submission, in our opinion, has been rightly rejected by the High Court, because it has already been explained by this court that the word assessment is used in the Income-tax Act in a number of provisions in a comprehensive sense and includes all proceedings, starting with the filing of the return or issue of notice and ending with dete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not, in our opinion, support the submission made on behalf of the appellants in the present cases. It was explained there that, under section 23A of the Act of 1922, there was no computation of income or determination of tax imposed by the charging section. That section by itself empowered the Income-tax Officer to impose the super-tax by his own order, and an order imposing such a tax could not be held to be an order of assessment. Further examples of similar orders were cited in that case and reference was made to orders under sections 18A(1), 35(9), 35(10) and 35(11) of the Act of 1922. After referring to these provisions, the court clearly indicated the reason for holding that proceedings under those provisions were not proceedings for assessment of tax by stating : The salient feature of these and other orders is that the liability to pay tax arises not from the charge created by statute, but from the order of the Income-tax Officer. In the present cases, the orders, which have been rectified or are being taken up for rectification, are all orders under which there was assessment of incomes and determination of the charge to tax in accordance with the charging sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he firm has been assessed under sub-section (1), sub-section (3) or sub-section (4), as the case may be, (a) in the case of a registered firm, (i) the income-tax payable by the firm itself shall be determined ; and (ii) the total income of each partner of the firm, including therein his share of its income, profits and gains of the previous year, shall be assessed and the sum payable by him on the basis of such assessment shall be determined : Provided that if such share of any partner is a loss it shall be set off against his other income or carried forward and set off in accordance with the provisions of section 24 : Provided further that when any of such partners is a person not resident in the taxable territories, his share of the income, profits and gains of the firm shall be assessed on the firm at the rates which would be applicable if it were assessed on him personally, and the sum so determined as payable shall be paid by the firm : Provided also that if at the time of assessment of any partner of a registered firm, the Income-tax Officer is of opinion that the partner is residing in Pakistan, the partner's share of the income, profits and gains of the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this position by laying down that the right of appeal in respect of the apportionment is to be exercised by the partners by filing appeals against the order of assessment of the firm and not against orders made in the course of subsequent proceedings for the individual assessments of the partners themselves. The second proviso to section 23(5)(a) also brings out this position. In certain cases, after the apportionment of the income of the registered firm, the share of a particular partner, who is not resident in the taxable territories, is to be assessed to tax also as if it is the income of the registered firm. All these provisions clearly show that proceedings for assessment of a firm consist of computation of the income of the firm, determination of tax payable by the firm, apportionment of the income of the firm between its partners in the case of a registered firm and, in appropriate cases, imposition of tax on the firm after including the share of the income of certain partners in the income of the firm, even though the firm is registered. The proceedings for assessment of the firm are not completed until all these steps have been taken by the Income-tax Officer, and each one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee's share in his assessment until the assessment of that income to tax in the hands of the firm was set aside. What was thus set aside was the attempt to tax the same income twice. It was in these circumstances that the court observed that there was no scope for the applicability of section 35(1) or section 35(5) of the Act of 1922. Section 35(5) did not apply, because, in fact, there was no assessment or reassessment of the income of the firm subsequent to the order granting registration. The finality of the assessment of the firm had been left untouched and while that order remained intact, the provisions of section 35(5) could not possibly be attracted. In the case before us, after registration of the firms was allowed in appeal, the Income-tax Officer in the proceedings for assessment of the firms proceeded further to make a fresh assessment of the tax payable by the firms and also to apportion the income of the firms between various partners, so that the income of the firms no longer remained taxed as income of unregistered firms, and liability arose of the partners to be taxed in their assessments in respect of their shares of the income. Clearly, in these circumstances, ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
