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TMI Blog1968 (3) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment proceedings against the assessee-firm for the assessment year 1958-59 and made an assessment order against it treating it as unregistered firm. Before the Appellate Assistant Commissioner the assessee-firm contended that, as the Income-tax Officer had already taxed the share income in the hands of two of the partners, it was not open to him to proceed to assess the profits again in the hands of the assessee-firm. The contention did not find favour with the Appellate Assistant Commissioner. In second appeal, the Income-tax Appellate Tribunal took the view that the Income-tax Officer was entitled to tax the profits in the hands of the assessee-firm and thereafter grant relief to the individual partners who had paid the tax on their separate assessments. Accordingly, the Tribunal dismissed the appeal. At the instance of the assessee, the Tribunal has referred the following question for the opinion of this court : "Whether it is legal to make an assessment on an unregistered firm, after some of its partners have already been assessed to tax on their share income from the firm? Sri R. L. Gulati, appearing for the revenue, has raised an objection to the general terms in whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its individual members. The option, has been made available only in respect of a firm or an association of persons. It is not available in respect of other groups specified in the provision. There is a chain of decisions laying down that, if the Income-tax Officer opts in favour of charging the profits in the hands of the individual partners of the firm or members of the association, it is not open to him to tax the profits again in the hands of the firm or the association of persons. This court held in Jyoti Prasad Agarwal v. Income-tax Officer, B-Ward, Mathura, that if the option is exercised in favour of assessing the profits in the hands of the individual members of an association of persons, the profits cannot be brought to tax in the hands of the association as such. And the view taken by the Supreme Court in Commissioner of Income-tax v. Raja Reddy Mallalram can be explained only on the hypothesis that the income of an association of persons can be charged to tax either in the hands of the association or in the hands of its individual members. Shah J., who spoke for the court, observed : " The unit of assessment in respect of the income earned by the association is eithe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the outset he was aware that the three individuals were members of the partnership firm, and that the returns filed by the individual partners set out their share from the profits of the firm. In the assessments of the individual partners the Income-tax Officer brought the share of profits to tax. He expressly stated that the share disclosed in the return of each individual partner was being included in his assessment subject to rectification under section 35 after the correct share was determined upon the assessment of the firm. By that statement the Income-tax Officer clearly intended that after determining the profits in the assessment of the firm he would return to the separate assessments of the individual partners and substitute the share finally determined for the share as returned. The share as returned by the individual partners had been subjected to tax. The share as rectified would now be brought to tax. Emphasis all along was laid upon the separate assessment of the individual partners and it is the income determined in those assessments which was intended to be brought to tax. We are clear in our minds that the Income-tax Officer had decided at the outset to tax the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of the partner or if included is not correct. That is a provision merely for correcting the share of the profits of the partner included in his individual assessment. The provision does not in terms nor by implication envisage a power in the Income-tax Officer to tax the profits in the hands of the individual partners and also in the hands of the firm. The provision relates merely to the assessment of the profits and not to the levy of a charge in respect of them. It is urged that even where the profits are brought to charge in the hands of the individual partners the Income-tax Officer will find it necessary, to compute the profits in an assessment of the firm. We are not concerned with that question here. The question before us is whether the Income-tax Officer can charge to tax the profits in the hands of the firm when he has already brought them to charge in the hands of the individual partners. It will be recalled that a submission sought to be based upon section 14(2) of the Act was raised before the Supreme Court in the case of Kanpur Coal Syndicate, the argument being that the Income-tax Officer was bound to charge the profits of the association of persons in the hands ..... X X X X Extracts X X X X X X X X Extracts X X X X
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