9911796707
TMI Blog1971 (10) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... carries on business of manufacturing bidis in this State. For the years 1958-59 and 1959-60 the assessment of the firm was taken up by the Income-tax Officer. When the matter was ultimately taken in appeal to the Income-tax Appellate Tribunal, a new ground was raised before it that inasmuch as the partners of the firm were individually assessed and inasmuch as the Income-tax Officer had exercised his discretion in assessing the partners in their individual capacity, the Income-tax Officer had lost jurisdiction to assess the partnership subsequently. This question was allowed to be raised by the Income-tax Appellate Tribunal before it for the first time, as it was a question of law. The contention, however, was negatived by the Tribunal, but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Officer may, instead of determining the sum payable by the firm itself, proceed to assess the total income of each partner of the firm including therein his share of its income, profits and gains of the previous year, and determine the tax payable by each partner on the basis of such assessment, if, in the Income-tax Officer's opinion, the aggregate amount of the tax including super-tax, if any, payable by the partners under such procedure would be greater than the aggregate amount which would be payable by the firm and the partners individually, if separately assessed; and where the procedure specified in this clause is applied to any unregistered firm, the proviso to clause (a) of this sub-section shall apply thereto as they ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e firm in the hands of the partners. Once the department makes its choice of assessing the income in the hands of the partners, it cannot proceed to assess the firm as such and, having assessed the firm, resort to section 35(5) of the Act to rectify the assessments of the individual partners. In support, a number of cases were cited before the Tribunal as well as before us. We may, however, refer to only one case which contains all the arguments that can be advanced, on behalf of the assessees. That case is Girdhari Lal Laxman Prasad v. Commissioner of Income-tax. In that case, relying on its previous decision as also three cases of the Supreme Court, it was held by the Allahabad High Court that section 3 of the Act impliedly gave an option ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmined. This clearly shows that the two entities, namely, the registered firm, and the individual partners, are expected to be separately assessed and the tax liability of the two entities is required to be determined. Clause (b) of sub-section (5) of section 23 of the Act, on the other hand, makes it clear that in the case of an unregistered firm the Income-tax Officer has a choice that instead of determining the sum payable by the firm itself, he may proceed to assess the total income of each partner of the firm, including therein his share of its income, profits and gains from the firm of the previous year. It would thus be clear that if section 3 is read with section 23, sub-section (5), in the case of a registered firm both the firm as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partners in accordance with the provisions of that section. After 1956 the firm did not cease to be an assessee; on the contrary, it was recognised as a separate entity and was subjected to tax as such. From those observations of their Lordships of the Supreme Court in Jain Brothers case, and also for the reasons given by us above, viz., that in the case of a registered firm and its partners there is no provision for the Income-tax Officer making any choice of proceeding either against one entity or the other, the conclusion is inevitable that the assessment of the individual partners does not preclude the Income-tax Officer from taking up the assessment of the firm as well. The legislature was aware that the assessment of the partners ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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