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TMI Blog1989 (2) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... nciple of its decision in the said case. On reference, however, this court did not agree with the reasoning and conclusion of the Appellate Tribunal, and answered two identical questions against the assessee and in favour of the Revenue. That decision should conclude the questions in this case. But, Mr. Y. Ratnakar, learned counsel for the assessee, raised a contention which was not raised or considered by this court in CIT v. Friends Enterprises [1988] 171 ITR 269. The contention is that before making the assessment in the status of an association of persons, notice under section 139(2) of the Act ought to have been issued calling upon the assessee to submit a return in that status. Since that has not been done, it is argued, the assessment made is illegal. Though this question has not been specifically referred to by the Tribunal for our opinion, the Tribunal was of the opinion, when the assessee asked for referring the same, that the said question is implicit in the two questions referred by it and that it is open to the assessee to argue the said question before this court. Though learned standing counsel for the Revenue contends that the assessee could not have asked for refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nership, there was no valid partnership in this case. Accordingly, he refused registration and stated further that the assessee's status should be determined as that of an association of persons. On August 19, 1980, he made the order of assessment. In this order, he referred to his earlier order dated February 1, 1980. He overruled the objection of the assessee that no assessment can be made upon it in the status of an association of persons. The assessee filed an appeal contending, inter alia, that since there was no income-producing activity carried on by the five individuals, they would not constitute an association of persons, and hence no assessment could have been made in that status. The Commissioner of Income-tax (Appeals), however, did not agree with the said submission and dismissed the appeal, whereupon the matter was carried in further appeal to the Tribunal. Before the Tribunal a specific contention-described by the Tribunal as an alternative contention-was raised to the effect that where a return was filed in the status of a firm, no assessment could be made in the status of an association of persons without issuing a notice under section 139(2) or section 148, as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the Allahabad High Court in CWT v. J. k Srivastava and Sons [1983] 142 ITR 183. Reliance is also sought to be placed upon certain observations of a Full Bench of this court in Pannabai v. CIT [1985] 153 ITR 608. The decision of the Bombay High Court in CIT v. Associated Cement and Steel Agencies [1984] 147 ITR 776 does, indeed, support the assessee's contention. In that case too, a return was filed in the status of a firm along with an application for registration. Registration was refused and assessment was made in the status of an association of persons. This was held to be impermissible on the following reasoning (at page 777) : "That a 'firm' and an 'association of persons' are two different 'persons' and, indeed, independent units of assessment, cannot be disputed, considering the whole scheme of the Income-tax Act, 1961. The mode of their taxing and process (sic) of liability are also different. Thus, even if the identity of the members of the alleged firm and the association of persons is established, there cannot be a valid assessment altering the status declared in the return. Mandatory requirement of issuing of a notice under section 143(2) before making assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ual, and since no notice was issued to the assessee in the status of an individual to file a return under section 14(2), the Wealth -tax Officer had no jurisdiction to make an assessment in the status of an individual and, accordingly, cancelled the assessment. This view was affirmed by the High Court on reference. The decision in this case too is based upon the reasoning that an association of persons is an entity different from an individual and, therefore, the return filed by one cannot be made the basis for making an assessment on the other without issuing a notice under section 14(2) of the Wealth-tax Act. For the reasons given by us while discussing the ratio of the Bombay judgment, we are unable to agree with the reasoning of this decision. It should be remembered that in the case before us, all the affected persons were already before the Income-tax Officer. It is not a case where, by changing the status, some persons or individuals who were not before the Income-tax Officer would have been affected. Not only all the affected persons were there before the Income-tax Officer, but they had also specifically raised the contention that no assessment could be made upon them eith ..... X X X X Extracts X X X X X X X X Extracts X X X X
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