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TMI Blog1981 (5) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... e, Smt. Gayatri Devi, representing their minor son, Kanhaiyalal. For the assessment year under reference, an assessment was originally made on an association of persons. That assessment order, a copy of which was handed over to us and which is not disputed by the Revenue, described the status of the assessee as an association of persons and the name of the assessee as follows : " Rameshwarlal Lohariwala & Others, Trustees to the Estate of Ganpatrai Sagarmal, 12, Armenian Street, Calcutta. The ITO, who passed the said assessment order on the 11th December, 1959, observed that the profits of that year had been divided amongst the settlors and beneficiaries and no profits had been allocated to the charity fund. Thereafter, he computed the total income at Rs. 1,11,160 and observed, inter alia, as follows: " No demand is raised in this case as the beneficiaries will be assessed directly under section 41(2) of the I.T. Act. The allocation of the total income amongst the beneficiaries is made as under: --------------------------------------------------------------------------------------------------------------------------------------------- Name Business Interest Dividend Dividend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficiaries, qua beneficiaries under s. 41(2) of the Indian I.T. Act, 1922, could no longer subsist. The ITO, therefore, under s. 148 of the I.T. Act, 1961, took steps for reopening the assessment on the assessee-firm for the assessment year 1958-59. By his order passed under s. 143(3) of the Act read with s. 148 of the Act, he made an assessment on the assessee in the status of an " unregistered firm " on a total income of Rs. 1, 10, 160. The ITO observed in his order, inter alia, as follows : " There is no new deed of partnership executed after the death of Sagarmal on the 15th April, 1955, and there is no application filed to register any such deed. The status is, therefore, taken as U.R.F." The assessee went up in appeal before the AAC and contended, firstly, that the initiation of the proceedings was bad in law and void abinitio and as such the assessment should be cancelled. Secondly, it was urge that while the original assessments were not yet cancelled or set aside by any competent authority, the framing of assessments of the income from the same source only in a different status under s. 147 and computing the total income at the same figure was merely a question of duplica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, uphold the action of the ITO in this respect for all the years under appeal." The assessee, thereafter, went up in further appeal before the Appellate Tribunal and contended, inter alia, that the original assessment had been made on the basis of merely computing the income in the hands of the association of persons for the purpose of being worked out in the hands of the respective persons, who were entitled to the income beneficially. Attention of the Tribunal was drawn to s. 41 of the Act. The Tribunal, after considering the rival contentions, observed, inter alia, as follows : " As the property remained with the donors, they were free to constitute themselves into a firm which they have done under the document dated 13-1-56. There was thus a firm which was in existence for the year under consideration. Even though the status is taken as association of persons originally, still in view of the clarification of the correct legal position obtained from the High Court's judgment and taking it along with the partnership deed dated 13-1-56, the Income-tax Officer could reasonably believe that income had escaped assessment in the hands of the entity as such. It was, therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t : Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in holding that the reassessment has been made as per law in the status of an U.R.F. while once the respective members have been assessed and also taxed directly for their respective incomes ? " Before us, it was first contended, with reference to the deed dated 13th January, 1956, that the trust was considered to be invalid on the ground that there was no valid trust. It was submitted that the donors were capable of constituting a trust by transferring the property and, in fact, by the document dated 13th January, 1956, they have done so. We are, however, unable to accept this contention urged on behalf of the assessee. We are unable to accept this contention firstly because from the order of the Income-tax Appellate Tribunal, it appears to us that this contention in this form had not been urged before the Tribunal and the Tribunal had no occasion to consider this question. Secondly, it appears that the parties have, in subsequent years, proceeded on the basis of firm. That would be apparent from the decision in the case of Rameshwarlal Lohariwala v. CIT [1980] 126 ITR 209. There, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rly by virtue of s. 64(ii) of the 1961 Act. For the reasons that we have indicated the point having not been taken specifically before the Tribunal and secondly that the point which required both consideration on the aspect of law as well as examination on fact having not been agitated before the Tribunal and consequently from the conduct of the parties, it appears, they treated it as the firm, in our opinion, this aspect cannot be allowed to be agitated at this stage as was sought to be urged by the assessee. Next question that requires consideration in this matter is whether the assessment having been done on the beneficiaries under s. 41(2) qua beneficiaries, could, therefore, be now reassessed on the same persons qua partners of an unregistered firm. Learned advocate for the assessee emphasised and emphasised very greatly on the aspect that assessment on the same persons qua partners and assessment qua beneficiaries would really amount to double taxation which should be avoided. He relied in this connection on a decision in the case of Ramanlal Madanlal v. CIT [1979] 116 ITR 657 (Cal). In that case, up to the assessment year 1964-65 the assessee-firm had been granted registrat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able units should not normally be made to suffer taxation twice unless the clear intention of the Legislature was there to tax the same income twice. The next principle that had to be borne in mind was that, according to us, though in fiscal law the charging section was the most important provision, the said charging section must be understood and construed in the light of the machinery provided, in order that the charge might be effectuated. Bearing the said principle in mind and having regard to the intention of Parliament in introducing the change, as there had been no substantial change in the machinery provided for taxation under the Act of 1961, the partners of an unregistered firm as well as the firm itself could not be taxed twice. We held, accordingly, that in the case of an unregistered firm and its partners there could not be simultaneous taxation. Further, it was not so much a question whether the ITO could have exercised an option or not to assess, the individual partners in the expectation that the firm would apply for a continuance of registration. There being an assessment on the partners, the liability of the firm to be assessed did not exist according to us. If th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility of this principle depends on a subsisting valid assessment. If the assessment made on an individual or a group of beneficiaries or partners be set aside or reopened on the ground that the said assessment was on a wrong, or illegal or improper basis, then if that reopening is not challenged as it was not challenged in the other case and a fresh assessment is made on the same persons or association of persons or the same individuals in different capacities then there is no double taxation, because double taxation principle can be attracted only where two assessments subsists simultaneously. If one assessment is gone or is treated to have gone because of the operation of some legal principle and the same income is subjected to tax in the hands of the same individual in another capacity or in the hands of some other person, as the case may be, then the principle of double taxation is not attracted. The three cases which we had to decide were not cases where the assessment was sought to be reopened under s. 148 of the I.T. Act, 1961, or under s. 34 of the 1922 Act. In this case the reopening is not under challenge by any question before us. If that is the position, then, in our o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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